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The SS trust fund is an accounting fiction. The vast majority of it is held as treasury securities and the cash has long since been spent. Thus the federal gove

The SS trust fund is an accounting fiction. The vast majority of it is held as treasury securities and the cash has long since been spent. Thus the federal government has offsetting liabilities for all of those assets. Once SS starts spending more than it takes in, the feds will have to raise capital to cover the shortfall, same as if the trust fund did not exist.

mikeash 8y ago
If a private company holds treasury securities, we don’t call that a fiction. What’s the difference?
- silotis 8y ago
  It's different because the private company didn't issue the securities itself. The equivalent for a private company would be creating $3 trillion in bonds, "selling" the bonds to itself, then claiming to have $3 trillion.
  - mikeash 8y ago
    In this analogy, they’d be different departments or subsidiaries with different balance sheets, so there’s no need for the scare quotes: they really are selling the bonds. And they didn’t issue $3 trillion in bonds, they issued $20 trillion and sold most of them to other parties on the same terms. At the very least it indicates that the company prioritizes the finances of that one department much more than any other. The other problem I have with this complaint is that it implies that things would be different if it didn’t hold treasuries. If it had $3 trillion in a bank account, would that make it “real”? The US government issues dollars too, and can devalue the currency at will, so it’s not really better. Ultimately, it’s a commitment mechanism. If SS were paid out of the general fund, it could be cut off to fund other projects at will, as long as Congress were willing to piss off old folks. (Which is already a big obstacle, admittedly.) By funding benefits from a gigantic trust fund holding government debt, cutting off SS to fund something else would require imploding the world economy.
munk-a 8y ago
Sorry, this comment missed a big point - the money wasn't spent on Social Security, the money has been borrowed by other agencies and expenditures that owe it back. That's like saying "Oh man, your job isn't paying you enough money, you should quit." 'But I make 80k, that's plenty!' "Oh, you uh did, until I stole all but five dollars." 'Oh darn, guess I'll quit then.'
- silotis 8y ago
  I'm well aware that the money was dumped into the general fund and spent on other things. That doesn't change the fact that the money is gone, so saying that the trust fund has $3 trillion doesn't really help with SS's fiscal viability.
  - munk-a 8y ago
    If the US government was instead a group of private corporations then the balance for SS would be positive due to the assets they have in the form of debts, just because there isn't cold hard cash there doesn't mean the money doesn't exist - the only way to get to that point is to consider the other parts of the government as bad borrowers and assume the debt will need to be written off.

mikeash 8y ago

If a private company holds treasury securities, we don’t call that a fiction. What’s the difference?

silotis 8y ago
It's different because the private company didn't issue the securities itself. The equivalent for a private company would be creating $3 trillion in bonds, "selling" the bonds to itself, then claiming to have $3 trillion.
- mikeash 8y ago
  In this analogy, they’d be different departments or subsidiaries with different balance sheets, so there’s no need for the scare quotes: they really are selling the bonds. And they didn’t issue $3 trillion in bonds, they issued $20 trillion and sold most of them to other parties on the same terms. At the very least it indicates that the company prioritizes the finances of that one department much more than any other. The other problem I have with this complaint is that it implies that things would be different if it didn’t hold treasuries. If it had $3 trillion in a bank account, would that make it “real”? The US government issues dollars too, and can devalue the currency at will, so it’s not really better. Ultimately, it’s a commitment mechanism. If SS were paid out of the general fund, it could be cut off to fund other projects at will, as long as Congress were willing to piss off old folks. (Which is already a big obstacle, admittedly.) By funding benefits from a gigantic trust fund holding government debt, cutting off SS to fund something else would require imploding the world economy.

munk-a 8y ago

Sorry, this comment missed a big point - the money wasn't spent on Social Security, the money has been borrowed by other agencies and expenditures that owe it back. That's like saying "Oh man, your job isn't paying you enough money, you should quit." 'But I make 80k, that's plenty!' "Oh, you uh did, until I stole all but five dollars." 'Oh darn, guess I'll quit then.'

silotis 8y ago
I'm well aware that the money was dumped into the general fund and spent on other things. That doesn't change the fact that the money is gone, so saying that the trust fund has $3 trillion doesn't really help with SS's fiscal viability.
- munk-a 8y ago
  If the US government was instead a group of private corporations then the balance for SS would be positive due to the assets they have in the form of debts, just because there isn't cold hard cash there doesn't mean the money doesn't exist - the only way to get to that point is to consider the other parts of the government as bad borrowers and assume the debt will need to be written off.