Posted on 01/13/2023 9:58:29 AM PST by SeekAndFind
Social Security Trust Funds have squandered billions of dollars on an antiquated investment policy.
That loss tells us a lot about the financial crisis coming to Social Security.
In 2019, Social Security lost roughly $1 billion because the system invests the excess reserves on exactly the wrong minute of the year. Any other day or any minute early in the day, saves the program money.
It is 2023, and the beat goes on. Over the course of 2022, Social Security redeemed more than $100 billion in high-yield debt, and lost nearly $5 billion in interest earnings in the process. The program just gave it away.
Here is the problem: Social Security generally needs cash to pay its bills in the back half of the year. Unfortunately, the program locks up all its loose cash on June 30. So, starting July 1, the program needs to redeem bonds, and the Treasury Department picks the wrong bonds for redemption based on a policy that literally dates back to the era of black-and-white TV.
To illustrate, in November, Social Security needed extra cash to pay the bills, and redeemed nearly $100 billion in bonds at par, which earned 4 percent interest. At the same time, it kept bonds that pay less than 1 percent on the books. Given the process, the program lost nearly $2 billion in interest.
For those so inclined to look at the loss in terms of math: 95.7B * (4-.075) * 7/12 months = a lot of money that has been simply thrown away. This is not terribly different from someone spending $1,000 on ATM fees.
This underlying problem was identified more than 20 years ago. Yet, nothing has been done about it since then. The solution is not terribly difficult.
(Excerpt) Read more at americanthinker.com ...
Interest that flows into the system is vital because this revenue is free cash flow. In contrast, when the program collects a dollar of revenue from the payroll tax, the worker in some fashion is given a promise of benefits in the future.
In this case, “free” means interest income adds to the life expectancy of the program on a dollar for dollar plus interest basis. Of the current $2.8 trillion reserve, the payment of interest from the government and interest on interest accounts for more than 90 percent of the Trust Fund.
Social Security is just another tax. Period.
Means test payouts. That’s about the only way I can think of it being ‘saved’
I love watching Republicans dive head first into social security and entitlement reform. The GOP is suicidal, and it’s wonderful!
How about the SS fund be allowed to invest in other things besides US Treasuries? It could be invested in many mutual funds spread across many asset classes.
Or crypto..
I used to think allowing that stuff might be a good idea, but not anymore with all the gambling-style funds and investments going on.
Just means test and pause CODA for 15-20 years will do it. But the most fiscal conservative will go ballistic if it means affecting their entitlements in anyway.
Social Security is not the real problem, it’s Medicare and Medicaid costs that are out of control. Currently now over 1/3 of Federal Budget and moving to 1/2. It will have to dealt with very soon.
Social security is a ponzi scheme.
Period.
You can’t “fix” ponzi schemes.
All you can do is wait for them to collapse.
COLA
Just like the EU kleptocrats.
Deflection.
From the real problems
Agencies Bureaus “Services”
I can have a respectful discussion with anybody about what the rules should be, but only as long as the rules apply equally to everyone.
“Over the course of 2022, Social Security lost nearly $5 billion in interest earnings...”
As bad as that is, the our government lost $45B in one spending bill to Ukraine, just to see Soledar liberated 2 weeks later.
And here is what we were promised way back in 1964!
https://www.ssa.gov/history/ssa/usa1964-2.html
Self-Supporting
“The program is designed so that contributions plus interest on the investments of the social security trust funds will be sufficient to meet all of the costs of benefits and administration, now and into the indefinite future—without any subsidy from the general funds of the Government. Both the Congress and the Executive Branch, regardless of political party in power, have scrupulously provided in advance for full financing of all liberalizations in the program.”
*****
About 20 or so years ago AARP magazine or Bulletin had an article on how the SS system was NOT a Ponzi Scheme.
Ponzi Schemes collapse. SS has not, therefore it is not a Ponzi Scheme.
A few pages more into the magazine was an article by Jane Briant Quinn on how the SS program was set up. Without saying it, the set up is just like a Ponzi Scheme.
In fact, the whole SS "lockbox" is the same thing. If the government just spent the excess SS tax money without running it through the lockbox we would be in the same situation we are in today: SS taxes do not cover paid benefits and the excess must me made up by the general revenue (or massive borrowing). Further, not having a lockbox might have been cheaper because then you wouldn't need an office in West Virginia (thanks Senator Byrd) stacking and counting paper bonds.
You make a good point. The GOP is expert at saying the wrong thing at the wrong time. So I’m guessing that right before the 2024 election some Republican leader will say, “It’s time to re-think Social Security.”
Democrat response: “Listen up, everyone. The Republicans want to take away your Social Security benefits!”
Usually I do, but when it comes to what I consider ‘payola’ like SS, I can’t help it.
The Simpsons quote applies with 99% of SS:
Marge: Where’d you get all the money? Grampa: The government. I didn’t earn it, I don’t need it, but if they miss one payment I’ll raise hell.Feb 24, 2010
“””To illustrate, in November, Social Security needed extra cash to pay the bills, and redeemed nearly $100 billion in bonds at par, which earned 4 percent interest. At the same time, it kept bonds that pay less than 1 percent on the books. Given the process, the program lost nearly $2 billion in interest.”””
If Social Security had redeemed the 1% bonds, they would not have received par. Instead, they would have received about 70% of the face value of the bonds.
I agree!
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