And what a surprise - rates today are much lower, yet tax evasion continues to be a problem.
And what cash will they give to the SSA in exchange for those bonds? Where will that come from?
The same place cash comes from now when the Fed buys t-bonds in order to manipulate the interest rate: nowhere. The Federal Reserve has the authority to create money to redeem any US government security.
The federal reserve can create new US dollars, and it can buy US Treasuries - but this is not the same as redeeming them. The fed becomes just another bondholder that needs paying by the treasury dept. The money goes to the person who previously held the bond as payment for the bond.
Also there is about $20 trillion outstanding public debt, and only $3.3 trillion in the whole money supply, so there is a big gap in money creation needed to pay off the debt. Would tank the currency and kill the economy (think hyperinflation).
https://www.treasurydirect.gov/NP/debt/current
http://www.tradingeconomics.com/united-states/money-supply-m...
The Fed does not get paid. It doesn't need to get paid, since the Federal Reserve by law has infinite liquidity.
https://www.quora.com/What-happens-to-all-the-bonds-that-the...
We're all aware. Whether the money is taken from the next generation or from the federal reserve is irrelevant. The point is that it's not yours until the government takes it from them and gives it to you.
Yes, but that is $25B out of total receipts of $884B[0]. For every $1.00 paid in over $.97 was paid back out to beneficiaries. In 2015 it was $.975 and 2016 will probably be higher still.
According to this page[1] the trust fund will be depleted by 2035. I know that is a projection and things can change, but to say there is no room for concern borders on hubris.
[0] https://www.ssa.gov/oact/STATS/table4a3.html [1] https://www.ssa.gov/oact/trsum/
Which, as you can see from comments upthread, is -- even though I personally don't think it's true -- one of the arguments that people regularly make in favor of SS when they feel it's under threat ("it's your money", "you paid into it and you should get your money out", etc.). Positioning it in this way makes voters feel like they have a personal investment in the system that they need to protect, which is clever because people generally hate having something taken away, much more than they dislike not receiving something (even if the amounts are the same).
When it becomes a straightforward tax, then it'll be attacked like every other tax during the periodic political pendulum-swings in favor of lower taxes and fewer government programs in general. And by removing the contribution cap, it'll suddenly have a lot of very wealthy enemies who have a significant vested interest in making sure it goes away. I would not expect it to last long under those conditions.
So bloody what? I've got no problem taking from the rich to fund a basic income to keep the elderly off cat-food. I've got parents and a grandmother left who need Social Security.
>When it becomes a straightforward tax, then it'll be attacked like every other tax during the periodic political pendulum-swings in favor of lower taxes and fewer government programs in general.
It already is attacked during regular political pendulum swings. Both Clinton and Bush 2 tried to privatize Social Security.
That shows a grave misunderstanding of both proposed solutions to the SA insolvency problem.
It would have been called mandatory social savings if that was its intended purpose. It's not. It never was. It's social security.
>one of the arguments that people regularly make in favor of SS when they feel it's under threat: "it's your money"
This is actually one of the arguments used to try and justify privatizing it and handing over the money to Wall Street to invest instead (Bush tried to do exactly this and Obama made noises about it).
>And by removing the contribution cap, it'll suddenly have a lot of very wealthy enemies
It ALREADY has a lot of very wealthy enemies who are trying to privatize it. One of the most prominent is Stan Druckenmiller, who is fairly open about inciting intergenerational warfare - telling "millenials" that "boomers" are the cause of their problems and that the "fix" is privatizing social security and austerity:
http://www.nakedcapitalism.com/2013/10/who-should-young-peop...
You're describing a distinction without a difference, as other parts of the USG have already spent the surplus.
The US government will be in debt for the rest of its existence and the balance of that debt will likely increase every year. The Federal Reserve openly targets a 3% inflation rate and that inflation is going to come from ye olde printing press.
IMHO, better this inflation come in the form of SS payments than payouts to military contractors.
I'm coming from the perspective that there is neither a short term nor long term plan to address the inevitable default of the US government, decades hence. We WILL either default, monetize, or sell federal land. Math won't stop working in my lifetime.
http://www.nakedcapitalism.com/2016/05/the-7-biggest-myths-a...
Social security's 2030 "insolvency" was a political decision not an economic inevitability.
Gun violence is trending down and rather low historically. So I guess SS really is doomed.
I think it is more likely that the attempt to try and cover Social Security shortfalls by importing labor will backfire, and that the new citizens will vote against paying more to cover retirement expenses for Boomers and Gen-X.
Because they'd like a similar system to take care of them in their old age, same as if they'd been born here? Why are you adding race into it as if the economic factor weren't the primary driver? If participants in the system have access to the benefits, in the future, why should they care about ethnic disparities between the current workforce and the cohort of retired people?
Your argument is that people of differing ethnic identity cam't have or perceive common or mutual economic interests.
http://www.politifact.com/florida/statements/2014/sep/24/car...
This is terrible legalistic reasoning. It essentially says the government cannot create a Ponzi scheme because Ponzi schemes are by definition illegal and governments define what is legal.
Better reasoning would incorporate the government's indirect control of inflation, direct control of federal wages and ability to "restructure" social security benefits and taxes, as well as the fact that the economy grows in real terms. This reasoning is more complex, but it is behind why investing in a start-up that plans to go public isn't a Ponzi scheme.
-There are no promises of huge returns
-The inner workings of the program are public knowledge
-There is no fundamental demographic or mathematical reason the system (a pretty straight-ahead social insurance program involving a certain amount of wealth transfer) should ever become insolvent, assuming the political will exists to keep it running.
Which is exactly what is happening now with the lopsided ratio of retirees and new incoming workers.
They seem to have marked the assertion as "False" based off of really semantic technicalities
Read up on it, it's a lot more interesting than the "it's going broke!!" stuff makes it out to be.
http://www.pewresearch.org/fact-tank/2016/04/25/millennials-...
That future probably wasn't terribly obvious to the politicians who created them (given that most public pension plans were created roughly between World War I and a bit after World War II).
In fact, based on some of the literature of the time (eg The Population Bomb -- https://en.wikipedia.org/wiki/The_Population_Bomb -- etc.) I'd say it's more like people were fearing the reverse.
Seriously, just google "is social security a pyramid scheme".
You'll find a LOT of breathless articles from personal blogs and sites like World Net Daily calling it a pyramid scheme.
You'll also find a lot of, for lack of a better way to put it, content of actual substance that describes how it's not a pyramid scheme, but a sustainable government program that's worked out just fine for decades (with regular adjustments, as all human endeavors need).
A ponzi scheme is quite different. You pretend to invest an initial investor's money. The returns to that investor are paid out of money coming in from later investors.
Social security works in this way. The money paid into social security is not invested at all. The returns from social security (money going out to current retirees) come entirely from new investments (money going in from current workers). This is the basic definition of a ponzi scheme. It is a sustainable ponzi scheme so long as taxes collected from current workers exceed benefits paid out to current retirees. The designers of this system did not count on two things: (a) ever increasing life expectancy and (b) the baby boom. The former has increased the length of time each person collects benefits and the latter has resulted in a demographic bulge that is now hitting its retirement years.
Thank you Mr. Bismarck![0]
[0] https://en.wikipedia.org/wiki/Otto_von_Bismarck#Old_Age_and_...
I understand the comparison to Ponzi schemes, but I consider these comparisons rather hyperbolic. The intent of a pay-as-you-go pension never is fraud. There are some definite problems with pay-as-you-go systems, especially now due to the fertility decline in the West, but the issues do not stem from pure malice.
A ponzi scheme has an intent to defraud. That's why they're illegal.
Social security has no intent to defraud. It's not "legal cause the gubmint says so," it's legal because it's not a fraudulent money-making scheme designed to enrich the leader.
Social Security and other pay-as-you-go schemes aim to reduce poverty, especially elderly poverty. By this measure, it has succeeded quite well (http://www.nber.org/bah/summer04/w10466.html), and the probable reason pay as you go was chosen I imagine was to provide immediate benefit (recall this scheme was launched during the Great Depression). I would consider it radical (and would want one to provide considerable justification) if one wanted to ditch Social Security entirely.
A better debate in my mind, of course, would be whether to phase Social Security into a fully funded model versus pay-as-you-go model. I can buy that kind of argument, a fully funded retirement scheme is more secure than a PAYGO type.
But even as it stands, the current Social Security gap doesn't sound like a complete disaster. Part of it actually is because Social Security is not completely pay as you go -- Congress raised payroll taxes in 1983 in part to cover this gap (http://www.pewresearch.org/fact-tank/2015/08/18/5-facts-abou...). Part of it is because we have some variables to play with -- raising the retirement age or raising the payroll tax cap, for instance. Medicare actually sounds like its in worse shape at this moment.
That's not how social security works. Every dollar you pay in flies out to fund promises made in years past. "Your" social security money needs to be earned by our children.