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The trust fund is over $2.5 Trillion

by muzz 8y ago

AnthonyMouse 8y ago
In treasury bonds. Whether present day taxpayers pay the money from withholding taxes to cover the bonds or social security taxes directly, it still comes from present day taxpayers. And even that $2.5T is substantially less than the amount they are projected to pay out.
- muzz 8y ago
  Where else would you suggest the surplus be invested? Do you think there is a safer investment vehicle on the planet?
  - AnthonyMouse 8y ago
    It isn't a matter of investing it in something else. There was never actually any surplus to begin with. If the government had done anything other than lend it to itself, they wouldn't have had that money to fund the programs they voted for. Then they would either have had to pay the full amount from additional taxes or borrow the money and pay interest, which over that time period was a >6% rate and would have been even higher if that amount of debt had actually been issued into the bond market. I leave it as an exercise to the reader to calculate what percentage of the "trust fund" total would have had to be paid in interest at those rates over half a century if they had actually paid it. Spoiler alert, it's most of the total. The net inter-generational transfer is actually substantially more than that, because the true measure of the inter-generational transfer is the debt itself, which exceeds even what's held by social security and medicare. That is what they spent without paying for and what their kids inherit. If they hadn't spent more than they paid there wouldn't be trillions in US government bonds for the "trust fund" to hold. That's the only way to have actually paid for it -- have held a net surplus of that amount, so you pass on net assets rather than net debt. And that isn't what happened.
    - muzz 8y ago
      This is circular logic.
      - AnthonyMouse 8y ago
        It isn't. The "trust fund" is an accounting trick to create something from nothing. Suppose there isn't enough money in the "trust fund" and we wanted to add some without raising taxes, reducing spending or issuing any new bonds into the market (which would consume liquidity and raise interest rates). Simple, you write some new bonds and give them directly to the social security administration. Now it has "more assets" -- but you haven't actually funded anything because you have an equal amount of debt.

The trust fund is over $2.5 Trillion

by muzz 8y ago

The trust fund is over $2.5 Trillion

In treasury bonds. Whether present day taxpayers pay the money from withholding taxes to cover the bonds or social security taxes directly, it still comes from present day taxpayers. And even that $2.5T is substantially less than the amount they are projected to pay out.

muzz 8y ago
Where else would you suggest the surplus be invested? Do you think there is a safer investment vehicle on the planet?
- AnthonyMouse 8y ago
  It isn't a matter of investing it in something else. There was never actually any surplus to begin with. If the government had done anything other than lend it to itself, they wouldn't have had that money to fund the programs they voted for. Then they would either have had to pay the full amount from additional taxes or borrow the money and pay interest, which over that time period was a >6% rate and would have been even higher if that amount of debt had actually been issued into the bond market. I leave it as an exercise to the reader to calculate what percentage of the "trust fund" total would have had to be paid in interest at those rates over half a century if they had actually paid it. Spoiler alert, it's most of the total. The net inter-generational transfer is actually substantially more than that, because the true measure of the inter-generational transfer is the debt itself, which exceeds even what's held by social security and medicare. That is what they spent without paying for and what their kids inherit. If they hadn't spent more than they paid there wouldn't be trillions in US government bonds for the "trust fund" to hold. That's the only way to have actually paid for it -- have held a net surplus of that amount, so you pass on net assets rather than net debt. And that isn't what happened.
  - muzz 8y ago
    This is circular logic.
    - AnthonyMouse 8y ago
      It isn't. The "trust fund" is an accounting trick to create something from nothing. Suppose there isn't enough money in the "trust fund" and we wanted to add some without raising taxes, reducing spending or issuing any new bonds into the market (which would consume liquidity and raise interest rates). Simple, you write some new bonds and give them directly to the social security administration. Now it has "more assets" -- but you haven't actually funded anything because you have an equal amount of debt.