Social Security

Social Security's IOU Trust Fund

Trump won't solve the problem. Clinton will make it worse.

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Hillary Clinton
GARY I ROTHSTEIN/UPI/Newscom

Social Security is the largest single program in the federal budget. The retirement and disability program will cost about $950 billion this year, which is about 23 percent of the entire federal budget. Along with Medicare and Medicaid, these "entitlement" programs are already the main drivers of federal spending. Unless reined in, Social Security and its counterparts will eventually explode the federal budget. Unfortunately, few in Congress—and neither of the major-party presidential candidates—have any interest in acknowledging, let alone confronting, the problem with Social Security's insolvency.

That it's insolvent isn't debatable. Social Security faces a $10 trillion funding shortfall. Since 2010, Social Security has been running a constant cash flow deficit, meaning that the taxes collected for the program aren't enough to cover the benefits paid to beneficiaries. To fill the gap and keep the checks going out, the program has been drawing from federal trust funds. However, the government's trust funds aren't like trust funds in the real world. Trust funds in the real world contain assets; the government's trust funds basically contain IOUs. What that means in simple terms is that the government already has to go further into debt to pay Social Security's bills—and it's only going to get worse.

Even if one believes in the sanctity of the government's combined trust funds in general, Social Security's will be exhausted by 2034, thus triggering a benefit cut of roughly 25 percent. However, since President George W. Bush tried and failed to reform the program in 2005, Congress has abdicated its responsibility by simply avoiding the issue.

On the campaign trail, things are arguably worse. The two main candidates, Hillary Clinton and Donald Trump, have promised to leave Social Security untouched. When asked about what they would do about it during the debate, Trump responded: "I'm cutting taxes. We're going to grow the economy. It's going to grow at a record rate." That's all well and good, but we can't grow our way out of this mess. That's largely nonsensical.

Clinton doesn't want to cut benefits, either, but she'd actually exacerbate the problem by raising taxes on the rich while increasing benefits for lower-income Americans. Though the tax increase part of her plan might extend the life of the program, it wouldn't fix much. The Committee for a Responsible Federal Budget looked at the issue and found that some increase in revenue would occur in the short term, but a cash deficit would return within 10 years and grow over time. It concluded: "This change would close just over one-third of Social Security's structural gap by 2090. In other words, a substantial portion of the fix defers the problem, but does not fix it." And that's calculated even before she starts to spend more on Social Security.
But even that's probably too optimistic, says the American Enterprise Institute's Andrew Biggs in a recent Forbes column, because her "tax increases on the rich would boost revenues by far less than she imagines because of rarely-discussed interactions with other parts of the tax code."

Third-party candidates are only marginally better on the issue than Clinton and Trump. Gary Johnson, the Libertarian, has called Social Security a Ponzi scheme and has personally endorsed privatization. But he has also talked about means-testing benefits—curtailing the benefits of wealthy Americans—and raising the retirement age from 67 to 72. As he is on most issues, here Johnson is to the left of the Libertarian Party platform, which would "phase out the current government-sponsored Social Security system and transition to a private voluntary system."

Evan McMullin, an independent candidate, has acknowledged the problem of overspending on programs such as Social Security, but his plan is light on details. To the best of my knowledge, his reform ideas boil down to raising the retirement age and means-testing the program. Same as Johnson.

Beyond solvency, Social Security suffers from many other problems, so meek tweaks, higher taxes or expanded benefits without other cuts aren't acceptable solutions. The free market movement has provided many reform ideas over the years, from private accounts to an expansion of Roth IRAs or traditional individual retirement accounts to plain termination. Now is the time to act.

COPYRIGHT 2016 CREATORS.COM

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  1. Gotcha! You left out Jill Stein. I know how conspiracies and misdirection work. This can only mean that she has a workable plan, her brand of socialism will do the trick that no other kind has done.

    VOTE JILL STEIN!

    1. Jill Stein AKA “Tofu Palin”.

      1. Both Jill Stein and Palin are far superior orators than HRC. They are far more mellifluous than HRC and their speech is less fraught with filler – ums, you knows, eh…eh….eh….and likes.

        1. Also I bet Jill Stein knows Libya is in the middle of a civil war unlike Hillary. Then again when it comes to foreign policy and oblivious destruction Hillary is basically the same thing as Mr Magoo driving in rush hour interstate traffic in an 18 wheeler while texting and eating a big mac.

          On the other hand what difference does it make?

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            1. Imogen…. you’re still above ground?
              Too bad…

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        2. I’ll bet that both Stein and Palin understand that Libya does NOT represent smart power at its best and that unnecessary jostling with bears is dangerous.

          Not only are they better orators, they have a better grasp of foreign affairs than HRC.

      2. Where ya been, shreek? Did you pay your bet yet?

        1. He is waiting for Jeb! to win the primary, gold to hit $600 an oz, then, then he will have big $!!!!

        2. He’s too busy looking for his sarcasm meter, and he can’t fford a replacement, so how can he pay off any bet which he probably didn’t lose in the first place?

  2. We should create a new government office: the Office of Double Money.

    Whenever the government receives money, it’ll turn it over to the Office of Double Money, which will allow the rest of the government to borrow the money, leaving the Office of Double Money with bonds they can sell on the bond market.

    Double. Money.

    And they can just do it over and over again.

    And people thought QE was awesome. This will be a new thing.

    1. Krugabe just got a little stiffie.

  3. Trust funds in the real world contain assets; the government’s trust funds basically contain IOUs

    US Treasuries are “assets” in the real world – but not in Libertopia.

    Granted, the program is still insolvent but making Trump like false claims serves no purpose other than to stir up the deplorables/Teabagger/Bitter Clinger idiots.

    1. “Assets” meaning a guarantee that you’ll get your money by having some thug shakedown someone in the future at gunpoint.

      1. So all the financial institutions, corporations, and insurance companies that hold US Treasuries are holding fake assets?

          1. Don’t worry, President Jeb is gonna fix it.

    2. How is a treasury note an asset? It’s a debt owed to the person who owns the T-bill. My student loan is an asset, but not for me.

      1. Clarification: how is it an asset for the Government.

      2. Your student loan is a liability to you and an asset to the note holder.

        You may be a high individual risk but collectively taxpayers are not. That is the real world but Libertopians will dispute such.

        To many Libertopians gold is the only real asset.

        Yet the barbaric relic fluctuates wildly in value – yet Treasures do not.

        1. Maybe I don’t understand it but here is how I look at it. US government “owes” retirees. They fund it by borrowing from tax payers through treasuries. So they are paying a debt, by increasing another debt. How is that sustainable?

          1. STFU AN ASSET IS WHERE INSOLVENT SOMETHING SOMETHING NATIONAL DEBT EXCEEDS GDP. I’M TECHNICALLY CORRECT BECAUSE ASSETS CAN ALSO BE LIABILITIES

          2. It is currently not sustainable only because the number of retirees is growing faster than the Trust Fund is.

            But trying to claim the Trust Fund holds no real assets is (but instead “IOUs”) is a meaningless detour from a fix to the problem.

            The real question is “Do we raise taxes or cut benefits?” but politicians won’t answer that question out of fear of offending either taxpayers or SS beneficiaries.

            1. But if the trust fund is full of treasury products, it is full of debt. It’s not meaningless, it’s accurate. I can’t pay my mortgage with my credit card and call my credit card an asset. This is really just academic because SS isn’t going to get fixed, because the only ways to fix it are painful, and no one wants to be the guy saying the party has to end.

            2. The Trust Fund is meaningless because it doesn’t fucking exist except as a progressive talking point meant to trick people into thinking that the payroll taxes collected from them are safely banked as a “retirement account”.

              1. You got that on wingnut.com or Alex Jones?

                1. The U.S. Supreme Court, actually. Look it up.

            3. The real question is “Do we raise taxes or cut benefits?” but politicians won’t answer that question out of fear of offending either taxpayers or SS beneficiaries.

              Or, go into more debt?

            4. “IOUs” from a third-party that is reasonably expected to repay are assets.

              Issuing an IOU from yourself to yourself contributes nothing to net worth on a consolidated basis. The asset and the liability cancel out, leaving only the obligation to pay promised benefits. Fortunately for the US government, SCOTUS has ruled that Social Security does not promise to pay benefits to anybody in the future. Benefits can be cut or eliminated any time Congress cares to do so. So there really is no enforceable liability to pay benefits.

        2. That is $600 an oz gold, right?

          1. The goldbugs were so full of shit, the market price per troy ounce of gold never got close to $2k

          2. $700 gold is coming back when interest rates normalize.

            And goldbugs are still idiots.

            Are you Doomsday Preppers still ready for a Mad Max world?

            1. Obamacare sure is doing swell, huh?

              1. 8% better than last year.

              2. It is doing fine and working like a market should. ACA premiums are rising to reflect higher healthcare costs.

                Like I have always said it is much to do about pretty much nothing and far better than single-payer would have been.

                1. Ah me, you are useful after all.

                  “much to do about pretty much nothing ”

                  It’s like a tard though gauge.

                2. Actually the rates are increasing because that’s what has literally always happened when you can’t deny coverage to someone who is incapable of being anything except a loss generator to the company.

                  Or can we add Insurance to the long list of shit you don’t understand?

                  And for the record, the Emergency Room provision and the various Medicare/Medicaid programs are what were driving cost increases, which in turn drove insurance rate increases, before the ACA was even a twinkle in Momma’s eye.

                  I can’t think of any legislation off-hand that’s actually bent the cost curve away from cost increases and, thus, rate increases.

                  The ACA was guaranteed to produce this result, and anyone and everyone knew it except the useful idiots. The architects of the plan itself were well aware of this inevitable and certain end. It could be no other way.

            2. $700 gold is coming back when interest rates normalize.

              The Oracle of Augusta has spoken. It is now memorialised and Is Known.

              1. He should make another bet with Playa.

              2. He is creeping up from the he has been raving about since 2013.

            3. In a Mad Max world, gold would be worthless.

              Are you going to eat and drink gold?

              Are you going to put gold in your gas tank, or stay warm with your gold?

              1. No. I’m going to use it to buy something to eat and drink and to put gas in my gas tank and heat in my house. I might have to use a lot more of it than I’d like, and it may become worth less relatively speaking, but it won’t be worthless. Very few tangible, concrete things in this world are “worthless.” Even piss and shit have their uses ( for making saltpeter for black powder.)

              2. Not to mention that, in a prepper post-apocalypse world, how much gold would you have to have in your pantry to sustain your lifestyle (like, food alone, for example) for, say, thirty or forty years, or do you think the Apocalypse you’ve prepped for will “settle down” to ‘normal economics’ in a decade or so?

                More rainbows and unicorns, but on the prepper side this time…
                Reality check, anyone?

            4. $700 gold is coming back when interest rates normalize

              Not likely. When interest rates “normalize,” the government’s blended interest rate on its debt is going to break the budget. that’s not a recipe for $700 gold, which you’ve been calling for about 7 years now.

            5. Palin’s Buttplug|10.27.16 @ 8:40AM|#
              “$700 gold is coming back when interest rates normalize.”

              Don’cha love “predictions’ that are couched in ‘when unicorns fart’ as a requirement?

        3. Your student loan is a liability to you and an asset to the note holder.

          Yes, a loan is a liability to the borrower and an asset to the lender. But in the case of Treasury Notes, the government is both the borrower and the lender, so on net a Treasury Note is worth $0 to the government, as each note is both an asset and a liability of equal value (which cancels out). Therefor, any statement to the effect that the SS trust fund is empty is true, as it is filled with $0 net value assets. If this is too hard for you to understand, there’s an experiment you can try at home to illustrate the issue: go take some money out of your own wallet, put it in your hand, and see how much richer you’ve made yourself.

        4. “Yet the barbaric relic fluctuates wildly in value – yet Treasures do not.”

          That’s why the guy who cashes in a 30-year Treasury bond this month gets about 45% of the purchasing power required to purchase the bond when it was issued in 1986 …

          whereas the guy who bought gold in 1986 and sells it today gets about 146% of the purchasing power of the $390/troy ounce he paid in 1986.

          If “value” is measured by purchasing power, the barbaric relic may fluctuate wildly in value, but its trend line is more or less upward. The trend line US Dollar’s value is reliably downward, such that it is worth only about 5% of what it was a century ago.

          It should be noted that, until fairly recently, the US Treasury bond paid a significant interest rate to compensate for its deteriorating value. In 1986 the rate was so high that it would have compensated for the difference between the 45% and the 146%, if it were not for the pesky fact that one must pay income taxes on the interest received.

    3. “serves no purpose other than to stir up the deplorables/Teabagger/Bitter Clinger idiots”

      AKA the growing number of people who are waking up to the fact that government is more and more becoming a lawless band of thugs are in danger of reaching a critical mass and bringing the whole shitshow to an explosive end. That sounds to me somewhat analogous to “breathing serves no purpose other than to circulate oxygen to, and dispel carbon dioxide from, the body” – well, yeah, but that’s a pretty damn important purpose.

      1. Then they should quit humping the legs of the two parties and vote Libertarian.

        Republicans suck just as much if not more (thinking 2003-07) than Democrats do.

          1. WELL I…agree actually.

            Then you might be a real libertarian. Swiss is like John’s half-ejaculation little brother – here to constantly recruit for the GOP.

            1. Oh horsecrap – show me one time I have said vote GOP! I am a libertarian, Donkeyboy.

              1. …and I will keep waiting.

    4. They are not assets moron because there is no store of value that they are written against. It is literally the equivalent to my spending my retirement savings and then writing little slips of paper promising I will pay myself back with interest at some point in the future.

      Given that the Federal Government has no excess revenue from which to honor those bonds and there is no evidence whatsoever that it possesses the capability to extract extra tax revenues (and quite a bit that says we are at or near the peak of the Laffer Curve) then it is a given that those IOU’s will simply be converted into regular treasury bonds when they are cashed in.

      So yes they are an “asset” if you think of the SSA as an entity separate from the government, problem is they are not an entity separate from the government and political reality says that barring a total collapse of our government every penny of those bonds will be paid back to the SSA we need to just start admitting that the debt owed by the government is not just the debt held by the “public: that leftists like to tout but the much larger debt including intragovernmental holdings

    5. The IOUs in the trust funds are not tradable, therefore they are not worth anything i m the bond market. Notwithstanding the effects of flooding the market with enough bonds to float this debt.

    6. By definition an asset is only an asset if someone is willing and able to pay you for it. Even being the moron you are you should know this. So how about those notes in the trust fund? Turns out they are rstricted and by law cannot be sold. Ecen id they could the represent a future liability to the gov’t. They can only be rdeemed by the gov’t, i.e. thru general revenues. So much for your assets.

    7. PB is right here. US Treasuries are assets of their owners and liabilities of the US. The holdings of the SS Trust Fund are recorded liabilities of the US. As constructed, the quoted statement makes a distinction without a difference between “assets” and “IOUs”. But there is indeed a difference ‘twist the two.

      It would be more accurate to distinguish between a real trust fund and the SS trust fund by stating: “Trust funds in the real world contain legitimate claims on the wealth and cashflow of third parties that are likely to make good on their obligations; US government trust funds contain unsecured claims on itself.”

    8. US Treasuries are assets if you’re not the US government.

      If like if I write a check for $100. If I give it to you, it’s an asset because you can cash it and get $100. If I give it to myself it’s not an assets because cashing it only gives me $100 that I already had.

  4. “Trump won’t solve the problem. Clinton will make it worse.”

    OR

    Crying won’t help you. Praying won’t do you no good.

    If that doesn’t sum up 2016 in ten words, I don’t know what does.

    1. Which was also the closing theme song for “The Big Short” which was friggin awesome.

    2. If that doesn’t sum up 2016 in ten words, I don’t know what does.

      Shit in one hand, wish in the other, and see which fills up? (Meh. Thirteen words.)

  5. “This change would close just over one-third of Social Security’s structural gap by 2090. In other words, a substantial portion of the fix defers the problem, but does not fix it.”

    The perfect political solution: The appearance of propriety and competence.

  6. I’ve said for a long time that Social Security should be means tested, Washington just needs to admit to the American people (who will be squawking about SS being “our money” and “you promised”) that hey, we lied to you and stole your money and spent it, now your choices are 1) face the fact that we lied to you and stole your money and spent it and that SS is just a welfare system for old people and treat it as such, or 2) keep pretending SS is some sort of retirement investment account and steal money from your children and your children’s children to repay the money we stole from you. There’s your choices: face the fact that you were lied to and swindled out of your money and accept that that money’s gone or lie to your children and swindle them out of their money in order to avoid facing the fact that that money’s gone. Please note that choice #2 makes you complicit in the scam, you dirty rotten bastard, stealing money from your own goddamn kids, you thieving piece of shit.

    1. Of course, since that will never happen, here’s what’s really gonna happen. You know all those IRA’s and 401K’s that have been accumulating tax-free dividends for all these years? They’re all owned by rich people who haven’t paid their fair share. So we’re going to need to charge a one-time-only special tax, a very small tax, on the wealthy who can afford IRA’s and 401-K’s. I mean, poor people don’t have IRA’s and 401-K’s do they? IRA’s and 401-K’s (and any retirement accounts, really) are, by definition, “extra money” that people have just laying around that they don’t need to pay current living expenses – and people who have extra money just laying around like that are, by definition, rich. Right? So doesn’t basic human decency and fairness dictate that the rich should be asked to pay just a tiny bit more – just this one time – to keep your grandma from starving to death?

      1. The Donkeys have already been sniffing around for a way to loot IRAs and 401ks….mostly under the guise of “mandatory retirement savings” accounts, run by your friendly and thrifty fedgov.

        I am 50, but will gladly say “OK, bye bye SS” if you just let me out – and I will sock away the $ the fed isn’t taking out of my check.

        1. Actually, that was your boy Bush in 2005 when he proposed a Social Security “fix” that would park 1/3 of your contributions in Lehman Bros.

          1. That is a fucking bullshit lie and you know it.

            The Bush proposal was to have 1/3rd of your social security taxes be deposited into an account you managed and the government couldn’t touch. The current Democrat trial baloons have all revolved around seizing existing private retirement accounts and using them to fund a new entitlement benefit over and above Social Security

            1. The current Democrat trial baloons have all revolved around seizing existing private retirement accounts and using them to fund a new entitlement benefit over and above Social Security

              that is a total lie. The only Obama “trial balloon” was Simpson Bowles (which cut benefits)

              And Bush’s 1/3 contribution would divert money FROM the Trust Fund thus hastening its demise.

              I know this shit. You only know the GOP talking points.

              1. Wait, where did I say Obama trial balloons. I said Democrat.

                The CEI and SEUI have both propose plans in the last 5 years to do exactly what I said.

                Also moron the entire point of the bush proposal was to hasten the demise of the trust fund by reducing the public’s reliance on tax revenues to fund their retirement benefits

              2. You don’t know shit. Diverting future recenues into a private program is not raiding. By your definition any reform to ss is raiding. But you are a donkey so counting is hard.

            2. The Bush proposal was to have 1/3rd of your social security taxes be deposited into an account you managed and the government couldn’t touch.

              Indeed, the Leftist talking point at the time was that managing this account would be too hard for the common peon who would thus lose his shirt in the market.

              1. Indeed, the Leftist talking point at the time was that managing this account would be too hard for the common peon who would thus lose his shirt in the market

                And the irony is that the proposal wasn’t any different from the TSP program that fedgov employees are allowed to participate in. You have the ability to allocate savings to different funds ranging from a stock market index to government treasuries. Millions of government workers can figure out how to use this, but a college-educated workforce can’t?

      2. I’m a reasonable man. Slow to anger, quick to forgive. But if they steal my retirement accounts, I’ll seriously consider violence for whomever voted for it.

        1. That’s where I’m at. It would be a theft of the largest financial asset I own (I don’t own a house) and it would put me at risk of privation or even outright starvation in my elder years. So yeah, my response to that would probably be great anger.

          1. it would put me at risk of privation or even outright starvation in my elder years.

            Nailed it. They want you dependent on government handouts. That way you have to vote for who will give you the most crumbs from the table.

        2. Well, to be fair, I have to admit that when IRA’s were first becoming a thing I laughed at the idea that tax-free money piled up in government regulated accounts wouldn’t prove irresistable to the government. ( I said this isn’t like letting the fox guard the chicken coop, this is like taking all your chickens over to the fox’s house and dumping them in his kitchen and asking him to keep an eye on them while you go on a year-long vacation.) I predicted that within 15 years or so – certainly by the year 2000 – IRA’s would have a big tax bite taken out of them because the government couldn’t possibly let that much money just sit there and not steal a handful. I was wrong, I admit it, they actually expanded the program for tax-free retirement investing so maybe they’re not irredeemable crooks. But I wouldn’t bet on it.

          1. The candle still had room to burn. we are getting closer to the nub, now.

            1. Obama has formally proposed (in at least one of his budgets) that caps be imposed on retirement account balances, which seems like the logical first step toward actually confiscating them. I believe he called for a maximum account balance that would buy an annuity equal to the maximum pension owed to the top GS-level federal employee. Thankfully, this went no where, but I look for such proposals to reappear.

          2. The sad part was that private businesses couldn’t stand there being a huge stash of money in their employees retirement accounts, when times got bad. That’s why so many private firms stopped offering defined benefit retirements and went to defined contribution schemes, where you’re on your own if you don’t put away enough.

      3. So doesn’t basic human decency and fairness dictate that the rich should be asked to pay just a tiny bit more – just this one time – to keep your grandma from starving to death?

        Uh, no, it doesn’t.

    2. Washington just needs to admit to the American people (who will be squawking about SS being “our money” and “you promised”)

      I agree, but despite the facts, the people will scream. The point was settled *only* 56 years ago by the Supreme Court, yet you still see bumper stickers about leaving “my” social security alone because “I” paid into it.

      https://en.wikipedia.org/wiki/Flemming_v._Nestor

    3. I’ve said for a long time that Social Security should be means tested,

      I agree that this is how they will “fix” it. In a way, SS has been means tested for 30+ years already.

      As I remember, SS payments were not subject to Federal Income Tax prior to the 80’s. After all, your contributions had already been taxed when you earned the money. Then comes the Greenspan commission to note that since you did not pay federal on the employer contribution, we’ll now tax 50% of your payments at the back end. And if you make over a certain amount, we tax 85% of your payments.

      IIRC, the 50/85 cutoff is not indexed to inflation. So over time all SS recipients can expect to pay the higher tax. I would expect politicians to continue to adjust those numbers as a way to stealthily means test Social Security.

      1. SS won’t be means tested. Everybody will get their benefits. Of course, if a recipient receives pension or IRA distributions over some de minimis amount there will be an offset against their full benefit. Kind of like federal employees don’t get to double dip now. Because … fairness, not means testing. When the system collapses, people will still get their benefits in fiat currency that deteriorates in value faster than COLA adjusts.

        1. ….. benefits in fiat currency that deteriorates in value faster than COLA adjusts.

          It already does and has done so for a number of decades. Screw the government’s official rate of inflation bs.

    4. So…”You fucked up. You trusted us.”?

    5. And whichever party is in power at the time can rely on not getting re-elected for the foreseeable future.
      Not to mention that there might be a rebellion, at least as far as making those “contributions” to the SS trust fund is concerned.
      What is most likely to happen is that, because the SC said it was nothing but a tax, the benefits will still be paid out, from what is being contributed, plus whatever needs to be drawn from the general fund, to make up the difference. Payroll taxes will be raised, some, and other taxes will be raised, to cover what is being paid out.
      That will be how the lie of it being a retirement fund will be covered by the bigger lie, that it is funding itself.

  7. That it’s insolvent isn’t debatable.

    Shriek, amsoc and Tony will be gibbering something to the contrary.

    1. Shreek’s already been busy in this thread.

      1. I see that – put up a Social Security or O!care thread and his statist alarm goes off “MUST DEFEND GUVMINT!!!”

        1. He’s such a one-note idiot.

    2. Wrong again.

      Granted, the program is still insolvent but making Trump like false claims serves no purpose other than to stir up the deplorables/Teabagger/Bitter Clinger idiots.

  8. Trump won’t solve the problem. Clinton will make it worse.

    SO WHO AM I SUPPOSED TO VOTE FOR?!?!?!?!?!!!!1!??!eleven?

    1. Fuck Beast! Grab America by the Pussy! 2016!

      1. Make America Deplorable Again?

        1. By George, I think you’ve got it!

  9. Right smack in the middle of this article was an ad from “Disability Justice” claiming I could earn up to $2600 a month for not working due to illness or disability.

    1. Sounds like a good deal. I’d jump on it.

    2. Disability fraud is all the rage under Obama’s jobless recovery.

      1. You really don’t want to know what many state Industrial Commissions have been doing with worker’s comp decisions…

      2. Disability fraud = white man’s reparations!

        1. So just how much is your monthly check?

          1. Not mental disability, NAS.

  10. Here’s how you know the trust fund is bullshit:

    Let’s say the trust fund was empty, and the government wanted to spend money on social security benefits. They could either:

    1. Spend whatever SS taxes they have
    2. Spend less somewhere else to spend more on SS
    3. Raise taxes
    4. Go into debt by issuing bonds

    OK, now there’s a trust fund! They now have the additional option to:
    5. Sell bonds on the bond market.

    Options 4 and 5 result in exactly the same thing: giving bonds to external debt holders.

    The Trust Fund is just an accounting gimmick for going into debt funding SS and pretending you’re not, at the same time.

    1. Almost right.

      Technically those bonds cannot be sold on the bond market, they are a special class which can only be used by the SSA.

      So to use the bonds to fund SS benefits the SSA must first redeem them with the treasury to convert them into cash.

      The Treasury then must figure out where to get the cash that they have to honor the SSA bonds, and for that we can either issue new Treasuries, cut spending, or raise taxes.

      It still works out the the same thing, eventually that entire SSA trust fund is functionally no different than any other Federal Debt as much as they try to insist it is.

      1. I assume the government could also pay off its debt to Social Security and immediately terminate the program, and allocating all of its assets to itself. Which would essentially be making the debt go away.

        For that reason, taking SS as part of the same government as a whole, the Trust Fund only has any worth in the ability to sell bonds, ie, Federal Debt, nothing else.

  11. Easiest thing to solve but the candidates are all in the bag for the AARP.

    Just raise the full retirement age by 2 months per year, exempting anyone who is either already on SS or within 5 years of qualifying for full retirement benefits. Tie Medicare to this, and the problem is even more solved.

    Or, we can watch the republic go down the drain.

  12. Excellent article and shockingly it points out just how worthless johnson is on thus issue. Nick must have been passed out on the couch to let this through.

  13. Since it’s clear that America is not ever again going to accept the idea that ALL individuals are responsible for their own retirement, the least damaging option that still gets Grandma her subsistence money is to guarantee payments for anyone who wants it, but allow absolutely anyone to opt out of 100% of their Social Security tax and associated benefits, take back anything they had previously contributed, with no interest or inflation adjustment, and do their own thing. Government raises income taxes or goes deeper into debt or whatever it has to do to cover the shortfall, but at least no one is forced to get a shitty return on their retirement money.

    This would clearly benefit rich people so it would be impossible to pass because 60% of the country automatically refuses to help rich people even if there are no downsides (and here, there are downsides). We’d also get horror stories about how Jim Bob thought he could opt out and be okay, but then the market crashed and he’s homeless. Terrible plan from a PR standpoint.

    I would still do it even if it meant SS is now directly stealing hundreds of billions from the general fund because at least you are giving people back some control of their lives.

    I guess “privatization” is okay, but there’s still a serious restriction of freedom in having a mandatory Fidelity account just like with mandatory SS taxes. So I’d prefer a clean break for those who want it.

    1. I’m 30 years old. If SS is to stay solvent long enough for me to get my money back, the retirement age will probably have to be raised to 85 or so. I would love love love to opt out. I already contribute a double digit percentage of my income to a retirement account and have been since I was 19. If I could contribute my SS taxes into that I would be able to retire much earlier and much more comfortably.

  14. Is it any wonder that even relatively fiscally responsible politicians tend to run away from this issue?

    The public does not like to be told they were duped by the New Dealers about what SS actually is and how it functions, and especially that that function is unsustainable. In some ways this is understandable, no one wants to be in the group getting screwed over when a scheme like this collapses, but one way or the other, at least one age cohort will be.

    1. The cohort in question will be Gen X. The boomers outnumber Gen X so they vote to protect SS and medicare while they receive it. Once they die off and Gen X is the only cohort receiving it, they’ll be outnumbered by the “Echo Boomers” who will cut them off.

  15. About that picture with this article: a trigger warning would have been nice.

    That face is going to haunt my nightmares for at least the next 4 years.

  16. Palin’s Buttplug illustrates the confusion of pretty much every person I have ever heard discuss the SS trust fund in the real world.

    Sure, we can say that SS has assets that will keep it floating for a few more years. But, those assets can only be accessed when the Treasury Department raises taxes (or borrows more money) so they can transfer the cash to SS, who can then transfer cash to old people.

    This is operationally no different than if there were no trust fund at all. If there is no trust fund, where does SS get the money it needs to pay benefits? By asking Treasury to raise tax revenue (or borrow more money).

    Therefore, the trust fund has no intrinsic value. Instead, it is a score card of all the SS tax revenue that we spent on other shit for the past 50 years.

    Where the lefties are correct is that SS can’t/won’t go bankrupt in a recognizable way. Instead the US will just print more money, transfer it to SS and then to old people. This is just a different way to tax people, through inflation. The people who get screwed are the ones on fixed incomes, or with cash reserves. People with useful jobs will get raises to offset inflation. People who have tangible, noncash assets will see those rise in value to offset inflation. It will just be a different way to transfer money from young people to old people.

  17. Oh, fuck it, I’ll give it one more try…

    Veronique… listen up.

    The problems you described and everyone else here is commenting on developed over DECADES and every fucking one here is trying to create ‘solutions’ that will Fix Things in the next decade (or if you’re a politician, Before The Next Election.)

    Bullshit! Never gonna happen! Let alone because of political crap that will stand in the way of those “solutions.”

    Here’s my take on it… again.

    First, SocSec must be remodeled to account for indexing to Life Expectancy of everyone IN it and ENTERING it.
    “Retirement Age should be something like ten years below Life Expectancy of the person paying into the system. It would have to be adjusted maybe every ten years or so. And everyone can fight over whether Life Expectancy, hence Retirement Age for SocSec eligibility should include factors for gender, race or other PC shit. LOL.. good luck with that part…

    Second, it would be great if it were OPTIONAL, where a potential signatory to it could opt for “Full” membership or some “Partial Membership,” based on their personal choice of how much of THEIR future Retirement Benefits they want to come from The Gummermint or from their Own Investments. In increments of, say, 10% or so, from zero to 100%. … With limited options to change that more than 10-20% over their working life.

    — continued….

    1. THEN, if it pleases Their Royal Majesties, contributions could be adjusted for EVERYONE… those entering AND those already In or Retired, to maintain solvency until the New Members take over the majority of the money flow.
      Insanely, enough, this Plan would take place over the Working Careers of everyone NOW entering the workforce. They’d know, upfront, what they’ll be paying AND what they could expect to receive, much unlike today’s “program.”

      Yeah, the government screwed it up and maybe THAT “1%” of the population (wish it were only 1%) could forfeit THEIR self-voted retirement plans to help pay for SocSec for everyone else.

      So, bottom line: It took nearly 100 years to reach this fucked-up condition and anyone with a reasonable fraction of a brain should be planning for a Repair Job that WILL TAKE at least three to five DECADES to get back to Anything Resembling “Sensible.”

      Ok, kids… back to your regularly-scheduled yelling.
      Cheers!
      plusafdotcom.

  18. Arguing that Social Security spending is a major drain on the Federal government (the biggest single federal expense!)? Even though Social Security has it’s own separate revenue stream (with payroll taxes from people who will be future moochers!)? Even though it’s an off-budget item? Answer this related question. How do you make pesky federal budget deficits appear smaller? Include both Social Security revenues and expense figures in the (combined) federal budget numbers, which politicians have been happy to do while Social Security was running surpluses building up the Trust Fund.

    Paper IOU’s? Is that what US Treasury Bonds are being called? If you think the government is going to ruin its credit by defaulting, you don’t understand debt financing. Treasury Bonds. Backed by the full faith and credit of the United States. Understand?

    That cash flow deficit? That hasn’t happened yet. That only currently occurs if you conveniently ignore the interest that the $2.8 trillion in the Social Security Trust Fund earns off of its Treasury Bonds. And you would ignore that only if you are trying to deceive someone or actually believe the deception. But yes, cash flow deficits will happen. And how will it affect the federal budget? It won’t. If Social Security cashes in Treasury Bonds, new bonds are sold to other investors to cover the redemption and to keep the federal debt financed. Did you think the federal government would implode because of a self-financed program? (continued)

  19. (cont., 2 of 3)

    And why is there $2.8 trillion in the Social Security Trust Fund? Because Baby Boomers will be retiring. Because in 1977 and in 1983 amendments were made to the Social Security Act of 1935 to provide for the build-up of the Trust Fund so that Social Security would remain solvent through the Baby Boomer retirement years and beyond. The 1977 amendment established estimated solvency for 50 years. The 1983 amendment projected that assets would rise to a peak in 2018, and then decline in order to cover annual deficits in the years between 2018 and 2051.

    It is 39 years later, and no significant amendments to the Social Security Act have been passed even though the fund is now expected to run out in 2034. Why? Read the above lies and recall all of the efforts to privatize or eliminate Social Security (think administrative fees from private retirement accounts).

    Social Security insolvent? With $2.8 trillion in a trust fund? And you haven’t actually read the Annual Reports of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds, have you? You know, like the 2016 report sent to the Speaker of the House of Representatives, Hon. Paul D. Ryan; the President of the Senate, Hon. Joseph R. Biden, Jr.; the Committee on Ways and Means; and publicly available. The secret report publicly available. (https://www.ssa.gov/oact/tr/2016/tr2016.pdf)

    1. Correction, not 39 years (that would be for 1977). It has been 33 years since 1983.

  20. (cont. 3 of 3)

    The increased retirement age and proposed cuts in benefits? That will not reduce federal deficits one thin dime. And any savings from cuts to Social Security will only change the date that the Social Security Trust Fund is depleted (currently 2034). Explode the federal budget? It isn’t even part of the federal budget by law. That’s why it is called an off-budget item.

    And remember this when you hear all those lies from people who have much more money than you. They pay a far smaller percentage of their income in payroll taxes. Those taxes are only taken out on income below $118,500. Above that and the rate is zero. And that is on net income. Their problem with Social Security is not with what they pay in. It’s the denial of financial fees for handling retirement accounts, or it’s an ideological objection to the most successful government program we have, a program that they consider socialist and one that should have failed long ago.

    Private retirement plans are subject to theft, bankruptcies, stock market crashes, bank closings, and incompetent or unscrupulous administration. In contrast, Social Security will always be there. Unless, of course, our politicians take it from us.

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