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 ...
You might lose interest depending up purchase price, however when redeemed at par=face value you don't lose principal. A bond with a 1% coupon sold in a higher interest rate environment would lose much more in principal that the 2 billion in lost interest.
Great post.
.Gov has been lying and lying and lying and lying for decades...and most of the sheeple still do not have a clue.
It almost lost the election for Bush
Jeez-o-pete...
Any financial investor worth their weight is making some money, even in today’s market.
The sheer incompetence in government employees is astounding.
There is absolutely no reason for this program to run out of funds, except for government incompetence
You broke the code, LR. The Rs are very, very bad at politics. Or maybe some are simply playing for the other team. It doesn't much matter as absolutely nothing will come of this nonsense.
At least money comes "in" for medicare and social security. Medicaid basically is free healthcare for the poor and illegal.
Yes, the system is set up to lose money intentionally and for many reasons. Solvency hasn’t been the goal of the U.S. government for a long time. Engineering crisis after crisis is the real goal of government. Keeping the populace in a constant state of fear, and uncertain about the future, provides infinite benefits to those in power.
Social security reform is like Frankenstein's monster to the Rs. Every few years they charge him up and watch as he rumbles thru the village being chased by villagers with pitchforks. It's a sideshow for DeeCee wonks.
COLA....divide the monies equally for all recipients rather than a graduated scale...after all....inflation was equal for all.
5 billion “lost” by the ever-vigilant, super-competent federal government.
And I have to write estimates and cases to justify even $500.00 or $5,000.00 for new tooling and equipment at my company!
Last thing on this, but I saw a recent post that it’s easier for wealthy people to spend $25k on something than $100. It’s the same mentality when it comes to deaths. Lots is a statistic, a few is a tragedy.
It’s human nature.
The easiest way to fix Social Security would be to Outlaw All Taxpayer Funded retirement programs and let congress go on Social Security for their retirement
That's a horrible idea that we should not entertain.
A "means test" for Social Security will inevitably result in anybody with a substantial 401k not ever receiving any benefits. You would be punishing the very people who worked the hardest in their lifetimes and put more money into the pot than everybody else.
You would have a situation where a person who worked for 40 plus years and built a $1 million 401k would get zero SSA benefits while others who barely worked at all get full benefits? That is not right at all.
Social Security was not setup as a transfer program, like welfare and food stamps. It was set up as a forced savings plan so that people would have money set aside for them in older age to draw upon, so that they would not be a burden on society in their final years.
We all know how this works. Politicians will sell the plan by making the means test ridiculously high. They will tell us not to worry because only those who have more than say $10 million in assets will be denied SSA benefits. Most people will shrug and say "that's reasonable, it won't affect me."
Once they get their foot in that door however, the means threshold will quickly come down to $5 million, $2 million, and suddenly even those with just $500,000 will be denied Social Security until they spend that nest egg down.
I just don’t feel sorry for people that have enough money getting by receiving expensive benefits they don’t need in retirement.
If you aren’t serious about limiting the payola, then you aren’t serious about reducing government spending.
It’s the ol Grandpa simpson mentality, and that needs to change badly. Cut the handouts, even if you think you ‘paid in’!!!
Not covering illegals that have never paid into it would be a good start.
Means testing punishes those that saved and invested. In essence it is a reward for those that did not save. It will create very bad incentives.
Why? If you paid in, you should get paid out.
“””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.
You might lose interest depending up purchase price, however when redeemed at par=face value you don’t lose principal. A bond with a 1% coupon sold in a higher interest rate environment would lose much more in principal that the 2 billion in lost interest.”””
You are correct. Here are bond prices as of today.
4% 11/15/2042 $103.203
1.125% 08/15/2040 $66.285
The author of this story is an imbecile.
If the Social Security had sold the 1% bonds, they would have received about $65 billion on the $100 billion face value of the bonds.
One the plus side, it made the system solid and transformed Chile from a third world country to a first world country in a single generation.
On the minus side, it deprived the leftists of a source of revenue they were using to transform Chile into a Communist Utopia and Pinochet made about 1800 of them disappear.
People never get as much as they paid in back. And if they did, that’s just an argument to cut the program entirely.
It’s a ponzi scheme. The only ‘good’ outcome is if you got in early and got more out of it. Otherwise, everyone is just going down with the ship.
Once again, people are ‘fiscally conservative’ until it comes to their own money. It’s always those ‘welfare queens’ that are the problem, never their own inflated entitlements.
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