Recession Bites Into Social Security’s Surplus

[mmr]

Criminals know that people who are distracted might forget to keep an eye on their valuables. It’s just happened to us as a nation.

We have all been so busy whining about bonuses at American International Group Inc. and arguing about the so-called card- check legislation that we forgot to watch the Social Security surplus. While we were looking away, that surplus disappeared, eight years ahead of schedule.

Something extraordinarily important was revealed in mid- March and received almost no news coverage. If you typed in the words “Social Security” on Google’s news service last Friday, the top hit was a New York story about a man who kept his dead mother in a freezer ever since she died back in 2007, just so he could continue to collect her benefit checks.

Almost as gruesome is the news about Social Security’s finances. Social Security has for years been the near-term bright spot in the federal budget. Each year the program has raised $50 billion to $100 billion more in payroll taxes than it paid out in benefits. Sure, deficits were expected far off in the future, but the current program was on sound financial footing.

Those days are, for the moment at least, behind us. According to the latest Congressional Budget Office estimate, the Social Security surplus will be only $3 billion in 2010. That number is almost surely too rosy, and the actual realization next year will be a big deficit. In February, according to data from the Social Security Office of the Actuary, the program paid out more in benefits than it collected in taxes and interest combined. There will be many more months like that before we are through.

http://www.bloomberg.com/apps/news?p...d=asbiybVqsYC0

I imagine that the Medicare "trust fund" will reach zero balance within the next two to three years as well (prior official projection: 2013). Anyone else feel like buying some 10-year treasuries?

[dpandorf]

Re: Recession Bites Into Social Security’s Surplus

http://www.bloomberg.com/apps/news?p...d=asbiybVqsYC0

I imagine that the Medicare "trust fund" will reach zero balance within the next two to three years as well (prior official projection: 2013). Anyone else feel like buying some 10-year treasuries?

There is no money in a Social Security Trust Fund nor is there any money in a Medicare Trust Fund. The money collected from payroll taxes that go toward both those programs are spent each year as part of the general fund. Our congress writes an IOU to both of those supposed trust funds for money they spend each year.

[ThePythonicCow]

Re: Recession Bites Into Social Security’s Surplus

There is no money in a Social Security Trust Fund nor is there any money in a Medicare Trust Fund.

It doesn't matter how they account for it; inter-generational transfer Ponzi schemes of that size must fail once a big generation is followed by a smaller, less wealth one. We could have real dollar bills collected from real taxes in the Trust Fund and zero national debt, and still Social Security (and worse, Medicare) would be unable to meet its promises. --Anyplace-- we park those funds, it will be an unbearable burden to someone when it comes time to pay it out. Too much is promised, relative to the GDP of the nation, in another few decades.

What does matter is where they park the money now. If they parked it in real gold ingots in Fort Knox, then the price of gold would be sky high. If they parked it in Treasuries, then politicians could spend more and appear to put the nation in debt less (the current situation.) If they parked it in GM stock, then GM would still be the biggest company on planet Earth. The flip side of the collapse of a Ponzi scheme in the out years is the misallocated and excessive funds in the earlier years, giving some lucky bastard (our congress critters, in the present situation) a false sense of wealth.

[Sharky]

Re: Recession Bites Into Social Security’s Surplus

The Social Security "Trust Fund" holds all of its assets in Treasuries. This is a huge fraud. Here's how it works:

1. The Treasury collects your FICA taxes
2. The taxes are used to buy Treasury Securities from... the Treasury
3. The cash "raised" by selling the Treasuries to the trust fund is then spent as part of the General Fund.

In other words, the govt really just spends the FICA taxes. The whole notion of a "trust fund" is just an illusion. The money comes into the govt, they create Treasury securities based on what they receive, and then the money gets spent. Nothing was ever saved. It's the same as the government just printing an IOU and calling that an asset.

SS is just a big wealth transfer program.

[cjppjc]

Re: Recession Bites Into Social Security’s Surplus

The Social Security "Trust Fund" holds all of its assets in Treasuries. This is a huge fraud. Here's how it works:

1. The Treasury collects your FICA taxes
2. The taxes are used to buy Treasury Securities from... the Treasury
3. The cash "raised" by selling the Treasuries to the trust fund is then spent as part of the General Fund.

In other words, the govt really just spends the FICA taxes. The whole notion of a "trust fund" is just an illusion. The money comes into the govt, they create Treasury securities based on what they receive, and then the money gets spent. Nothing was ever saved. It's the same as the government just printing an IOU and calling that an asset.

SS is just a big wealth transfer program.

Anybody here remember the Social Security Lockbox?

[kelton56]

Re: Recession Bites Into Social Security’s Surplus

Which is why the U.S. is very likely to default on itself, i.e. the $4.6 trillion of fictitious "investments" in the Social Security, Medicare and other government retirement accounts.

Since these all are pay-as-you-go programs with surpluses "lent" to the government to mask the true federal spending deficits, and since, as such, they merely are accounting entries, the U.S. will wipe the slate at some point.

That will set up the ugly, intergenerational battle pitting pampered Baby Boomer progeny newly unwilling to allow further increases in their FICA payroll withholding against the tide of their aging parents still under the illusion they will receive a full share of benefits.

They'll start means-testing benefits, and increasing retirement ages and other cosmetic fixes which fix nothing, and then they'll tell the Boomers "sorry about your luck, hope you have some family you can live with."

Things should get really interesting within 5-8 years...

[runlikehe11]

Re: Recession Bites Into Social Security’s Surplus

It doesn't matter how they account for it; inter-generational transfer Ponzi schemes of that size must fail once a big generation is followed by a smaller, less wealth one. .

Even Sesame Street gets how Ponzi works.

Sorry if this is offensive to anyone

http://www.youtube.com/watch?v=XJ8OjAB_e3g

[ASH]

Re: Recession Bites Into Social Security’s Surplus

The Social Security "Trust Fund" holds all of its assets in Treasuries. This is a huge fraud. Here's how it works:

1. The Treasury collects your FICA taxes
2. The taxes are used to buy Treasury Securities from... the Treasury
3. The cash "raised" by selling the Treasuries to the trust fund is then spent as part of the General Fund.

In other words, the govt really just spends the FICA taxes. The whole notion of a "trust fund" is just an illusion. The money comes into the govt, they create Treasury securities based on what they receive, and then the money gets spent. Nothing was ever saved. It's the same as the government just printing an IOU and calling that an asset.

SS is just a big wealth transfer program.

It gets better! The Treasury pays the Trust Funds interest on the special-issue bonds held by the Trust Funds! For Social Security, which is still running a small surplus, that interest income is re-invested in more government account series bonds. So, the fraud perpetrated upon the younger generations has actually been compounding! Not only have their elders collected taxes assessed specifically for retirement and spent the money on general government expenses while writing an IOU for themselves against future generations' general tax revenue, but those IOUs were structured in such a way as to grow by compound interest!

From A Summary of the 2008 Annual Reports of the Trustees of the Social Security and Medicare Trust Funds:

OASI (a.k.a. Social Security) outgo during 2007 was $495.7B. The 2007 income was $675B, including $97B of interest income. So, the actual Social Security surplus was $82.4B ($578.1B real income from payroll taxes and taxation of benefits), but the debt future generations owe to the Social Security Trust Fund increased by $179.3B!

[tombat1913]

Re: Recession Bites Into Social Security’s Surplus

The Social Security "Trust Fund" holds all of its assets in Treasuries. This is a huge fraud. Here's how it works:

1. The Treasury collects your FICA taxes
2. The taxes are used to buy Treasury Securities from... the Treasury
3. The cash "raised" by selling the Treasuries to the trust fund is then spent as part of the General Fund.

In other words, the govt really just spends the FICA taxes. The whole notion of a "trust fund" is just an illusion. The money comes into the govt, they create Treasury securities based on what they receive, and then the money gets spent. Nothing was ever saved. It's the same as the government just printing an IOU and calling that an asset.

SS is just a big wealth transfer program.

Soon we'll start seeing a lot more people asking questions like this. And then they'll say "that tombat1913 was way ahead of his time."

[ThePythonicCow]

Re: Recession Bites Into Social Security’s Surplus

It gets better! The Treasury pays the Trust Funds interest on the special-issue bonds held by the Trust Funds! For Social Security, which is still running a small surplus, that interest income is re-invested in more government account series bonds. So, the fraud perpetrated upon the younger generations has actually been compounding!

Amusing - thanks.

Though, as I noted in an earlier post on this thread, it really doesn't matter. Regardless of what clever accounting and propaganda tricks they use, this is all just a way to extract more money from the economy for Washington, DC, in return for unforfillable promises.

Compounded lies are just more lies.

To look at it another way -- how could they invest this Social Security fund so that the program worked? There is no way. That many people (now in their 40's and 50's) cannot live that well (as promised) on the backs of those few people (now in their 20's or 30's), in a world of increasingly competitive labor.

The crime is that the current malinvestment of the "Social Security Fund" is going toward funding more corruption and power grabs by the USA federal government.

Not only will the money not be there; our liberty will not be there either.