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Bullshit. The government bond traded for SS and Medicare funds is not sold on the open market. It has got zero to do with the risk free rate of return. The gove

Bullshit. The government bond traded for SS and Medicare funds is not sold on the open market. It has got zero to do with the risk free rate of return. The government can default on all SS and Medicare payments without affecting any bond holders.

toomuchtodo 10y ago
TL;DR Bondholders can go to zero. Special notes will not. > The government bond traded for SS and Medicare funds is not sold on the open market. https://www.stlouisfed.org/publications/regional-economist/july-2010/flight-to-safety-and-us-treasury-securities https://www.stlouisfed.org/publications/regional-economist/j... "Government debt of the United States is typically issued in the form of U.S. Treasury securities. These securities—simply called Treasuries—are widely regarded to be the safest investments because they lack significant default risk. Therefore, it is no surprise that investors turn to U.S. Treasuries during times of increased uncertainty as a safe haven for their investments. This happened once again during the recent financial crisis. In fact, the increase in the demand for Treasuries was sufficiently large so that prices actually rose with an increase in the supply of government securities." http://www.cbpp.org/research/social-security/policy-basics-understanding-the-social-security-trust-funds http://www.cbpp.org/research/social-security/policy-basics-u... "The Social Security trust funds are invested entirely in U.S. Treasury securities. Like the Treasury bills, notes, and bonds purchased by private investors around the world, the Treasury securities that the trust funds hold are backed by the full faith and credit of the U.S. government. The U.S. government has never defaulted on its obligations, and investors consider U.S. government securities to be one of the world’s safest investments." https://www.ssa.gov/oact/progdata/fundFAQ.html https://www.ssa.gov/oact/progdata/fundFAQ.html "By law, income to the trust funds must be invested, on a daily basis, in securities guaranteed as to both principal and interest by the Federal government. All securities held by the trust funds are "special issues" of the United States Treasury. Such securities are available only to the trust funds. In the past, the trust funds have held marketable Treasury securities, which are available to the general public. Unlike marketable securities, special issues can be redeemed at any time at face value. Marketable securities are subject to the forces of the open market and may suffer a loss, or enjoy a gain, if sold before maturity. Investment in special issues gives the trust funds the same flexibility as holding cash." Special issues are literally more valuable than gold, backed by the taxing authority of the US government.
pas 10y ago
It shouldn't even have to hold bonds, it's a closed system, so why exactly? The Social Security system is funded by the current active population, and the beneficiaries are the inactives of past generations. Sure, it's great that in theory your payroll tax is converted into a bond, and then when you retire they sell it and pay you from that, but ... that's not what's happening in the big picture, because if there's surplus then it just lowers the yearly deficit in the federal budget. (As it happened for years, but the fund will be depleted around 2034.)
- BearGoesChirp 10y ago
  >The Social Security system is funded by the current active population, and the beneficiaries are the inactives of past generations. You start looking at it hard and the pyramid shape begins to appear. I'm young enough that I plan my retirement assuming 0 money from Social Security despite the vast amounts I pay in. I see it as wealth redistribution from the young to the old who are already better off.
  - toomuchtodo 10y ago
    Can you provide stats about these old people who are already better off? Because most of them are just kept out of poverty by social security. Just curious where you get your belief from since the data shows otherwise. http://www.cbpp.org/research/social-security/social-security-keeps-22-million-americans-out-of-poverty-a-state-by-state http://www.cbpp.org/research/social-security/social-security... "Social Security Keeps 22 Million Americans Out of Poverty: A State-By-State Analysis" "Social Security Lifts 15 Million Elderly Americans Out of Poverty" "Social Security Lifts More Than 1 Million Children Out of Poverty"
    - BearGoesChirp 10y ago
      https://www.ssa.gov/news/press/factsheets/basicfact-alt.pdf https://www.ssa.gov/news/press/factsheets/basicfact-alt.pdf 62 million receiving social security. Using your numbers, that means 40 million aren't in poverty receiving it, while there are 7 million non-elderly receiving it who are kept out of poverty. My claim, if I make it a bit more wordy is that the elderly receiving social security have more wealth on average than those paying into it. To be a bit more exact, I was referencing those young enough to not be receiving it anytime soon. I didn't exactly give an age range, but we can go to the following site and see some interesting findings. https://dqydj.com/net-worth-by-age-calculator-for-the-united-states/ https://dqydj.com/net-worth-by-age-calculator-for-the-united... For example, $10k for a 25-29 year old was about the 50 percentile. For someone 65+, it is the 12 percentile. You can try a number of data points and see that the trend is that the older have more wealth. >Because most of them are just kept out of poverty by social security. Most? Even with the worst numbers, it is only around 2/5 of the elderly who receive it. Social security is a large regressive tax. It is generally paid by younger people who have less wealth and goes to older people who have more wealth.

toomuchtodo 10y ago

TL;DR Bondholders can go to zero. Special notes will not. > The government bond traded for SS and Medicare funds is not sold on the open market. https://www.stlouisfed.org/publications/regional-economist/july-2010/flight-to-safety-and-us-treasury-securities https://www.stlouisfed.org/publications/regional-economist/j... "Government debt of the United States is typically issued in the form of U.S. Treasury securities. These securities—simply called Treasuries—are widely regarded to be the safest investments because they lack significant default risk. Therefore, it is no surprise that investors turn to U.S. Treasuries during times of increased uncertainty as a safe haven for their investments. This happened once again during the recent financial crisis. In fact, the increase in the demand for Treasuries was sufficiently large so that prices actually rose with an increase in the supply of government securities." http://www.cbpp.org/research/social-security/policy-basics-understanding-the-social-security-trust-funds http://www.cbpp.org/research/social-security/policy-basics-u... "The Social Security trust funds are invested entirely in U.S. Treasury securities. Like the Treasury bills, notes, and bonds purchased by private investors around the world, the Treasury securities that the trust funds hold are backed by the full faith and credit of the U.S. government. The U.S. government has never defaulted on its obligations, and investors consider U.S. government securities to be one of the world’s safest investments." https://www.ssa.gov/oact/progdata/fundFAQ.html https://www.ssa.gov/oact/progdata/fundFAQ.html "By law, income to the trust funds must be invested, on a daily basis, in securities guaranteed as to both principal and interest by the Federal government. All securities held by the trust funds are "special issues" of the United States Treasury. Such securities are available only to the trust funds. In the past, the trust funds have held marketable Treasury securities, which are available to the general public. Unlike marketable securities, special issues can be redeemed at any time at face value. Marketable securities are subject to the forces of the open market and may suffer a loss, or enjoy a gain, if sold before maturity. Investment in special issues gives the trust funds the same flexibility as holding cash." Special issues are literally more valuable than gold, backed by the taxing authority of the US government.

pas 10y ago

It shouldn't even have to hold bonds, it's a closed system, so why exactly? The Social Security system is funded by the current active population, and the beneficiaries are the inactives of past generations. Sure, it's great that in theory your payroll tax is converted into a bond, and then when you retire they sell it and pay you from that, but ... that's not what's happening in the big picture, because if there's surplus then it just lowers the yearly deficit in the federal budget. (As it happened for years, but the fund will be depleted around 2034.)

BearGoesChirp 10y ago
>The Social Security system is funded by the current active population, and the beneficiaries are the inactives of past generations. You start looking at it hard and the pyramid shape begins to appear. I'm young enough that I plan my retirement assuming 0 money from Social Security despite the vast amounts I pay in. I see it as wealth redistribution from the young to the old who are already better off.
- toomuchtodo 10y ago
  Can you provide stats about these old people who are already better off? Because most of them are just kept out of poverty by social security. Just curious where you get your belief from since the data shows otherwise. http://www.cbpp.org/research/social-security/social-security-keeps-22-million-americans-out-of-poverty-a-state-by-state http://www.cbpp.org/research/social-security/social-security... "Social Security Keeps 22 Million Americans Out of Poverty: A State-By-State Analysis" "Social Security Lifts 15 Million Elderly Americans Out of Poverty" "Social Security Lifts More Than 1 Million Children Out of Poverty"
  - BearGoesChirp 10y ago
    https://www.ssa.gov/news/press/factsheets/basicfact-alt.pdf https://www.ssa.gov/news/press/factsheets/basicfact-alt.pdf 62 million receiving social security. Using your numbers, that means 40 million aren't in poverty receiving it, while there are 7 million non-elderly receiving it who are kept out of poverty. My claim, if I make it a bit more wordy is that the elderly receiving social security have more wealth on average than those paying into it. To be a bit more exact, I was referencing those young enough to not be receiving it anytime soon. I didn't exactly give an age range, but we can go to the following site and see some interesting findings. https://dqydj.com/net-worth-by-age-calculator-for-the-united-states/ https://dqydj.com/net-worth-by-age-calculator-for-the-united... For example, $10k for a 25-29 year old was about the 50 percentile. For someone 65+, it is the 12 percentile. You can try a number of data points and see that the trend is that the older have more wealth. >Because most of them are just kept out of poverty by social security. Most? Even with the worst numbers, it is only around 2/5 of the elderly who receive it. Social security is a large regressive tax. It is generally paid by younger people who have less wealth and goes to older people who have more wealth.