"Social Security has nothing to do with the deficit"

[_Quasimodo]

No, SS is exactly insurance. That's how it was first conceived. It was set up as a way for poorer people to have a retirement income after they could no longer work.[/quote]

People still have more choice to purchase health insurance or not than they have to pay social security, even after Obamacare. I could cancel my disability insurance with my company tomorrow if chose to do so. I could cancel my 401k. The IRS could do nothing to me.

But do you? I don't know how your individual policies work, but most people do not have that ability. Most people that work for lower wages only have the government policies to cover their retirement costs. Do you think that is a bad thing? Do you think that poorer people should starve after they are no longer able to work?

Where do you guys get off calling unemployment, social security, and other mandated government taxes insurance? That's MSNBC spin.

Horse biscuits (I can send you the recipe if you want). They are not taxes! Both Unemployment Insurance (hence the name) and Social Security ARE insurance policies. People pay into them and receive payments from them as needed.

Why are you are so afraid that someone is stealing your money? I doubt that you make enough that it is even consequential. The irony is that if you were fired tomorrow, you would file for unemployment and when you retire, you will file for Social Security. In the meantime, you complain about them.

Hypocrisy.

[_ajax18]

why save up a giant nest egg so you could support yourself indefinitely when you know you'll die in your working years anyway?

Because wealth has more to do with what your parents do for you than what you do for yourself. I'd like to give my children that opportunity and let them have things that I didn't. The difference is that as conservatives we have the patience to work for these things legally and justly rather than embracing communism.

[_Quasimodo]

why save up a giant nest egg so you could support yourself indefinitely when you know you'll die in your working years anyway?

Because wealth has more to do with what your parents do for you than what you do for yourself. I'd like to give my children that opportunity and let them have things that I didn't. The difference is that as conservatives we have the patience to work for these things legally and justly rather than embracing communism.

Communism? Seriously? Aren't you about twenty years behind the times? The world has changed a lot since the John Birch Society drifted into obscurity. Joe McCarthy died of shame and alcoholism over 50 years ago.

[_Jersey Girl]

Because wealth has more to do with what your parents do for you than what you do for yourself. I'd like to give my children that opportunity and let them have things that I didn't.

Could you give me some examples of what you're talking about in the above? What do you mean, what your parents do for you?

[_cinepro]

If you consider the "unified federal deficit" to be the sum total of all government revenue and expenses, including Social Security, then this is true.

But if you use the technical legal definition of the "unified federal deficit", what Charles Blahous (of the Hoover Institute) says here is absolutely, unequivocally false.

Where, exactly, are you getting your "technical legal definition" of "unified federal deficit", and why doesn't Charles Blahous know about this? Honestly, unless you have a better reference, I'm going to have to take the word of the executive director of the bipartisan President’s Commission to Strengthen Social Security over yours.

But if Charles Blahous isn't good enough, how about Andrew Biggs, who is the former principal deputy commissioner of the Social Security Administration. Does the fact that he's conservative mean we should ignore him and give precedence to such prime sources as someone with a Ph.D. in English writing at "Alternet.com"...?

From 2012:

Budget wonks use two main measures of the budget deficit: the "on-budget" balance, which includes everything except Social Security and the postal service, and the "unified budget," which merges the on- and off-budgets together. If, for example, the on-budget was running a deficit of $100 billion while the off-budget ran a surplus of $100 billion, the unified budget would be in balance.

The unified budget approach is by far the most common for both budget wonks and the media. As a 2005 AARP policy analysis stated, "The [Congressional Budget Office], the U.S. General Accounting Office, and other agencies that produce budget documents and analyses think that the unified budget concept gives the most complete picture of total federal revenues, spending, surpluses, and deficits." When you read that the Obama White House projects a 2013 budget deficit of $901 billion, that's the unified budget deficit they're referring to.

And on a unified budget basis, when Social Security's financial position worsens the budget deficit grows. Social Security today contributes about $53 billion to the budget deficit-$165 billion if we include the temporary payroll tax cut designed to stimulate the economy-rising to $100 billion by 2020 and never looking back. It's as simple as that. Is Social Security the main driver of today's $1.3 trillion unified budget deficit? Of course not, and no one said it is. But it's not pennies or dimes either, as the left would have you believe.

http://www.realclearmarkets.com/article ... 99912.html

Biggs is conservative, but he does know something about social security.

[_cinepro]

No, the payment is made up by spending down the assets in the Social Security trust fund--real assets that were created by past payroll taxes explicitly for that purpose. And reiterating what I stated above, if the Social Security Trust Fund runs out of money (and the law isn't changed first), then benefit payments will be reduced so that current Social Security benefits are low enough to be covered by current Social Security tax revenue.

The social security trust fund is a debt owed by the US Government; they took the money from social security and spent it, and gave social security a bunch of IOUs. Payment made from the "trust fund" to social security have to be paid from the general fund.

Here's how NPR reported it in 2011:

Neither the lockbox nor the private investments ever came to pass. Nor did Bush's prediction that Social Security revenues would outstrip expenses until 2015. At a recent Senate Budget Committee hearing on the nation's economic outlook, Chairman Kent Conrad (D-ND) noted there's been a sea change in Social Security's finances.

"My staff informs me under the new report, Social Security has gone permanently cash negative now. Is that the case?" he asked.

"Yes, that's right," came the response from Congressional Budget Office Director Doug Elmendorf, whose agency prepared the report.

Conrad added that the time had finally come for the money Social Security has lent the federal government to be paid back.

"How's it going to be paid back? It's going to be paid back by the other general expenditure of the federal government having to be reduced to make way for the payments that we're going to have to make on those bonds," he said.

http://www.npr.org/2011/02/09/133627103 ... ping-point

[_Kevin Graham]

I asked, "Tell me cinepro, if SS never existed, what would our current deficits and debt be? Exactly as they are today."

Kevin, at some point your insistence on this tumbles into willful delusion, and you're only going to end up looking foolish.

This really your answer to that question. By not answering it?

I don't know whose word you'll accept on this. How about Charles Blahous? He's one of Obama's guys. Obama nominated him to the Board of Trustees of the Social Security Trust Funds, so if he doesn't know what he's talking about, then we've got huge problems...He wrote the following in an LA Times opinion piece in June of 2014 after someone insinuated that he had stated that SS doesn't contribute to the deficit. Here are some excerpts, and I recommend the entire piece to you

Cinepro, you're ignoring the analogy Analytics provided. He explained that shifting funds from one credit card to the other doesn't ultimately change your overall debt. Now I just told you that our debt would be the same with or without Social Security, making my case that the program is deficit neutral. Let me try to explain this with an analogy.

Let's say I decide to start a real estate investment program. I am renting out a home and receiving $1000/month and using that money to pay a 30 year $500/month mortgage. The extra $500 can only be spent on expenses relating to maintenance and repairs of that house. The money I don't spend I put into a interest bearing savings account. After twenty straight years of receiving month after month surplus averaging $200, I realize that with interest, I have roughly $50,000 in the account. Then, for the first time in 20 years I end up spending more money on the house than what I received in rent because the water heater and air conditioner needed replacing. I just experienced my first budget deficit in years, and to make matters worse, an inspector explains that numerous other home improvements would need to be made in the near future, guaranteeing budget deficits over the next two years. So, at this point, do I throw up my hands and say real estate investment is just a deficit producing nightmare, or do I consider the 20 years of accumulating surpluses that have increased my overall wealth?

To make the analogy more relevant to government looting, let's say my daughter decided she wants to go to graduate school, and so I break my rule about tapping into the home savings account, and spend the entire $50k for her education and a car for her to drive. That same year, the renters move out of town and I have trouble finding their replacement. Suddenly, I'm in the red because now I have to pay the entire mortgage out of my own funds. So, to borrow from Analytics, does shifting funds from one account to another really increase my overall debt? Of course not. But if you're looking at this cynically or "in the moment," you may say to yourself, "Damn, I have a budget deficit for the first time in years. This real estate investment must have been a really bad idea!" And obviously this is how you choose to look at Social Security, and it is precisely the way Blahous spins it. And technically, you're correct about the anomalous deficits, but you're wrong when you say SS caused the deficits. Why? Because you're ignoring the fact that the SS program had put in over $2.7 trillion into that "general fund" long before it needed that measly $70 billion to make up for the first annual deficit in over 25 years.

So, a more contextual or realistic understanding is that your overall wealth has increased because your investment has given you much more than it has taken out. After all, you just put your daughter through graduate school and bought a new car. If the money for those thing didn't come from the house savings account, it would have come from elsewhere, probably in the form of a interest accruing loan. You also have more than $50k in home equity that you otherwise wouldn't have. Now you may be asking yourself, how does this pertain to Social Security since it provides no wealth. Well, the fact is the program itself has been producing surpluses for three decades, totaling close to $2.8 trillion. That money is used to fund education, health care, build roads, military aircraft, subsidies, etc.

And this is where I think you and your Conservative bunch operate with a double standard while trying to demonize the SS program. Because the second the program doesn't receive enough revenues to cover the benefits for the fiscal year (which just happened for the first time in decades and was always expected to happen anyway) you have conniption fits and use it as proof that the program is a proven drain on the economy and drives up debt/deficits. Yet, when it comes to the trillions in surplus revenues generated since its inception, you don't factor any of that in before passing judgment. Again, $2.8 trillion in revenues. That's nothing to sneeze at. As far as complaining about it being "spent," the fact is the government is going to spend what the government is going to spend, and this is true with or without the SS program. The government didn't spend "more" than it would have without the trust fund. We're talking about a government whose budget is around $4 trillion a year and so it isn't going to completely alter its budget priorities or defund programs over a measly $50-100 billion/year from SS surpluses. So to the point, if it didn't use that money from the trust fund it would have borrowed it from foreign investors and paid those billions of dollars in interest to them instead of the SS beneficiaries.

So once you understand the overall context, it should become perfectly clear why SS doesn't drive up the overall debt. If you could blink your eyes like a Genie and make it so that SS never existed, then you'd have to come to grips with the fact that those trillions in revenues would be gone as well. The national debt would still be $18 trillion.

[_Kevin Graham]

Understanding the Social Security Trust Funds

Few budgetary concepts generate as much unintended confusion and deliberate misinformation as the Social Security trust funds. Political candidates of both parties accuse their opponents of “raiding” the trust funds.[1] Some writers disparage the trust funds as “funny money,” “IOUs,” or a “fiction.”[2] All these claims are nonsense. In fact, the Social Security trust funds are invested in Treasury securities that are every bit as sound as the U.S. government securities held by investors around the globe; investors regard those securities as being among the world’s very safest investments. This brief paper provides some basic information about the Social Security trust funds.

How Do the Trust Funds Work?

Social Security’s financial operations are handled through two federal trust funds — the Old-Age and Survivors Insurance (OASI) trust fund and the Disability Insurance (DI) trust fund. Although legally distinct, they are often referred to collectively as “the Social Security trust fund.” All of Social Security’s payroll taxes and other earmarked income are deposited in the trust funds, and all of Social Security’s benefits and administrative expenses are paid from the trust funds.
In years when Social Security collects more in payroll taxes and other income than it pays in benefits and other expenses — as it has each year since 1984 — the Treasury invests the surplus in interest-bearing Treasury bonds and other Treasury securities. Social Security can redeem these bonds whenever needed to pay benefits. The balances in the trust funds thus provide legal authority to pay Social Security benefits when the Social Security program’s current income is insufficient by itself.

What Is the Trust Funds’ Financial Status?

Social Security is adequately financed in the short term but faces a modest long-term financial shortfall amounting to 1.0 percent of gross domestic product (GDP) over the next 75 years, the period that the program’s actuaries use in evaluating the program’s long-term finances.[3] Social Security has run a surplus in every year since 1984, as was anticipated when Congress enacted and President Reagan signed the legislation based on the recommendations of the Greenspan Commission in 1983. The authors of the 1983 legislation purposely designed program financing in this manner to help pre-fund some of the costs of the baby boomers’ retirement.

Under current projections, the combined Social Security trust funds will continue to run annual surpluses until 2020. The interest income that the trust funds earn on their bonds, as well as the proceeds the trust funds will receive when their bonds are redeemed, will enable Social Security to keep paying full benefits until 2033.

In 2033, the combined trust funds are projected to run out of Treasury bonds to cash in. At that point, if nothing else is done, Social Security could still pay more than three-quarters of its scheduled benefits using its annual tax income. Contrary to a common misunderstanding, benefits would not stop. Of course, paying three quarters of promised benefits is not an acceptable way to run the program, and Congress should take action well before 2033 to restore long-term solvency to this vital program.

Most analyses of Social Security focus on the combined OASI and DI trust funds, since both programs are integral parts of Social Security, but the two trust funds are, in fact, separate. The DI trust fund faces exhaustion in 2016, and the much larger OASI fund is projected to last until 2034. Congress must therefore take action before late 2016 to replenish the DI trust fund. Increasing the share of the payroll tax that is allocated to DI (and reducing the OASI share) would assure that both the OASI and DI programs remained solvent through 2033. Congress has reallocated payroll tax revenues many times in the past, and doing so has not been controversial.[4]

How Are the Trust Funds Invested?

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.
The Treasury securities held by the trust funds have some special features that make them even more attractive investments than other Treasury securities. First, the trust funds’ investments do not fluctuate in value and can always be redeemed at par. Even if the securities must be redeemed early, Social Security is guaranteed not to lose money on its investment. Second, all of the securities purchased by the trust funds — even short-term securities that will mature in one or two years — earn interest at the same rate as medium- and long-term Treasury securities (those not due or callable for at least four years).

By the end of 2013, the trust funds had accumulated nearly $2.8 trillion worth of Treasury securities, earning an average interest rate of 3.8 percent during that year. The annual report of Social Security’s board of trustees lists the specific securities owned by the trust funds, their maturities, and interest rates. The trustees project that the trust funds will earn $99 billion in interest income in 2014.[5]

=======================


Paul N. Van de Water worked for over 18 years at the Congressional Budget Office. From 1994 to 1999 he was Assistant Director for Budget Analysis. In that capacity he supervised the agency’s budget projections, analyses of the President’s budget, cost estimates of legislative proposals, and estimates of the cost of federal mandates on state and local governments. As Deputy Assistant Director for Budget Analysis from 1992 to 1994, he coordinated CBO’s analysis of the Clinton Administration’s health plan and other proposals to reform the financing and delivery of health care.

Van de Water holds an A.B. with highest honors in economics from Princeton University and a Ph.D. in economics from the Massachusetts Institute of Technology.

[_Kevin Graham]

What the 2014 Trustees’ Report Shows About Social Security

By Kathy Ruffing

Ruffing spent 25 years at the Congressional Budget Office, where she analyzed a wide range of topics including interest costs and federal debt, federal pay, immigration, and Social Security. Upon her departure, the Congressional Record praised her as a dedicated public servant who worked tirelessly to advance the legislative process and whose analyses displayed the best characteristics of CBO reports: impartiality, clarity, and comprehensiveness.

Before joining CBO, Ruffing spent several years at the Department of Labor and the Social Security Administration. More recently, she helped launch a budget study at the National Academy of Sciences.

Ruffing earned a B.A. in economics and political science at the University of Pittsburgh, and an M.A. in economics at George Washington University.

[_Kevin Graham]

Social Security Sense and Nonsense

In a new paper and podcast I’ve tried to correct some of the misinformation that critics of Social Security have been spreading about the program.

Here are the facts. Social Security is a well-run, fiscally responsible program. People earn retirement, survivors, and disability benefits by making payroll tax contributions during their working years. Those taxes and other revenues are deposited in the Social Security trust funds, and all benefits and administrative expenses are paid out of the trust funds. The amount that Social Security can spend is limited by its payroll tax income plus the balance in the trust funds.

The Social Security trustees — the official body charged with evaluating the program’s long-term finances — project that Social Security can pay 100 percent of promised benefits through 2037 and about three-quarters of scheduled benefits after that, even if Congress makes no changes in the program. Relatively modest changes would put the program on a sound financial footing for 75 years and beyond.

Nonetheless, some critics are attempting to undermine confidence in Social Security with wild and blatantly false accusations. They allege that the trust funds have been “raided” or disparage the trust funds as “funny money” or mere “IOUs.” Some even label Social Security a “Ponzi scheme” after the notorious 1920s swindler Charles Ponzi. All of these claims are nonsense.

Every year since 1984, Social Security has collected more in payroll taxes and other income than it pays in benefits and other expenses. (The authors of the 1983 Social Security reform law did this on purpose in order to help pre-fund some of the costs of the baby boomers’ retirement.) These surpluses are invested in U.S. Treasury securities that are every bit as sound as the U.S. government securities held by investors around the globe; investors regard these securities as among the world’s very safest investments.

Investing the trust funds in Treasury securities is perfectly appropriate. The federal government borrows funds from Social Security to help finance its ongoing operations in the same way that consumers and businesses borrow money deposited in a bank to finance their spending. In neither case does this represent a “raid” on the funds. The bank depositor will get his or her money back when needed, and so will the Social Security trust funds.

As far back as 1938, independent advisors to Social Security firmly endorsed the investment of Social Security surpluses in Treasury securities, saying that it does “not involve any misuse of these moneys or endanger the safety of these funds.”

Moreover, Social Security is the “polar opposite of a Ponzi scheme,” says the man who quite literally wrote the book about Ponzi’s famous scam, Boston University professor Mitchell Zuckoff. The Social Security Administration’s historian has a piece on this topic as well.

Unlike the frauds of Ponzi — and, more recently, Bernard Madoff — Social Security does not promise unrealistically large financial returns and does not require unsustainable increases in the number of participants to remain solvent. Instead, for the past 75 years it has provided a foundation that workers can build on for retirement as well as social insurance protection to families whose breadwinner dies and workers who become disabled.