When Congress set up Soc. Sec. trust fund, did they INTEND not to repay what they borrowed from it?

[yurbud]

Supposedly the trust fund was to prepare for the coming wave of retirements of baby boomers, so Social Security built up a surplus so they wouldn't have to raise rates through the roof on the rest of us when boomers retired.

There's nothing wrong with borrowing that money--it's better than borrowing it from a bank or foreign country--but did Congress intend to stiff us all along, playing a game of three card monte to make up for tax cuts for the rich, and then when it comes time to pay the piper (us), our card has disappeared. To protect the tax cuts for the rich, the loan from us is not repaid.


Was this an intentional scam? Did they PLAN not to repay us all along, like Ken Lay with his employees pensions or something?

[jtown1123]

1. It wasn't a scam. They must pay it back, or it's a default on U.S. Bonds.

[indurancevile]

6. if it wasn't a scam, why did they jack up fica to produce big surpluses that could be borrowed in

first place? in what sense did this help social security?

we could have been paying 1-2% less in social security for 30 years.

[jtown1123]

14. B/c in '83 they had an emergency where they couldn't pay benefits in two months

and they figured to cover the baby boom, they should make all the adjustments during this bargain. It worked incredibly well. Saying something is a scam just allows them to not pay it back. We need to be tactful how we discuss SS.

[indurancevile]

26. the only fix required was a slight increase in fica, something which had been done before.

reagan/greenspan went much further, changing a pay-as-you-go pass-through system into one which produced unprecedented increasing (real dollar) surpluses for 30 years. it did not work "incredibly well". it set up the situation we find ourselves in today.

there was no reason AT ALL to borrow from workers to fund general operations for 30 years. it did NOT make social security more fiscally sound. it did NOT make social security more capable of paying benefits down the road.

it was a SCAM, & i will call it a scam.

[reformist2]

2. They don't plan on getting rid of SS. But they want to reduce benefits so that it never runs a defic

[yurbud]

11. if it ran a deficit, it would just dip into that built up surplus, which is supposed to last to 2037

or something like that.

[indurancevile]

28. "dipping into the surplus" = charging the general fund. that is not the way social security

was designed to operate. it was set up as a pass-through.

[PoliticAverse]

47. Right, 'Dipping into the Surplus' means presenting the securities in the trust fund for payment...

by the Federal Government which means they must come up with the money
from the general fund.

Social Security as a 'pass-through' aka 'pay as you go' program really has no
mechanism for dealing with surpluses other than giving them to the rest of the
government when the surpluses are incurred.

[indurancevile]

48. It has a way, which is not accumulating the surpluses in the first place. which is how it

functioned for the first 40-odd years of its history. TF was a one-year cushtion or less. Now it's nearly a four-year cushion.

[reformist2]

52. They were fine with SS as long as it was a cash cow revenue generator.

Now that it's time to actually cash in some of the trust fund, oh no, that will never do!

It's becoming increasingly obvious that the rich have every intention of cheating the middle class out of every dollar they can.

[shanti]

3. *ushco

once *ush the elder was in place the plan was on. i pin all of this on the *ush family (and cohorts). it had been planned for years.

ymmv

[Ruby the Liberal]

10. Reagan was the one who first raided that fund.

[shanti]

23. yep

that is so....but he was just the puppet. *ush was the puppet master.

[dkf]

4. Moynihan intended to, Reagan and Bush spent it instead.

When Daniel Patrick Moynihan realized what they were doing he tried to reverse course and cut the social security tax...

http://articles.latimes.com/1989-12-30/news/mn-974_1_social-security

[indurancevile]

5. Yes. The law is clear. All excess social security collections go into the trust fund,

which must be "invested" in US securities. Which means all excess social security collections are borrowed by the US government & spent.

The consequences of accelerating the percent of wages collected by fica were known: increasing surplus collections. The disposition of the surpluses was known. The fact that the borrowiing would have to be paid back from the general fund was known.

There was never any reason (related to the stability of social security) to collect so much surplus. None.

[yurbud]

12. so the boomer bubble was a hoax?

[indurancevile]

18. not seeing your point.

[yurbud]

20. you said there was no reason to build up the trust fund, implying we could still pay as we go

even when boomers retired.

[indurancevile]

30. which we can. and are going to. collecting extra for 30 years (from not only

the boomers, but gen x etc.) didn't improve the ability to pay benefits now IN ANY WAY.

[PoliticAverse]

40. Indeed. Social Security is a 'pay as you go' program and the current trust fund doesn't change that

at all...

[SoCalDem]

7. They thought they could just keep kicking the can down the road

and as people died off, the "savings" from not having to pay those benefits, combined with payments in, they could skate until the Boomer generation all died off.. We DID prepay a shitload of money into the system.

Five things did their plan in:

1) people started living a LOT longer due to improved meds & surgical techniques

2) medicare costs skyrocketed due to "managed" care coming online in a big way since the '80s

3) congress was greedier & more mathematically challenged than even they thought

4) the internet came along and made a LOT of people aware of their past, present and future plans for squandering...and made them desperate

5) our legislative intelligence has been shrinking for decades, and lobbyists /staffers are really running things

[Ruby the Liberal]

8. "Paid for it to be there". Congress is too short sighted with their #1 priority in getting reelecte

Once Reagan squeesed the toothpaste out of the tube, it was down hill from there when it came to raiding that account.

Gore tried to warn people about this in 2000 with Bush's Top 2% Tax Cuts, but people didn't listen.

Now, the boomers are starting to retire and it is time to pay back for the last 30 years of folly.

No different than short sighted CEOs managing their company by quarterly performance as opposed to setting it up for long term success.

[kirby]

9. They did not account for the demographic changes...

Obama knows this. The Social Security program knows this too. The country is getting older, people are living longer, and people are having less children. That changes the equation.

The concern is that ASSUMING the trust fund is available, the trust fund will be depleted between 2037 and 2041.

[indurancevile]

13. of course they did. the same 1983 amendments that started bloating up the trust fund

raised the age for full benefits.

[jtown1123]

16. Yes. Talk to people on the Greenspan commission. The baby boom was planned for. n/t

[kirby]

19. It was not fully addressed...

If so, why will the trust fund will be depleted between 2037 and 2041.

[jtown1123]

22. Sure it was. They only plan out SS on 75 year plans. They will address the future

possibly shortfall when we get closer. These predictions are so far out and based on worst case scenarios, a shortfall may never happen.

[indurancevile]

32. The trust fund is NOT social security & has nothing to do with the ability to pay benefits.

The point of the 1983 "fix" was to build it up so that it could be "depleted" later.

in other words, workers' money was borrowed by the gov't with the promise that it would be paid back later.

[jtown1123]

34. Check your history. SS was in dire straights in 83. I know pple who participated

on the commission. They had to raise revenues immediately to cover the shortfall, which would occur in a matter of months, instead of 2 decades. The excess money collected was put into a trust to cover the baby boomers.

[indurancevile]

35. I know my history, thanks. The situation in 83 was not "dire". It was the predictable result of

oil shock inflation & recession resulting in less real revenue than had been forecast. The only fix that was needed was a hike in fica to account for the difference, something which had been done before.

Social security's fiscal stability has NOTHING to do with how much money is in the trust fund. The trust fund is a holding pen for excess revenue, money over & above that spent cutting checks for retirees. All the money that goes into it is borrowed & spent on general government -- by law. There is not & can never be any "lock box".

It was a scam. But since you think it wasn't, kindly explain how collecting a trillion plus excess from labor for 30 years has increased the stability of social security.

Then kindly explain why, that being the case, our lords & masters are discussing cuts to social security.

[kirby]

41. Your argument is so naive...

'Social security's fiscal stability has NOTHING to do with how much money is in the trust fund.'

That is like me saying that your ability to pay your bills has nothing to do with the amount of money in your bank.

There are many factors involved in the solvency of SS. There are many variables that can be tweaked. The only reason there needed to be a trust fund is to accumulate excess reserves that will be used when the outflows exceed the inflows. The reason for that is due to the aging population.

Last year there was a $49B deficit between the amount of money contributed by current workers and the amount paid out to current retirees. That trend will get worse as the years go on. Without the trust fund, where would that $49B come from?

[PoliticAverse]

44. The same exact place the revenue would come from without the existence of the trust fund...

The trust fund doesn't contain actual 'real economic assets' - it contains what are effectively calls on the
rest of the assets of the Federal Government.

If the government needs $49B dollars to pay retirees it still needs to come up with the money - whether
the Social Security administration just informs the government of the fact or presents a piece of paper
saying 'you owe us $49B' changes that fact not one bit.

[indurancevile]

49. "there are many variables that can be tweaked, blah blah, that is due to the aging population blah"

you didn't say anything.

the deficit between payroll taxes + taxes on benefits was $51.3 B.

It would come from where it always came from: taxes on workers. which IS where it came from. there was no need to tax workers for 30 years to get it.

furthermore, while you call me naive, your confusion of accounting fiction with real value is the real naivete. all value comes out of current production. the only real question is how the value of that current production is to be divided up.

[kirby]

50. Depends on how much taxes you want to pay...

Due to the aging demographics you will need to keep increasing the payroll tax to keep. There are other variables like changing the age, changing the benefits, changing the caps, etc.

[indurancevile]

53. "aging demographics" are irrelevant. but since you think they're so important, quantify them.

[kirby]

54. Sorry...

If you truly think that the aging demographics are irrelevant to long-term stability of SS then I need not discuss anything further. Such a basic fact is central to the whole concept of inflows and outflows to the system.

[indurancevile]

55. lol. can't be bothered, eh? your claim that demographics is "central" is just wrong. production &

productivity are central. demographics are a distant second, third, or fourth.

PS: the echo boom was larger than the baby boom, & total fertility per woman was higher. i don't think you even know much about the us demographic picture.

[PoliticAverse]

43. By 'dire straights' you mean 'spending more than it was taking in in FICA tax revenue'.

In a 'pay as you go' program like Social Security that means taxes supporting the program are too low.

The design problem with Social Security is that in a 'pay as you go' program you need to adjust revenue
with expenditures more frequently than Social Security actually does. Ideally FICA tax rates would be changed
each year to match expenditures for the next year taking account any overage/underage from the previous year.

Why this isn't done is purely for political reasons.

[yurbud]

15. that's still more solvent than the rest of the government, so why break something that works?

[alc]

17. for the last 11 years that was their intent

Gore was criticized for talking about the "lock box". I think most in congress understood but didn't want the details to get out.

I think it was their intent from the start. The fact that the trust fund has "special US bonds" instead of regular US bonds is a good indicator that they knew what they were doing. We can default on "special bonds" without upsetting the market of regular bonds. SS trust managers can't sell the special bonds on the open market, so they are pretty much at the mercy of congress.

[Uncle Joe]

21. It would be illogical to believe that any politician following the dogma of Grover Norquist didn't

intend for Social Security, Medicare and Medicaid to eventually go on to the chopping block and whether you chop off the head or just start with an arm or leg, the ultimate result will be the same, death to the safety net, the only difference being instant death versus death by stages.

Any government being "drowned in a bathtub" can't possibility champion the causes and needs of its' citizens, unless those citizens have mega-bucks, that kind of government is just fighting for survival and nothing else.

Those can be the only results of this ongoing "drown government" dynamic until some political leaders come to power with the courage, conviction and vision to reverse the current disastrous course.

One thing is for certain, the steadfast leaders willing to buck the current suicidal dynamic will need to obtain political power in spite of the corporate media, not because of them, as the corporate media's narrow self-serving interests are fundamentally at odds with those of the general public.

Thanks for the thread, yurbud.

[Recursion]

24. No one, not even Paul Ryan, is proposing we invalidate the Trust Fund's bonds

Where did that idea get started?

[indurancevile]

33. no, they're just proposing things which lead to the same result.

the result is not having to pay back what was borrowed.

[Recursion]

36. They're proposing changing the statutory definition of benefits

Would we be stealing from current workers if we raised benefits?

[indurancevile]

37. changing the definition of benefits = not having to pay back all or part of what they borrowed.

what don't you get about that?

[Recursion]

38. The part where that involves not paying back what was borrowed

The trust fund will still be eventually exhausted

[indurancevile]

39. no, it won't, under those conditions.

[PoliticAverse]

45. Exactly. If benefits were reduced to 0 the trust fund would never have to be paid back at all. n/t

[NNN0LHI]

25. Lot of people were thrilled to have their SS and Medicare being spent watching Shock and Awe on TV

Now they want their Shock and Awe and their SS and Medicare too.

Don

[PoliticAverse]

46. Your Social Security dollars at work...

http://blogs.abcnews.com/theblotter/2007/02/contractors_and.html

[B Calm]

27. The congress is bought and paid for by corporations!

[Trillo]

29. We'll gladly pay you today for a hamburger tomorrow? n/t

[PoiBoy]

31. Thom Hartmann offers up a good explanation...

...in a review of Prof. Ravi Batra's 2005 book "Greenspan's Fraud"...

The article is over 5 years old, but Thom's points and sense of history are relevant to our understanding of this situation, IMO.


http://blog.buzzflash.com/hartmann/10015

[fascisthunter]

42. that's alright... the rich won't mind people breaking into their homes to steal

[Cool Logic]

51. Off-balance-sheet accounting was bad for Enron and it is bad for the fedgov.

The difference is that what Enron did was a crime.