Social Security is financed through a pay-as-you-go system, which means that current workers’ Social Security taxes are used to pay benefits for current retirees … Real reform – especially with respect to Social Security – must reflect demographic reality.
This statement may have been true 30 years ago but as Sita Nataraj and John Shoven noted:
In order to ease the burden on workers during the retirement of the baby boom generation, the 1983 Social Security Reforms set payroll taxes above the level needed to pay current benefits, thus partially prefunding the baby boomers' retirement. The military and civil service retirement programs followed suit in the mid-1980s and switched from pay-as-you-go financing to funded systems. The excess income generated by these retirement programs was held in the federal trust funds, which have accumulated almost $3 trillion since the reforms took place.
In other words, we did have real reform in 1983. Nataraj and Shoven, however, caution that focusing on the unified budget may have led the government to reduce taxes and increase spending such as we did during the Presidency of George W. Bush. Funny thing – Congressman Ryan wants to cut income taxes even further.
13 comments:
The excess income was not held in the federal trust funds.
It was lent to the Treasury to pay for current expenses.
The income is gone - principal and interest. Actually, the interest was paid in debt, so that was not really income, like the principal, that was loaned to the Treasury.
I can provide reputable government citations supporting not only the SS trust fund, but the federal retirees' trust fund as well.
Don Levit
The Greenspan Commission, noting the possible problem, required budget reports from 1993 onward to be made with the SocSec overfunding treated as a "trust fund," as it were.
Strangely, Fed Chair Greenspan is among those who never (from what I can find) referred to the reporting method his commission required when speaking in, say, 2001. Not even privately, unless Ron Susskind misread Paul O'Neill's notes.
Hmm. My reitrement savings is also lent to someone else and collects interest. Are you saying that my funds are gone too? How far do we go to justify abusing the Social Security contributions we've made over my life time to be used for low taxes on capital income? Which of course is the point!
ProGrowthLiberal:
Your retirement savings, if invested wisely, will simply be liquidated to pay your benefits.
Can the same be said of liquidating the trust fund?
No, when tapping the trust fund, new money must be raised.
Don Levit
The excess income was not held in the trust funds. It was lent to the Treasury to pay for current expenses, and lower the deficits.
The interest was paid in debt, not cash.
The entire trust fund is pay-as-you-go.
When it is tapped, new money must be raised, which means, if a deficit, it is raised by issuing debt held by the public.
Don Levit
A financial institution, such as the Social Security Trust Fund (in effect a primary lender to the Treasury Dept), always lends its assets in order to earn interest. The Social Security legislation requires that the Trust Fund keep its assets invested in US Treasury instruments. That is, and has always been, the safest haven for assets in the form of cash. All borrowers, the US government included, must raise funds to pay its debts and the interest which accrues on that debt. What do you suggest Don, a return to the biblical restriction, neither a lender nor borrower be?
You know all of this Don becasue every time you exhibit your stupidity concerniing the Trust Fund either Trucker or I correct you.
No, Jack, I suggest that we need to change the law, for the trust fund makes it no easier to pay benefits than if the trust fund did not exist.
If Roosevelt envisioned the program paying for itself, why must new revenues be raised for every dollar paid out from the trust fund?
By the way, the federal retirees' trust fund works the same way - tapping the fund is the same process as paying for battleships.
There is no sense in tweaking the numbers in the trust fund, if they do not represent wealth that can be liquidated without raising new money.
The system must be privatized.
The original legilslation considred private annuities.
Private annuities can be bought today in which one captures a percentage of the gain, such as the S&P index, but loses nothing if the S&P goes down.
And, they guarantee a 3% return.
That is an investment which the insurer pays out without raising new monies - a "real" store of wealth.
Don Levit
"And, they guarantee a 3% return." Don Levit
Finally, proof positive that you are an imbecile and that's putting imbeciles in a negative light. Ask your friendly annuity salesperson to show you the clause which guarantees the return. Can you really be that stupid? There is a bridge in Brooklyn that is seeking investors for a repaint. Please send a check.
The better solution to the problem of paying back the Trust Fund assets and all other US debt is better selection of elected representatives to the Congress along with Presidential candidates that are less beholding to their big money contributors and more to some semblance of democratic ideals.
Don that faint sound of laughter you hear?
It is a composite sound track of all EconoSpeak commenters who have given up on you. You know why the claim in your first comment is wrong, because everyone from PGL and Barkley on down has spent hours explaining to you why it is based on a flawed of just aboutneveything related to the nature of money as related to various debtminstruments as related to the specifics of Social Security.
Yet even when you must know some onus are watching to continue to trot out your original argument without even a nod to the effort we put in. Well contempt breeds contempt and your contemptuousness has bred plenty coming back
Mr. Levit is tedious in the extreme. But, no need to call him an idiot. His words speak for themselves.
Nancy, Bruce, Jack:
Which statements of mine regarding Social Security are inaccurate?
Please cite word for word, and why they are inaccurate?
Don Levit
Don
You've asked that question many times now and it has been answered repeatedly. No one is interested in feeding into your asinine behavior any longer.
"The marvel of the dancing bear is not how well it dances, but that it dances at all".
Don your demand that we reproduce every wrong footed statement and every mis-reading of every government Report you ever made before our critiques can be seen as valid is essentially a claim that we must have have full exhaustive choreography of every step ever made by the Dancing Don Bear so as to precisely point out every single foot fault.
Well it doesn't work that way. When all the dance critics that have ever cared to watch and review any individual performance of yours are pretty much in agreement over time that your dancing sucks we really are under no obligation to pin it down to some particular paw (sic) de deux in a performance on Nov 18th, 2010.
"Look! It makes mouth noises like an actual rational creature!! Throw it a ginger snap!!!"
Back to your den Don, maybe you still have time in this lifetime to learn a new trick.
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