The Feds Owe SS $2.5 TRILLION That Has Been Borrowed From SS

[stopbush]

to fund tax cuts for the rich, wars, bridges to nowhere and bush's prescription drug plan.

Where in the discussion of the future of Social Security does this FACT come in to play? These IOUs are in the form of T-Bills, which are supposedly backed by the "full faith and credit" of the USA. Is that no longer an operational fact when it comes to the $ the Feds owe SS? Are T Bills only a good investment when they're not backing up SS? Are those IOUs "on paper only" as conservatives love to say?

SS monies are taken out of OUR paychecks every week. This year alone, SS will run a $77BILLION SURPLUS from payroll collections and interest on those IOUs. That $77-B will be "borrowed" to pay for tax cuts, etc, AGAIN this year.

Back in the 1980s under Reagan, the amount of $ withheld from our paychecks to fund SS was raised, supposedly because -according to Paul Volker - it would make SS solvent FOREVER. Well, it looks like all it did was to take more $ out of the pockets of the middle class so Congress would have a bigger slush fund available to pay for tax cuts for the rich. In effect, they took the money all of us paid into SS, wrote checks to the rich (in the form of tax cuts) with the money that we all paid into SS, and left the middle class with an IOU in place of OUR $, which the RW "financial wizards" now tell us exists "only on paper."

So, we're left with worthless paper (IOUs), while the rich have already cashed their tax cuts which were paid for with our SS contributions.

And the Deficit Commission's solution is to up the retirement age so we can pay another 4-year's-worth of withholding taxes into the SS Trust Fund (more of our $ to steal for the rich!) while cutting our retirement benefits by 3-6% AFTER we've already been screwed out of our first 4 year's of benefits all together, because that's what's necessary to fund those bush tax cuts for the rich.

Nice work if you can get it.

[HereSince1628]

1. Every veteran from every US war since 1935 fought to protect the US

Were they more likely to be fighting for profits of giant investment corporations or for preserving the government that had promised them security in their old age and infirmities?

I'm guessing we were stupid enough to think we were fighting for our futures and that of our descendants.

[inna]

2. class warfare in action.

[stopbush]

5. It's only class warfare when the middle class points out the scam/inequities.

When the rich are stealing from us it's called "being an entrepreneur."

[Poll_Blind]

12. +1 SO true.

PB

[City Lights]

3. There's never a lockbox around when you need one.

I often wonder how the world would differ today had the Scummy Court of the Untied States allowed the votes to be counted.

[SammyWinstonJack]

4. I want to thank Obama for creating this commission and loading it with known SS haters.

:puke: Heckvuajob Obama. :eyes:

[madrchsod]

6. yes...was this rahm`s brilliant plan?

[stopbush]

8. And what's the end game of the SS privatizers?

Simple: they want all that money AND all of that SURPLUS MONEY that SS currently generates sitting in THEIR bank accounts, earning them interest, while they pay out the bare minimum needed to make it appear that they are providing financial security to retirees.

In the meantime, that SS $ is no longer available to the Feds to borrow. Let's face it, the Feds DO occasionally borrow $ to fund socially responsible programs. But once the SS money has been moved to private hands, that will stop. Any $ the Feds have left will be used to fund the military-industrial complex. Government-run social services will end.

Remember the scene in the movie "Wall Street," where the sharks are circling at the big meeting convened to sell off Blue Star Airlines, when one of the robber barons points out that "the real win here is the over-funded pension plan of the workers. Gekko makes $70-million there after paying off the minimum retirements?" (paraphrasing) Well, that's what we have here - the SS system is currently OVER FUNDED. Once the robber barons get their hands on it, they will LOWER benefits, RAISE the retirement age AND do whatever they can to minimize what they legally have to pay out to beneficiaries.

It will be just like private-run health insurance taking a 30-40% PROFIT out of the $ we're all having deducted from our paychecks right now. because the pirates will NOT reduce the amount of $ we all pay into an SS program, but they WILL reduce the benefits they pay so they can make more profits. And it will be sold to the public under the lies that 1. we can't afford it anymore, and 2. the private sector will run SS more-efficiently than the feds ever could.

[Scuba]

27. Bingo. Thanks for this.

[glinda]

32. They are going to gamble it away....

[laughingliberal]

7. K & R nt

[durkermaker]

9. they put it in a lock box, but forgot to lock down the lock box

and now the whole lock box is gone

[watrwefitinfor]

10. PERFECT subject line.

They work so hard to cover this up. You put it so plain and simply. They are thieves.

The Feds Owe US (the people who paid into SS all our lives, and those who are still paying into SS) $2.5 TRILLION That Has Been Borrowed From SS.

Now, instead of sitting around whining, can we all send this OP to Keith, Rachel, Ratigan, and anyone else who might actually get it before the public?

Oh, yeah, and getting it onto the top of the front page of DU won't hurt.

Wat

[slipslidingaway]

11. KNR n/t

[bobbolink]

13. Are you really sure "Borrowed" is the term you want to use?

STOLLEN

seems to fit better...

:nuke:

[suston96]

14. Lots of passion here but.......

....not exactly how Social Security and the Trust Funds work.

Go here: http://www.ssa.gov/OACT/ProgData/fundFAQ.html#n4

All cash monies coming into the US from whatever source, including Social Security and Medicare payroll collections, go into the US Treasury and are all accounted for as Cash Paid In with Credits to the appropriate accounts.

All payments due out on obligations and liabilities of the US government come from the same source.

There is no way that I know of to indicate that Social Security and Medicare taxes, nor any other sources of revenue, paid into the US Treasury can be targeted for "raids" by any branch of the US Government or anyone else.

Matter of fact, from my link above:

The Social Security Trust Funds are the Old-Age and Survivors Insurance (OASI) and the Disability Insurance (DI) Trust Funds. These funds are accounts managed by the Department of the Treasury. They serve two purposes: (1) they provide an accounting mechanism for tracking all income to and disbursements from the trust funds, and (2) they hold the accumulated assets. These accumulated assets provide automatic spending authority to pay benefits. The Social Security Act limits trust fund expenditures to benefits and administrative costs.

If you have anything other than what this common and usually erroneous rhetoric indicates, please present it. I have heard of "raids" on Trust Funds but have never seen any proof or valid descriptions.

Go here for a good discussion on the misleading rhetoric regarding "raids" on Social Security and Medicare Trust Funds:

http://peoplespension.infoshop.org/blogs-mu/2010/09/20/has-social-security-ever-been-“raided”/

Oh, I rec'd your post, Good points for discussion and clarification.

[stopbush]

15. Thanks for the links.

The question is simple: what are those securities worth?

It's a bit of a sleight of hand: take the money collected by SS withholding, buy US Securities with the money, which Congress then borrows from to fund any program it will. If one believes those securities are "backed by the full faith and credit of the USA," then there's really no problem when SS is forced to begin redeeming said securities to fund outlays.

The issue is whether or not the US government will be able to make good on paying back the money to SS that was used to buy securities. In a few years, SS will take in LESS $ per month than it brings in. At that point, SS will begin presenting those IOUs to the feds in the form of redeeming some of those securities it purchased. And, since these are "special securities," they may be cashed in for face value at any time, ie: there is no maturity period involved as there is on, say, a US Savings Bond.

It's an obvious question: how will the US Gov generate the tax revenues necessary to cover the redemption of those securities so that SS can continue to pay full benefits? Any ideas?

Gore wanted to put SS in a lock box for a reason.

It doesn't really matter that SS is REQUIRED to buy securities with the money it collects. It only matters what those securities are really worth. Suppose you have one of those banking programs where you "require" your bank to round up any purchases you make on your debit card and to deposit that rounded up $ into your savings account. You are transferring money from one account to another in small increments and earning interest on the transferred money. You may even set up your account so that you may not make a straight withdrawal from your savings - you may require the money be transferred back to checking before you can use it. Not a problem - until your bank tells you that that they don't actually have all of that rounded up money in your savings account after all, that it was only there "on paper."

I may be wrong, but that's sort of how I see the SS purchase of securities working, albeit on a very small scale.

[suston96]

17. Lock boxes and things.

If you follow my first link and then my edited post your questions will be answered.

Surplus cash coming into the US Treasury has to be invested by law and it's a good thing.

So much criticism of TARP and what has happened is that the program is generating profits for the Treasury better than those 30 year T-Bonds.

http://www.aolnews.com/surge-desk/article/bloomberg-report-shows-tarp-profits-top-treasury-bond-returns/19682593

Bloomberg Report Shows TARP Profits Top Treasury Bond Returns

(Oct. 20) -- Returns on the Troubled Asset Relief Program used to bail out the financial industry, better known as TARP, generated higher profits for taxpayers than 30-year Treasury bonds, according to a Bloomberg report.

The government earned $25.2 billion on its investment of $309 billion in the financial sector, which many critics originally believed would result in losses of hundreds of billions of dollars.

The full faith and credit of the United States backs that 20 dollar bill in your pocket as well as any investments made in the US of America.

[stopbush]

20. According to Sen Kent Conrad this am, we are borrowing 40 cents

of every dollar we are spending on the Fed level. He says that is unsustainable.

There comes a point in capitalistic societies where the "full faith and credit" of a government is meaningless. Example: the Depression. There comes a point where a nation jumps the shark in its ability to honor its debt obligations. You and I both know this. This country has been there before. We don't want to go back.

The question is at what point does that 20-dollar bill in my pocket suddenly lose half of its purchasing power because the government can no longer back the full value of that 20-dollar bill?

[suston96]

23. What that $20 bill buys is not what we are discussing.....

Social Security enrollees, present and future have a right to expect that their social compact with the United States of America will be honored.

As do retired military and disabled veterans, honored today for their service. Along with other retired US civil service retirees, And so far none of these groups have ever been denied their dues.

And sorry, I don't know what you mean by "this country has been there before".

The Great Depression was caused by banks and Wall Street financiers who suckered ordinary people's money to invest in questionable projects. That was not money invested in the US government. That is another matter and is a bag of oranges compared to the apples we are discussing.

http://americanhistory.about.com/od/greatdepression/tp/greatdepression.htm

I usually carry a second $20 bill with me just in case that other $20 bill isn't enough to pay for a trip to Burger Kind with the family.

[mmonk]

19. A matter of semantics. Those tax collections are ear marked.

In other words, the dedicated tax revenues are raided to pay for their (government) appropriations. This is due to the tax policies of supply side economics, the economic choice of both parties now.

[ProgressiveEconomist]

25. The problem with the "Trust Fund" is not raids, but rather the opposite: Drawing down

the Trust Fund to cover shortfalls from FICA revenues would present a fiscal problem when the SS cash flow turns negative for decades in a few years.

There are TRILLIONS of dollars worth of 15-year non-publicly tradable T-bonds in a Trust Fund file cabinet in WV (see http://www.usatoday.com/news/washington/2005-02-28-trust-fund_x.htm ).

But, because they are not publicly tradable, the ONLY thing SS trustees can do with them is wait to present them to Treasury for payoff.

Trouble is, Treasury would have to borrow or tax to pay off the Trust Fund bonds. But Congress always can cut benefits or raise retirement ages to forestall the trustees need to present the bonds for payment.

The Trust Fund is a "through the looking glass" Alice-in-Wonderland creation. See post #18 below for my recommendation how to fix this problem.

[suston96]

26. If things reach such Twilght Zone happenstances, Social Security will be......

....the least of our's or anyone's worries.

For Social Security to go broke, enrollees must reach into their 90s and the economy must be so bad - 20%+ unemployment...that will spiral down contributions or close to it.

In which case I repeat, Social Security will be the least of all the problems facing a government dealing with mass unemployment and roving gangs of starving and homeless mobs.

Why not get this - these administrations to fix the economy and create enough jobs to resume the normal contributions to Social Security and Medicare?

What incredible logic: bleed present enrollees so that future enrollees will receive what they have been promised. Something is warped about those progressive economics.

I prefer to think that Wall Street and banks and that debt commission are behind these privatization efforts - call them what you want - that's what they are.

Wall Street and the Banks and the Debt Commission - what a partnership!

[ProgressiveEconomist]

31. "Something is warped about those progressive economics" You mean GREENSPAN economics

Alan Greenspan constructed a system where there was no Soverwign Wealth Fund or other independent assets for SS Trustees to manage. Then he engineered a $2.5 trillion transfer of FICA contributions and accumulated interest to the Treasury, in exchange for non-publicly tradable bonds. Treasury spent those revenues over the last 27 years, mainly for tax cuts to the very wealthy. They are gone.

There's a $2.5 trillion debt from Treasury to the SS Trust Fund, in principle backed by the Full Faith and Credit of the US. But Congress always can prevent that debt from coming due by cutting benefits and raising retirement ages. Whenever it does so, the "SS Trust Fund" GROWS!

There's absolutely nothing progressive about it--it's the most regressive scheme imaginable. A regressive tax was used to accumulate $2.5 trillion in tax cuts for the very wealthy. Then regressive benefit cuts to vulnerable people who no longer can work forestall paying back the debt to the Trust Fund.

Alan Greenspan was an evil GENIUS! As Ronald Reagan's 1980 campaign economic adviser, he argued that the poor needed to pay MORE in taxes. Then he devised an incredibly stealthy plan to accomplich his goal.

[suston96]

33. Greenspan economics? Dunno about Greenspan....I know Mrs. Greenspan.....

There's a $2.5 trillion debt from Treasury to the SS Trust Fund, in principle backed by the Full Faith and Credit of the US.

There's a $2.5 trillion debt from Treasury to the SS Trust Fund, in principle backed by the Full Faith and Credit of the US. But Congress always can prevent that debt from coming due by cutting benefits and raising retirement ages. Whenever it does so, the "SS Trust Fund" GROWS!

I don't know about all that. Congress wants to fuck the American People? It does so at its own risk.

Pretty soon the voters will realize that changing political parties that run Congress resolves nothing and that they will have to take matters into their own hands.

Constitutional Convention II sounds exciting to me.

That 2.5 trillion debt the US Treasury owes to the Trust Fund? That's an asset that looks good on any balance sheet. Has the US Treasury ever failed to pay any of its debts?

[ProgressiveEconomist]

36. 'Has the US Treasury ever failed to pay any of its debts?' It doesn't have to get to that point.

It's as if you had a bank account you planned to tap when you went part-time. But when you tried to start withdrawing funds, the bank said, "Sorry. We're not going to give you any cash. You'll have to live on your part-time salary. But just look how much faster your account balance will grow!"

[TexasObserver]

16. "Embezzled" is the proper term for it.

[ProgressiveEconomist]

18. "IOUs are in the form of T-bills". Not quite. The "SS Trust Fund" is ingeniously tricky

Repeated Republican calls to raise the retirement age and cut benefits actually would make the Trust Fund appear MORE HEALTHY, as actual payouts slow relative to currently promised payouts.

The SS bonds, unlike T-bills and most other Treasury bonds, are "not publicly tradeable". The bonds sit in a file cabinet in Parkersburg WV (see http://www.usatoday.com/news/washington/2005-02-28-trust-fund_x.htm ) and can be redeemed ONLY by submitting them to the US Treasury.

If the SS Trust Fund bonds were publicly tradeable, trustees could convert some of them to cash whenever they thought interest rates had bottomed for a while, and buy various kinds of hard assets whenever they thought their markets were undervalued. Then the SS trustees would have much more leeway than they do now, waiting for Treasury to redeem bonds unless Congress tells Treasury to slow redemption down.

My #1 recommendation for true SS reform would be to stop transforming FICA into any "non-publicly-traded" instruments. Let SS Trustees use FICA revenues to buy the very same bonds Treasury sells to China and the rest of our creditors. Then pressure to cut benefits and raise retirement ages rather than pay SS what it is owed gradually would lessen.

[stopbush]

21. Thanks for the clarification. Yes, they are "special securities"

that can only be redeemed by the UST.

It is tricky and complicated as you say, but it isn't beyond the understanding of most people, if only it was discussed on occasion.

[ProgressiveEconomist]

22. Please keep on posting about SS! I LOVED your OP, but jsut had a quibble about

"T-bills".

I especially liked how you pointed out that Ronald Reagan's "SS Reform Commission" Chair Alan Greenspan engineered this "SS Trust Fund" supposedly to hold all the extra FICA we've paid since the early 80s.

Before that, no "Trust Fund" really was needed, because each year SS paid out essentially every dollar of FICA it collected. The "Trust Fund" has, as you've pointed out, primarily been a "Slush Fund" for Republican income "tax cuts" for the wealthiest.

It amazes me that Reagan still is remembered as a "tax cutter" rather than as a master pension thief. IMO 99.9 percent of "Reagan Democrats still don't realize they've been victimized! As Republicans demand higher retirement ages and benefit cuts, very few Americans are asking, "What happened to the TRILLIONS in FICA we've paid for a generation, supposedly to prevent the very problem you say we face now?"

[guardian]

24. But

all SS money was in a "lock box". Surely our elected officials wouldn't lie to us? :sarcasm:

[amborin]

28. K&R

[amborin]

29. K&R

[sarcasmo]

30. Bernie Maddoff is a small player compared to the Federal Government.

[ProgressiveEconomist]

37. Kick!

[bluesmail]

34. Too late to get a rec in. K&R. eom

[suston96]

35. Excellent study on the Trust Funds.......

http://articles.latimes.com/print/2010/aug/08/business/la-fi-hiltzik-20100808

The myth of the Social Security system's financial shortfall
The trust fund is in far better shape than critics admit.

August 08, 2010|Michael Hiltzik

The annual report of the Social Security Trustees is the sort of rich compendium of facts and analysis that has something for everybody, like the Bible.

In recent years, during which conservatives have intensified their efforts to destroy one of the few U.S. government programs that actually works as intended, the report's publication has become an occasion for hand-wringing and crocodile tears over the (supposedly) parlous state of the system's finances.

This year's report, which came out Thursday, is no exception. Within minutes of its release, some analysts were claiming that it projected a "shortfall" for Social Security this year of $41 billion.

Before we get to the bogus math behind that statement — which doesn't actually appear in the report — let's look at the encouraging findings by the agency's trustees, who include the secretaries of Labor, the Treasury, and Health and Human Services.

The trustees indicated that the program has made it through the worst economic downturn in its life span essentially unscathed. In fact, by at least one measure it's fiscally stronger than a year ago: Its projected actuarial deficit over the next 75 years (a measurement required by law) is smaller now than a year ago.

The old age and disability trust funds, which hold the system's surplus, grew in 2009 by $122 billion, to $2.5 trillion. The program paid out $675 billion to 53 million beneficiaries — men, women and children — with administrative costs of 0.9% of expenditures. For all you privatization advocates out there, you'd be lucky to find a retirement and insurance plan of this complexity with an administrative fee less than five or 10 times that ratio.

This year and next, the program's costs will exceed its take from the payroll tax and income tax on benefits. That's an artifact of the recession, and it's expected to reverse from 2012 through 2014. The difference is covered by the program's other income source — interest on the Treasury bonds in the Social Security trust fund.

That brings us back to this supposed $41-billion "shortfall," which exists only if you decide not to count interest due of about $118 billion.

******

[Poboy]

38. kick

[defendandprotect]

39. PENTAGON still can't find $4 TRILLION ... and bailouts were $12 TRILLION ....

When do we get that back?