Corrente

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It appears as though the conspiracy to change/do away with social Security has a friend in Ben Bernanke and the Fed:
Ben Bernanke Is Bankrupting The Social Security Trust Fund

"In June of each year the Social Security Trust Fund (SSTF) reinvests a significant portion of its investment portfolio in newly issued Special Issue Treasury Securities. The interest rates on these bonds is set by a formula that was established in 1960. The formula was designed to insulate the SSTF from transitory changes in interest rates by averaging market based bond yields over a three-year period.

Bernanke’s Fed has set interest rates at zero the past four years. In 2012 the 1960's formula has finally caught up with the SSTF. It got murdered on this year's rollover."

Now I'll probably be dead by the time the shit hits the fan but this still pisses me off and if readers have parents that are dependent on SS for their 'retirement', then this should be of concern to them.

And it should be of concern to anyone who doesn't want any more erosion of the so called safety net to occur.

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Submitted by ubetchaiam on

'Murdered on the rollover' I took to reference the program that 'smooths
out the vagaries of interest rates as they affect SS given Bernanke's perspectives on interest rates in the future.
As towards the optics, according to the author,negatively -see the shortened time date for issues arising- but then see Hipparchia's reply.

Submitted by hipparchia on

first off, if you've got parents or grandparents that you care about living on social security, yes, you need to be concerned. the fools and knaves and leeches in the current congress and administration are either actively working to starve your loved ones or are happy to be passively sitting by and letting it happen.

the fear-mongering over the interest rates is a feature, not a bug.

speaking of bugs, here is one of my rants on the social security trust fund(s), just for a little background information.

[for now, i'm putting aside the facts that (1) the "trust fund" is basically just an accounting trick, and (2) the united states government does not "need" to use taxes to fund this or any other program]

here's the 2012 social security trustees report. it covers the income and outgo for the calendar year 2011 and makes a some wild guesses predictions about the future financial state of social security. here's the financial overview [from p14]:

just for comparison, here's the financial overview from the trustees' 1997 report for the calendar year 1996 [from p24]:

there's an extra line under "income" in the 2012 table - Reimbursements from General Fund of the Treasury. That's right, congress can, at any time it so chooses, vote to transfer money from the general fund to the social security trust fund(s). this particular transfer was part of the lower-payroll-taxes-extend-unemployment miniature grand bargain of not too long ago:

A temporary reduction in the Social Security payroll tax rate reduced payroll tax revenues by $103 billion in 2011 and by a projected $112 billion in 2012. The legislation establishing the payroll tax reduction also provided for transfers of revenues from the general fund to the trust funds in order to "replicate to the extent possible" payments that would have occurred if the payroll tax reduction had not been enacted. Those general fund reimbursements comprise about 15 percent of the program's non-interest income in 2011 and 2012.

but congress could just as easily make up any other reason - declining interest rates, for instance - to transfer money into social security.

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just for giggles and grins, see if you can tell which of these is from 1997 and which is from 2012:

and

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an interesting side note...

the three 1997 recommendations for restoring social security's "actuarial balance" were (privatize, (2) privatize, and (3) privatize: invest part of the trust fund in the stock market, put a significant portion of each person's social security payments into individual accounts, or put a smaller portion of each person's social security into individual accounts and cut benefits somewhat.

and in 2012 the recommendations are (1) increase payroll tax rates, (2) reduce benefits, (3) find other sources of revenue, and (4) all of the above.

what do you want to bet that the "other sources of revenue" are going to morph into "individual accounts" instead of "raise the income cap" or "tax the rich and transfer that from the general fund to the social security fund(s)"?

Submitted by ubetchaiam on

Gracias, appreciate the info and clarity.

Submitted by hipparchia on

i appreciate your letting me hop up on my soapbox and spout off on one of my eternal hot button issues. :)

Submitted by ubetchaiam on

The continued 'mix and match' reporting conjoining OASI and DI really makes it hard for the public to get a realistic appraisal of the issues.

Submitted by hipparchia on

another feature-not-a-bug! like the way social security and medicare contribute to the deficit, except when they don't.

you are correct about the di fund being in "more dire straits" than is the oasi fund. a simple, quick fix would be to just pass a law authorizing a one-time large[ish] lump sum transfer from the general fund to the di fund, enough to set it on a "fiscally sustainable" path for a few more years. there are other, probably better fixes, but we're really going to have to get rid of a sizeable portion of the cretins and fantasists in congress first.

Submitted by Hugh on

It's an interesting point. On the one hand, we have the partial rollback in the payroll tax. On the other, we have essentially no interest being paid on funds in the trust fund. I can see both as excuses for declaring Social Security in trouble and justifying cuts in benefits and raising the retirement age.

It is, of course, all bullshit. First, the trust fund is an accounting gimmick, a backdoor tax on current and past workers who have paid into the fund. The surpluses aren't held or invested by the government. They are transferred into general revenues and spent. Meaningless IOUs are written against them. I say meaningless because a government commitment to cover any shortfalls in Social Security funding is all that has ever been needed. How that funding would be handled in the future would be the same even if the surpluses had never existed.

I am trying to be careful in my wording, but there is some unavoidable crossover between three different views: the gold standard thinking of the politicians of both parties who put the scam of the surpluses together and who have benefited from them ever since, a gold standard critique of this scam (i.e. that the surpluses were never necessary because the government's commitment to cover future shortfalls would be the same with or without them), and a non-gold standard MMT view with my own resource approach mixed in.

So with that let me proceed to my second point, taxes have only two purposes at the federal level: to force the currency to have value because it must be used to pay taxes and to distribute resources among individuals in the economy by extracting the medium of distribution, money, from them. That's it. Paying for spending is not one of them. Tax money once it hits the government account is immediately extinguished. That is it ceases to exist. I think this is one of the hardest notions to get people who have grown up with gold standard thinking to understand. And even though we went off the gold standard 40 years ago in 1971, it is the thinking which remains dominant, primarily because it provides such rich justifications for why money should not be spent on the 99%.

Just as taxing subtracts money from private accounts. Spending adds money back into them. It is all about distributing resources in the economy. In a fair and just society, this distribution aims at giving all its members the basics: a job at a living wage, housing, education, healthcare, and retirement so that they can have a decent and fulfilled life. In one like ours, the distribution concentrates all our resources in the hands of an unproductive few to the great detriment and misery of the rest of us. What I am getting at with all this is that the government has never had the need for surpluses or the payroll tax to fund Social Security. It creates money and spends it on Social Security because this program has been viewed as a societal good, even back in the gold standard era where it originated.

Sorry for such a convoluted comment but it is like peeling back an onion. Narratives built on narratives. Or more accurately lies stacked on lies. And it takes a while to work down through it all.

Submitted by ubetchaiam on

"Or more accurately lies stacked on lies." ; and trying to get thru them all is like walking in quicksand.

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Submitted by mtngun on

And what Warren Mosler said, that ZIRP is a drag on the economy because it removes interest income from the economy.

Ed Harrison is concerned that ZIRP encourages speculation and leveraging, not that Wall Street needs encouragement in that department.

Submitted by Lex on

""In June of each year the Social Security Trust Fund (SSTF) reinvests a significant portion of its investment portfolio in newly issued Special Issue Treasury Securities."

Translation: "In June of each year the Social Security Trust Fund (SSTF) gives a significant portion of its funds raised from taxing workers to Congress to spend as it pleases and accepts IOUs from governmental institutions consistently working to destroy it in return for the actual money out of workers' paychecks."

I don't begrudge the payroll tax even a little bit, not even if it's not there for me for some reason besides nefarious politics. I'm ok with "my" tax dollars being dispersed to my grandparents, soon parents, and the general elderly. What i'm not ok with is giving that money to a highly corrupt political body/process with a long history of being terrible at managing money.

I've heard the "crisis" described as not one of the SSTF but rather one of the general fund because at some point Congress is going to have to start appropriating money to pay back all they've taken over the last 30 years and they'll run into the political dilemma of raise taxes or cut funding to the military ... and then also have to explain that they've been borrowing, not only from the present generation of workers but from the now elderly for decades and they don't want to pay it back. (Or we're all going to have to pay twice because they frittered away the money they borrowed.)