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Sun Dec 30, 2012, 06:25 PM

Social Security and the Debt

Like I said, its sunday night, let's chat ....

When you get your paycheck friday evening (yeah, I know it hasn't really worked that way in years) you see on the stub that some amount was taken out for Social Security. So you paid into the system. Let me ask you ... where did that money go?

For some reason we've been given to believe that the money heads for some sort of 'lock box' from which claims are paid. Of course anyone in authority who is asked to explain just where the lock box resides is quick to tell you that there really isn't one, its just a metaphor. They rarely go on to explain beyond that. Well, where the money that is paid in goes is simple, it goes into the general fund to pay the bills of the United States. And what does the Social Security Administration get in return for watching your hard earned funds pass right out the door to fund the operation of Government? They get special Bonds, a sort of interagency IOU. Those bonds, which the Social Security Administration has been accumulating for decades, are the major part of the debt of the United States of America.

Yep, that's right most of the debt, about two-thirds of it, is owed to those of us who participate in the Social Security System. Who is that? Well, everyone who has every paid in, every received a payout, or any dependent of either. Its you and me and the next door neighbor and it is to us that a great deal of the National Debt is owed. We are owed far more of it than any foreign nation, including China, and in a very real sense the greater the National Debt is the richer each and everyone of us is.

So I don't worry so much about the debt, I like it when the richest country on earth owes me money, I only worry about the good management of that country and responsible stewardship of its budget, be it in balance or not.

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Arrow 4 replies Author Time Post
Reply Social Security and the Debt (Original post)
1-Old-Man Dec 2012 OP
Make7 Dec 2012 #1
Angry Dragon Dec 2012 #2
PSPS Dec 2012 #3
Igel Dec 2012 #4

Response to 1-Old-Man (Original post)

Sun Dec 30, 2012, 06:28 PM

1. You can't just make stuff up and expect people to believe it. ( n/t )

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Response to 1-Old-Man (Original post)

Sun Dec 30, 2012, 06:29 PM

2. ............

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Response to 1-Old-Man (Original post)

Sun Dec 30, 2012, 07:07 PM

3. You're being a tad simplistic

There's nothing unusual or "wrong" about the Social Security Trust Fund bring invested in bonds. That's how it is designed and what it was mandated to do when it was set up under FDR. These bonds pay interest (which is added to the fund) and are, as you say, "special" in that they garner a higher return and even better security than ordinary Treasury bonds which, themselves, remain the safest place to put money in the world.

The whole notion of a "lockbox" never made sense to me because SS was never intended to be some kind of "mattress" into which contributions were to be stashed.

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Response to 1-Old-Man (Original post)

Sun Dec 30, 2012, 07:16 PM

4. Try numbers.

The trust fund has about $2.7 trillion in it. FICA taxes have been going between surplus and deficit recently--recession, more baby boomers retiring. There's a correlation--one that'll diminish over time--between those who paid and those who are owed. A lot of those who paid extra won't get it; a lot of people who get more than they paid towards the surplus will get it.

At $700 billion a year outlays for benefits, the US population's "paid in" enough for about 4 years' of benefits if all other revenue sources stopped. Yet people act like all the benefits they'll get are somehow stashed away somewhere. Most benefits current and future retirees will receive are going to be paid by people who are working. Retirees primarily funded other people's retirement and only the surplus for the last 30+ years has been saved.

National debt is $15.9 trillion and rising by a bit under $100 billion a month. The SS Trust Fund accounts for 17% of the national debt. That's less than 1/5. That's far less than 2/3. The trust fund is considered "intragovernmental debt"--there are a couple trillion dollars additional intragovernmental debt.

The FICA trust fund, though, has to be paid back. When it gets paid back the money will have to come from general revenues. Tack a $100 or 200 billion onto the budget for "repaying Trust Fund". We can fund that by raising taxes, cutting discretionary spending, or by seling more public debt.

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