What kind of idiot is making financial plans for 2037?

Certainly not Leon Panetta or Janet Napolitano.

And Obama is all for that theft.

We need a new country.

Wow massacio! And the Blackstone reference in a Blackstone run world is just superb.

Ok so here is what we do. The Labor Unions need to organize…all of them and run a candidate just on that issue alone. All the progressive organizations get behind them. We give what we can afford and start a grassroots organization campaign to help these candidates. And Labor has the money and man/women power also. Then in each state we run new Senators and congress people. Run on that issue……..its a winner……we can’t lose.
How many senior citizens do we have in this country ? Did you see that guy in Iowa take on Romney today over SS???

“The Catfood Commission, the Great Compromise, the Gang of Six, the Chained CPI, and all other plans make it clear that the elites of both parties intend to complete the theft from the Social Security Trust Fund by raising your taxes and/or cutting your benefits.”; well said.
And the link about empathy really needs more exposure.

I like this plan, a lot. At a rally earlier this year, I asked the local Union VP when he planned to run a candidate for anything, and promised money. He looked at me like I had warts.

Excellent! Short, to the point and 100% true. The president and the congress have made it clear that they will default (the *D* word) on the government’s obligation to its citizens. This is why president Ass Hole would not use the 14th amendment. He does not want to acknowledge the constitutional requirement to restore the Social Security Trust Fund.

Our government and the people who own it constitute a crime syndicate. No new combination of Democrats and Republicans will change that.

Obama was sent to Washington to do a job. Follow the money.

Death by a thousand paper cuts. The goal for the Super Congress, as for Erskine Bowles, is never to do anything so obvious as to provoke riots although if you look at the big picture, that would probably be in order.

So, raise the age for benefits a bit in a couple of decades, cut benefits a little here and there… always make it look like it’s going to affect someone else. Oh yes, and keep up the fear-mongering.

Yes, many of the rich really are different. The simple fact that the super rich hold so much of the nation’s wealth shows they are not “prosocial” – they could care less about society. The strike it rich game Wall Sters play, where the challenge each and every day is to come up with the most lucrative play or financial manipulation imaginable is anti-social. The fact they are still playing this game at this point, with the economy the way it is, amounts to sociopathology in my book.

Social Security is the most successful program our government ever created. Has never missed a payment, runs a gigantic surplus, has saved many widows and children from misery, has helped disabled Americans, has reduced poverty for elderly people immeasurably.

But these are the primary reasons Social Security is always a target: IT’S A HUGELY SUCCESSFUL GOVERNMENT PROGRAM. The fascists fear it, and try to trash it with bullshit talking points precisely because it is so successful. And if government can do something like this, then a logical person would say “what other good things can government do?”

Either i dont understand this, or I don’t agree with this. I see little diffence between the argument that someone is stealing from the Trust Fund and the argument it’s just worthless IOUs. Neither is true. The fund is a savings account for payroll taxes. It holds Treasuries that have the full faith and credit of the US behind them. If you doubt that, you’re in S&P territory.

Sure,to ensure funding payment of scheduled benefits at 100%, you eventually have to do something, but so what? You also have to do something in future years to pay for the army, the weather service, and the grounds keepers on the national mall. we will.

I used to tell people that it was stupid to work under the table because in doing so they weren’t contributing to social security and it wouldn’t be there for them when they turned 65 67 70.

Looks like I was the stupid one after all….

..and now they’re coming for your social security money….and they’ll get it… they own this country….George Carlin “The American Dream”

http://www.youtube.com/watch?v=acLW1vFO-2Q

If Republicans can take a pledge that they won’t vote for anyone who raises taxes, we can take a pledge not to vote for anyone who cuts Social Security or Medicare benefits.

I have made that pledge.

What?
There are only two sources of money for Social Security. Payroll tax and regular tax. The Trust Fund is a comforting fiction. There is no savings account, lock box, or other pile of money.

Everything from now on that isn’t covered by payroll taxes, is paid by General Revenues. (income taxes) Everything. That means it’s already part of the deficit.

Myers when he was Chief Actuary for SS always told me – and Congress – that it was wrong to hold more than 12 months or less than 3 months of benefit payments in the trust (so as to not screw up monthly payments if a dramatic recession and wave of retirements) – today that would be about 550 million max – seems Reagan/Obama needed to steal an additional 2.5 trillion.

Obama always said he wanted to think big.

Interesting that they had 16 trillion to give to the financial institutions. Screw them. If we sit still for this we deserve it. We need to mobilize and make a people’s party. No Progressive name to the organization. We should want all citizens to work together – all stand together. No pitting one against the other.

See #11

Obama can go to hell

Anyone who believes that he is not part of this is an idiot.

Anyone who votes for him is an idiot.

Obama is NOT the “lessor” of two evils. He is evil.

He knows exactly what he is doing.

While I wouldn’t dispute that some change is on the way eventually, the SS trust fund is non-existent. How anyone believes such a thing really exists is beyond me.

It is like you loaning yourself money and then they you coming to yourself to get the loan paid off. What are you going to pay it off with??? If you had the dough, you wouldn’t have borrowed it in the first place.

Yeah, you got a note from the government, but who is you in this case? The government. Because, who does the government get its money from? You.

The SS trust money is gone, gone, gone.

The only way the “money” is going to be paid is with money made TODAY. So, it is no different from any other budget item. Yeah, the government needs to pay off the bonds in the SS Trust “fund,” but where do they get that money from? Money you make THIS YEAR. Not some money you stashed away.

It is essentially, a loan you made to yourself, and basically worthless for all practical purposes–except some mental exercise to enable you to say the money is owed. Owed from who to who? From you to you.

The politicians who spent it over 50 years or so are to blame. And they are from ALL sides. They stuck it to you. It ain’t just tax cuts. It was for all sorts of goodies over a long period of time with all parties in control at one time or another during the plundering.

We’ve all been bent over. And, then the slick politicians go around blaming each other to try to make it one big mess so the blame is diffused.

Not true – not any more true than we must budget for China’s redemption of bonds. We do not do that because it would be nuts. If they redeem we sell some bonds to someone else to get the cash to give China – and that act has no effect on the budget, no effect on the deficit, and no effect on the national debt. It works the same for Social Security.

Your comment reflects Bush lies – his trying to pretend he had a case for ending SS and going to Wall Street savings accounts for the retired, keeping the trust fund for tax cuts for the rich.

The Greenspan Commission sold the increase in FICA taxes in 1983 to the credulous fools who ran the Congress, with the flat statement that it meant that we would pay more so there would be money when we retired. That clearly meant that we would use the bonds in the Social Security Trust fund to make the payments due to me and the rest of the baby boomers.

The money didn’t disappear. It covered up the massive tax cuts given to the rich.

Now they don’t want to pay off any of the bonds. They want, as the link says, to insure that income every year is more than enough to pay benefits that year.

The idea that I was paying thousands of dollars every year so there would be money for me when I retired was centered on the idea that the revenues of the government would be sufficient to retire the bonds in the Social Security Trust Fund.

If the government had the revenues today, it could fund the payoff of the bonds. If the intent was that FICA tax revenue would be high enough in 2011 and going forward to pay benefits every year, why did we raise FICA and leave that in place garnering $2.5 trillion dollars of extra revenue from the workers and cutting taxes by even more for the rich.

The stealing is taking payroll taxes to buy bonds so the cash moves to the general account where it can offset tax cuts for the rich. Not a problem until you decide you will never send cash back to SS by redeeming those bonds – meaning the extra payroll taxes were never for the SS system – they were a theft for funds to give the rich.

“It will require increased taxes to pay off the Social Security Trust Fund, and rich people aren’t going to pay taxes.” -masaccio

This doesn’t make sense. When Social Security runs a surplus, i.e., FICA tax revenue exceeds benefit payments (an “off budget” surplus), then by law Social Security must lend this surplus to the federal government if it’s running “on budget” deficits. Social Security lends by buying special issue bonds. These bonds are special issue because they can’t be resold like other government bonds. The federal government is legally obligated to pay interest on the bonds and repay the principal when the bonds mature.

These repayments may come from tax revenue or borrowing from anyone willing to lend to the government, e.g., the Chinese, Japanese or oil rich Middle East countries. The point here is that the government may repay money borrowed from Social Security by rolling over that debt. That is, they borrow from some other entity to repay what it owes Social Security. This doesn’t add to the national debt since the federal government is just borrowing to repay what it borrowed.

The government doesn’t have to raise taxes on rich people or anyone else to repay what it owes Social Security.

Further, Social Security is projected to be able to pay full benefits from now until 2038 with no changes whatsoever to the program based on a projected 2.1% annual RGDP growth rate. If the annual RGDP growth is anywhere near its historic average over the last 80 years (including the Great Depression of the last century) of about 3.1%, then Social Security will be able to pay 100% of promised benefits in 2038 and well beyond. Further if annual RGDP growth is 2.1% over the next 27 years, then in 2038 Social Security will be able to pay approximately 80% of promised nominal benefits. In real terms, in terms of goods and services that these nominal payments can buy, this 80% of benefits is greater than 100% of benefits today.

It’s a fools errand to mess with Social Security based on the facts of the system’s finances. There must be other reasons to cut benefits such as someone mentioned above, that it’s a government program that has worked flawlessly.

You are nuts. And, I say that politely. You’ve been had and you don’t realize it.

So you and shooter242 agree with me that it was theft to raise taxes on the income of workers allegedly to have money to pay benefits starting about now, when in fact the purpose was to raise taxes on income from work and cut taxes on income from capital gains and hand out other tax benefits to the rich.

It’s a shell game. The FED buys Treasures and we have a debt limit problem. What? A debt problem from borrowing money from ourselves? They give the financial institutions – 16 trillion through the FED and this is not a debt – just devalues our dollar. No wonder they won’t allow an audit of the FED; the auditors would go nuts.

The 2008 financial crisis was the biggest theft in history; from the taxpayers to the gamblers. Not only did the irresponsible gamblers get their money back, they kept their jobs and got bonuses. I glad Obama had a pay czar. Good job Brownie.

Both Parties are gone, they have no credibility. Anyone who supports either party should be tried for treason!!

Again “loaning yourself money” is the sale of bonds to any agency that has a dedicated tax that produced a surplus.

You made the sale to the agency rather than selling bonds to China.

When China wants their money you must sell new bonds to get cash, or you must raise taxes to get cash. It is no different than with Social Security.

Getting the cash is not an expense, it is not a budget item – it is a re-financing chore.

The horror is the idea that money that was used to finance the tax cut for the rich might be requested and collected by a new tax on the rich. Best way to avoid that is to pretend there is no debt, that no bonds were sold to get the financing for that tax cut.. A bit of a lie but then this is politics.

There special bonds, not your standard Treasuries. They also don’t pay interest. If the government decides to default on SS bonds, it’s not going to affect standard Treasury bonds. The government is more interested in keeping China happy than its own citizens.

I’ve been saying the same thing as the author. Why would you worry about SS when it is fully funded for 30 years. The answer is you wouldn’t. The problem is that in a few years the government will have to start cashing those IOU’s. The only way they are going to be able to do that is by raising taxes. Thus the hysteria over cutting SS.

True on all your points – but it is the fear of a tax increase on the rich that motivates the Obama attack.

“The government doesn’t have to raise taxes on rich people or anyone else to repay what it owes Social Security.”

True – selling new bonds does the refinancing – but paying off the bonds without selling new bonds means a new tax

The SS Trust holdings of bonds are credited by law with interest

the political and financial elites have no intention of ever paying off the bonds held by the Social Security Trust Fund.

“Hello, Information? I need the number for Standard and Poors please.”

“True – selling new bonds does the refinancing – but paying off the bonds without selling new bonds means a new tax” -papau

Or the bonds could be repaid without that and borrowing done to finance the “defense” budget. How would anyone know whether the borrowing was for “defense” or Social Security? The money all goes into one big pot.

What? Yes the payroll taxes were used by the General Fund, and replaced with pieces of paper. But now the flow has reversed and General Fund money is paying Social Security.
Now, what tax cuts for the rich are we talking about? Did I miss something?

Actually it is a budget item. Just as the funds from SS are used to reduce the budget deficit. That’s why the “balance budgets” of the 1990s were smoke and mirrors. The government was using the SS Trust Fund to balance its books.

When the payout to the trust fund begin it will go on the federal budget as an expense and the government then decides whether to raise taxes to pay it off or borrow the money and increase the deficit.

My bad.

By that logic, whenever Congress raises a tax in one era and then lowers another tax in another era, then the whole point was to steal from the first group to give to the second. All this means is that there is a redistributive effect, each time, but so what? I agree it’s better to use the tax system to transfer wealth downwards for equity and public purpose reasons, and if that’s all you’re saying, fine. I’m objecting to the framing here, which plays into the wrong hands.

What? Theft? Payroll taxes?

Apparently you missed the last 28 years.

I don’t understand that either. When the Fed bought Treasuries, it reduced the debt via rebating the interest. I don’t see any connection with mas’ SS argument.

I don’t think that’s correct. It’s true the bonds are not tradable in markets, but they do pay interest, and that interest is accounted for as part of the revenues available, along with payroll taxes, to fund the benefit payments.

Unless we can be a potential spoiler these royalist thieves will steal everything while giving us more bipartisan theatrics and endless austerity.Jared Bernstein just noted a few minutes ago that the administration was planning on growing the economy with massive cuts in spending outlays.Any society that is stupid enough to believe one can expand something by shrinking it,is a society that would countenance genocide.To quote Voltaire:”Those who believe absurdities today will accept atrocities tomorrow.”

Wingnuts think Reagan cut taxes, and don’t think the FICA increase counts as a tax increase on those who could least afford it. They need to own that tax increase, and explain it to all of the rest of us fools who bought the myth sold by Reagan/Greenspan/Tip O’Neill.

You just see it a tax hike for the working class and a completely unrelated cut in taxes for the richest among us. That’s not what anyone thought at the time, to the best of my recollection.

@masaccio

It sounds like you’re asserting that raising the payroll tax rate in 1986 was in order to reduce taxes in 2003. Yes? Doesn’t that strike you as remarkably farsighted for politicians?

Payroll taxes come out of the pockets of the working stiffs, not the wealthy, so there is a distinction between general taxes and payroll taxes. Any honest politician would vote to end the “unified budget” that lumps Social Security with the general budget, but they want to keep that cash cow coming. If payroll taxes are, in reality, defacto income taxes, just add 15.3% (the worker/ employer payroll tax) to your income tax rate to come up with your REAL income tax rate.

The Federal has not paid a dime of interest or anything else to the SS Trust Fund. All the money so far has flowed from the Trust Fund to the government to help cover the deficit. The fund has been running a surplus to fund the Baby Boomer retirements. Well the Baby Boomers are starting to retire and that means sometime soon the government is going to have to make good on those bonds. As soon as the money flow reverses, the government has a new budget item which is going to grow year by year and that’s the problem they don’t want you to know about. Ever hear that in the mainstream media? So all this BS about the Trust Fund being in trouble is because both parties don’t want to pay the bill coming due. It means less for war, new taxes, etc.

What they want to do is to put off paying off those bonds or, ideally for them, default on the bonds claiming the government is broke and just payout what comes in.

So strengthing the Trust Fund is all about defaulting on the bonds, and not telling the public that they have no intention of honoring those bonds.

Now that I’ve had my training from the Modern Money folks, it’s time for all here and the politicians that care to get re-educated.
It’s time to unlearn what you have learned.

That is the simple truth. If those funds are good to go to 2036, why are we hyperventilating now? And what is this 13 t for the next 75 years? You mean they did not count the fund or added revenue? What sort of idiots are they? 75 years? really?

I think the point is exactly as you say, there is no solvency problem with SS. What this post points out is that those who are now trying to pretend that there is a problem (thus the need for big changes to “secure SS for future generations”) are denying that it is solvent.

This creates the opportunity to welch on the deposits already made, and make current and future workers pay the shortfall out of new wages or reduced benefits. The only way this makes sense, is if you do not plan to honor the bonds at full value…which means that the workers of the country made massive payments to the general fund (to pay for wars, tax breaks, etc.) for which they will never be repaid.

Masaccio, I worship at your feet. This post is a masterpiece that should reside in a place of honor next to the Magna Carta, the Declaration of Independence, and my collection of the complete works of Terry Pratchett.

In all honesty, this brought tears to my eyes. Tears of anger and indignation. It is a fine piece of work, and exposes the ugly essence of the political/oligarchical class.

If this doesn’t make everyman want to drag Congress and Wall Street out into the public square and tar and feather them, I don’t know what will.

Screw you China. The money ain’t there. They just told us.

Funny I just read a blog that says interest is paid on those bonds. Somebody’s not telling the truth.

No. Reagan cut taxes, remember? For the rich? And raised taxes on the workers which thoroughly hid part of the massive deficits he ran up. Remember?

I guess we are going to reclassify those bonds to, what, junk? and then burn them up? Yeah, taxes from the general fund will have to pay them off but that was the intent from 1983. What changed other than a few thieves are running the show now?

I have no earthly idea how you can say those funds are gone. Are the funds for other debts to Japan and China gone? Or can they still get paid off?

One of the questions to demand of cat food politicians and others: “Are you anticipating defaulting on the SS trust fund bonds that workers and their employers paid for?

Sorry. Interest on the bonds is credited to the account year after year, and is available for paying benefits. When current payroll taxes alone are not enough to cover full benefit payment, full benefits still continue, as they have this year, which means payments are being debited from the account, which includes accrued interest.

Just one more point. The politicans keep saying that now we have only 3 taxpayers to 1 retiree, therefore, we have to make adjustments. This implies that they only want to pay out what comes in. They never mention that in the 1980s this was anticipated and why SS is running a surplus. I haven’t done the math but I’ll bet the reason why they always say we have to strengthen Social Security to last 75 years is that it really pushes out the date it will be necessary to cash in those bonds. Maybe, they never will have to cash them in.

Just picking the pocket of the poor and middle class. AGAIN!

Dear masaccio and papau,

The gears in my head have been grinding away for the past year or so, trying to get a handle on SS finance. I have a series of questions. I need a “Social Security Finance for Dummies,” but absent that, would you be willing to answer my questions? They are probably quite simple, but my thought process is such that I have to build very carefully from the simple to the more complex, especially when something like finance is involved.

Here’s the first one: The “bonds held by the Social Security Trust Fund” are issued by whom and, probably more importantly, on behalf of whom? Other federal agencies who need money and come to the SSA because they know the SSA is sitting on a pile of it?

More questions will follow, if you’re game, based on what I learn from any answer you might give.

My heartfelt thanks for any assistance you might render.

Not correct [PDF]:

1. Social Security will have a surplus of $69
billion in 2011, based on revenue of $807.7
billion and spending of $738.4 billion [Figure 1].

2. Social Security has three revenue sources—
Payroll contributions from employers and
employees (83%), interest earned on social security’s U.s. Treasury bond assets (14%), and income taxes on the social security benefits paid by those with higher incomes (3%) [Figure 2].

As I see it, they won’t actually default. They will simply fix things so that the current FICA covers the annual benefits, perhaps with interest on the bonds. That way, they’ll never have to default.

Our Nobles are on a tax strike, much as the Nobles of France were on a tax strike during the reign of Louis XV. The King needed money to pursue his wars; the Nobles said “tax the common people, not us.” The common people didn’t have any money because the French economy was in the crapper. So Louis had to borrow. Which he did, prodigiously.

Soon enough, he went to his Heavenly Reward, and his grandson, the easy-going, well meaning, but not very bright Louis XVI ascended to the throne, whereupon he shortly decided that a French intervention in the American War of Independence would be a Good Thing for France, and so, with borrowed money, France intervened, decisively it would turn out.

Oh but that intervention — and the complete refusal of the Nobles of France to pay more in taxes — caused a financial collapse, bankruptcy for the state in fact, which led Louis to call upon the Estates-General, rather than just the Nobles, to come up with some revenue pronto to keep the wolves from the many doors of Versailles.

Unfortunately for Louis and his family and many of the Nobles of France, it didn’t end well.

Let’s just say our situation is somewhat like that of the French, late in the reign of Louis XV.

“…au reste, après nous, le Déluge.”– Madame de Pompadour to Louis XV after the French losses at the Battle of Rossbach, 1757.

75 years is utter nonsense. And the ratio is too. The fund is good until 2036 or 2037. Maybe in 2032, if I’m still around I’ll get to thinking what we should do about it. Oh wait, I got the answer, raise the tax or just credit the SS fund with another trillion from the Treasury.

As noted the Bush tax cuts went primarily to the wealthy – although percentage reductions in FIT were not that different by earnings amount until you get to the very wealthy, the dollars obviously were all to the wealthy as that is where most of the FIT – but not the payroll income tax – comes from.

Those 3 tax cuts were done in years where each year we had an increase in the national debt (the real measure of any deficit) of over $500 million. There was no money for the cuts. So to make the cuts we had to borrow more.

In effect we borrowed to give money to the rich.

Social Security had a payroll income tax surplus each of those years and thereafter and was given bonds for that money, as the money was then given the rich.

The rich do not want to pay back the money they borrowed from Social Security =- meaning a higher tax on the rich is collected to redeem those bonds.

When you borrow and do not pay it back it is theft. The rich are trying to steal the Social Security Trust Fund – some here see that as capital crime – in all its meanings.

Here is a good introduction from the Social Security Administration.

The people who put together that website do a remarkable job of explaining the whole thing. When I started in earnest learning about SS and its history, I read huge chunks of things they posted, including legislative history and a series of charts and summaries of the finances.

Right now there not paying a dime no matter what is credited. The only way money flows right now is from the from the Trust Fund to the treasury. Don’t you think this was all gamed out as a possibility when this was set up. If not, why have special bonds? Why not regular treasuries of varying redemption dates?

Part of the problem is also that ordinary people have been forced to sink their additional retirement funds into Wall Street. Thus, whenever the banks and rich folks get in a jam, they can squeeze the masses ’till it hurts through market selloffs. At that point, even those of us who know we’re getting scammed and robbed by the bankers will wake up and scream for the government to stop the pain. And the government obliges by handing the rich another round of bailouts, which always leaves us even poorer.

In other words, it isn’t just that they own the politicians, they also own our supplementary retirement nest eggs. The ordinary people really need to be able to pull out of Wall Street, 401k’s and all, and tell them to stuff it! If we don’t, we become our own enemies …

First, here’s one for you. Why do we have to issue bonds to anyone, like say China?

Hey, thanks for that link. Its really good.

Perhaps a better challenge: “If you are not anticipating defaulting on the SS trust fund bonds workers and employers have paid for, why do you think you need to cut benefits?” I want the ball in their court. Do I understand this correctly? They are pretending the bonds have disappeared?

“The “bonds held by the Social Security Trust Fund” are issued by whom and, probably more importantly, on behalf of whom? Other federal agencies who need money and come to the SSA because they know the SSA is sitting on a pile of it?”

I grow a bit tired at this hour. I’ll try to be understandable but please cut me a little slack.

Treasury issues all bonds. to anyone. Social Security collects cash but only keeps enough for benefits and to cover anticipated and unanticipated variations in the cash need for benefits and expenses. The rest of the cash to used to buy bonds from Treasury. So as to “not disrupt the market with large bond transactions” the bonds sold Social Security are “special” and can only be redeemed by presenting them to Treasury. Interest on the bonds is paid by Treasury at “market rates” as determined under the laws formula. St the Social Security Administration end, the bonds, and any other assets, are held an account called the Social Security Trust Fund (there are 2 accounts (and sub accounts may be there) in the Trust Fund so as to track the payroll taxes for each part OASDI – the name for Social Security – where OAS is old age and survivor benefits paying retirement annuities and life insurance benefits like the continuation of the wife’s benefit after the husband dies and the funeral benefit of $255 (amount set in the 40′s and never changed), and the DI tax for the benefit that is the disability program that pays annuities if you are totally and permanently disabled (leading to death or at least 2 years without a job).

No one comes to Social Security for money. Once the bonds are purchased Treasury has the money to do with as it will.

There are other agencies with trust funds – the highway fund and its dedicated tax comes to mind. They also have Treasury hold their funds to do with as it will. But they, and Social Security, and China, and Japan, etc never stop being owed the money they lent Treasury.

You got it right. It’s old smoke and mirrors game they do so well. They’re trying to convince you that they’re actually strengthening the SS Trust Fund while what they’re really doing is avoiding, as long as possible, cashing in the bonds that you have been paid for.

Back in early 1980′s during RayGun Ronnie’s Reign of USG Fiscal Error the topic of SS taxes being increased was kicked around and after some proper political Shadow Puppet StagePlay Greenspan Commission suggesed and Congress/POTUS increased payroll tax rates for FICA on both employees and employers or self employed Americans.

If you did not pay FICA taxes you soon would be in real trouble with the IRS and facing real penalties for not paying FICA. Those of us who have been self-employed or employers know all about quarterly tax payouts/pay-ins or what happened/happens to you when you fail to do so.

The USG/IRS wanted/wants those FICA taxes withheld,escrowed and paid in or else you as a self employed American or as an employer of Americans would soon face/be facing real trouble with IRS and steep/inflicted legal/monetary pain/consequences. You had/have to pay FICA.

Now USG does not want to honor the other side of FICA contract? The pay out/pay back part?

So — now some thirty years after RayGun Ronnie was POTUS — Barack Obama — DINO POTUS of USA/RayGun Ronnie fan and the current version of a Newt Gingrich styled U.S.Congress — which during G.W.Bush WH years ran up deficits year after year for warmaking/militarism while cutting real tax loads for corporatists/oligarchs — now BO and Congress want to undermine/discredit USG SS and create looming/ongoing uncertainty about/over SS Trust Fund.

Funny how Americans like me after having worked by the hour for wages and paid in these FICA taxes for several decades are now being told by Barack Obama or his selected hacks like Alan Simpson or with this coming Super Congress that the SS Trust Fund was/is really a Ponzi Scheme.

The USG is now going to renege on paying back the $$ that we paid into SS Trust Fund as employees,employers?

These payroll/paycheck taxes were not called income taxes but the FICA tax.

Now we are being told FICA withholdings were just a USG fiscal ruse to create slush funding for USG while real income taxes were cut/reduced for wealthy and the corporatists.

Now USG does not want to honor SS Trust Fund Treasury Note face values.

If working and poor/underadvantaged/unemployed Americans let USG do this and happen then we may as well just become political/economic serfs/slaves.

Work for 3rd/4th world labor rates/conditions and struggle to live like working poor/destitute 3rd/4th world humanbeings.

This is what the elites seem to want is it not?

If this does not bring about a 1789 French Moment in USA what will?

From the official SS web site, answering the question, what interest do the special bonds earn:

The rate of interest on special issues is determined by a formula enacted in 1960. The rate is determined at the end of each month and applies to new investments in the following month.

The numeric average of the 12 monthly interest rates for 2010 was 2.760 percent. The annual effective interest rate (the average rate of return on all investments over a one-year period) for the OASI and DI Trust Funds, combined, was 4.642 percent in 2010. This higher effective rate resulted because the funds hold special-issue bonds acquired in past years when interest rates were higher.

http://www.ssa.gov/oact/progdata/fundFAQ.html#n3

More from the SS web site:

Money to cover expenditures (mainly benefit payments) from the trust funds comes from the redemption or sale of securities held by the trust funds. When “special-issue” securities are redeemed, interest is paid. In fact, the principal amount of special issues redeemed, plus the corresponding interest, is just enough to cover an expenditure.

More from the SS web site:

Far from being “worthless IOUs,” the investments held by the trust funds are backed by the full faith and credit of the U. S. Government. The government has always repaid Social Security, with interest. The special-issue securities are, therefore, just as safe as U.S. Savings Bonds or other financial instruments of the Federal government.

If that’s true, then why do we have to reform Social Security? There’s plenty of money in the Trust Fund. Like I said smoke and mirrors. Don’t be conned.

That’s the point. Social Security should be off the table – period.

All messages from politicos and pundits that say otherwise are complete lies.

The government has always repaid Social Security,

The government has never paid a dime on those bonds. Cash flow has always been from the Trust Fund to the Treasury. That’s about to change and that’s why all of a sudden the system needs to be “reformed”.

No. See my comment @61. 14% of this years revenue for SocSec is in the form of interest from those bonds.

I think that’s fair.

First, thanks to papau for what is really a very clear response to my question–despite the late hour! I will add this piece to the puzzle I’m trying to put together.

Secondly, thanks to mosaccio for the link (and for this diary, of course). With the link, this diary and another of yours, and papau’s response I think I can start filling in some of the details I’ve been lacking.

Just one more tonight, if anyone is willing: To what extent is the 2% payroll tax holiday that went into effect six or eight months ago drawing down money that would otherwise be used to pay current retirees and thereby causing the SSA to have to redeem some of the Trust Fund bonds?

Social Security is involved, because they hit the debt ceiling by calling the 1.6 trillion debt. It is all a game to take Social Security. Ron Paul was the one who discovered the FED’s treasuries were being called debt. All the economists say Paul is right. The Fed should return the treasuries and the debt ceiling problem goes away. The major networks will not talk about and Congress and the Pres. ignore it, because they don’t want people to know about the scam.

http://thehill.com/blogs/floor-action/house/174953-rep-paul-introduces-bill-to-cancel-public-debt-held-by-the-fed

In addition, Obama continued the tax holiday he started last – collecting 2% less SS deductions, so if the theft don’t work this way they can say the Trust Fund is getting smaller.

runs a gigantic surplus,

Exactly. In the 1980s Milken’s minions raided companies that had excess funds in their pension trusts. It was easy as pie. Issue junk bonds, buy the companies, distribute the pensions fund overage (and some underage), and get out of Dodge. This is the same model, tested and true, and now on a larger scale, coming to a cinema new you.

I believe that interest income plus revenues even at the current lower rate are greater than the benefits payable. I haven’t seen any real numbers lately, but I recall reading earlier this year that FICA receipts by themselves were not sufficient to pay benefits, largely because of massive unemployment, and that it would be necessary to use some of the interest income.

The money is gone. We operate on the greater fool theory. The debt will never be paid off. It can’t be, it’s too much.

And where does the interest come from? General revenue, income taxes. There’s no other money. It’s either payroll taxes or regular taxes.

You are suffering from a failure to read and comprehend; although none of that will stop your lust to kill Social Security, which by the way puts you at odds with 3 out of 4 of your fellow citizens.

Why do you hate Americans?

Hey Shooter, shoot on over to http://www.cepr.net and do a little reading on Social Security written by an expert, Dr. Dean Baker.

From CBO on the fact 2010 outlays (payments to beneficiaries) exceeded payroll ax receipts, but the difference was made up from the interest credited to the bonds in the Trust Fund:

In calendar year 2010, for the first time since the enactment of the Social Security Amendments of 1983, annual outlays for the program exceeded annual revenues excluding interest credited to the trust funds. CBO projects that the gap will continue: Over the next five years, outlays will be about 5 percent greater than such revenues. However, as more members of the baby-boom generation (that is, people born between 1946 and 1964) enter retirement, outlays will increase relative to the size of the economy, whereas tax revenues will remain at an almost constant share of the economy. As a result, the shortfall will begin to grow around 2017.

https://www.cbo.gov/doc.cfm?index=12375

Good suggestion, but don’t think it will matter.

Your right the money is gone. When you borrow money and spend it, it is gone. You need to work and pay the money back, with interest. The only way you get out of paying it back, is if the debt is forgiven. But I am not forgiving the debt the country owes me. And, I was opposed to all the wars and the bailout of the financial industry which is where the money went. So, if our government needs money, they should get it from the defense contractors and the financial industry, not from me..

Meh, half the unions have the same problem that the government does. While collective bargaining is fairly effective at raising standard of living, the unions are filled with people who feel certain subsets of people should be considered special and entitled. And I say that as someone who has a spouse in the UTU who just dealt with at least a half a dozen people being disenfranchised on their local level(which the Labor Dept decided they did not deal with since the election feel after the chairman election.)

The CBO summary has a nice chart showing when that started — 2010, and it will continue.

https://www.cbo.gov/doc.cfm?index=12375

Flat wrong. The money is no more “gone” than the money you put in your savings account is gone, even though the bank has loaned out money. You could go to the bank today and ask that the amounts in your savings account be transferred back to your checking account, to allow you to pay your bills. Or you could just transfer the accrued interest to your checking, if that’s all you needed to pay your bills. Same concept.

Although the payroll tax was reduced in the bill last December, the bill allowing that also directed the Treasury to credit the Trust funds with the amounts of the lost tax, so there has been no reduction in the Trust Fund.

The entire reason behind the continuing propaganda about Social Security is that starting with Reagan, his and subsequent administration EMBEZZLED BILLIONS from the trust funds! Yes, Virginia, when you are a trustee of funds for someone else and you spend the money for your own purposes that is called embezzlement.

The bruha now is that they DO NOT WANT TO PAY IT BACK. So they are jumping through their asses to invent ways they can justify their outrageous theft.

FUCK THEM ALL. May their grandchildren be found hanging from the nearest lamppost.

Thanks, mosaccio.

Well done, masaccio. The theft of the Social Security funds is the real monetary story at the federal level.

Keep in mind that Social Security is simply the federal version of this theft. This same thing is true at the state and local levels, which is why the state and local governments are demanding the workers who had agreed to take pension funds as part of their pay now accept they won’t ever get paid their money.

While the funding details are different between SS and the state and local pensions, it’s fundamentally the same thing – governments (i.e., the rich) have been stealing from the public for…well, forever. Now that the theft may finally be exposed the political problem is how to con the public long enough that the people who stole the money can get away. Hence the distractions of “default on the debt!1!!” or “ending unions’ collective bargaining rights!1!!” or whatever.

Of course, even though the theft of Social Security and the state and local pension funds totals many, many trillions of dollars, even that pales in comparison to the greatest theft of all – the theft by the central bankers of the entire money supply, the sovereign currency of the United States, which by rights belongs only to the people.

That is the greatest theft of all. But all these are really aspects of the same underlying reality: the people of this country are and have always been slaves of the rich.

But the slaves are finally starting to wake, and rise, up.

Thanks. This is an outstanding resource. I have posted to my diverse array of friends to get ahead of the bloviating. There is a link to all of the proposals on the table since 1995, and the Social Security Administration’s response to them. Read the response to Simpson-Bowles for a flavor of the agency’s position.

That is exactly what I was saying. Perhaps, I phased it wrong.

Yes, this is what they say. But why so convoluted? If they want to reduce deductions by 2 %, just do it. I guess you trust the government more than I do.

Amazing amount of mis-information going around these days.

Social Security has had excess benefits over income in many years, requiring Treasury to cash in bonds. The years are shown below with income, expense, and the deficit (in millions) that was met by cashing in bonds.

1959…..9,516….10,793…..-1,277

1961…..12,937…13,388…..-451

1962…..13,699…15,156…..-1,457

1965…..17,857…19,187…..-1,331

1975…..67,640….69,184….-1,544

1976…..75,034….78,242….-3,209

1977…..81,982….87,254….-5,272

1978…..91,903….96,018….-4,115

1979…..105,864…107,320…-1,456

1980…..119,712…123,550….-3,838

1981…..142,438…144,352….-1,914

In 1982, the Old-Age and Survivors Trust Fund borrowed money from the Hospital Insurance Trust Fund, and repaid the borrowed amounts in 1985 and 1986 (it had less than 25 billion with an outgo of 6 times that amount and borrowing the money allowed for seasonal variations in income).

I should have mentioned there is no law against Social Security Trust Funds buying Gov bonds in the public market rather that getting a “special” bond from Treasury – but Reagan made a decision to only do market purchases in “special situations” so as to not have turmoil in the bond market – and that there were no special situations then – and there have been none since – - – so no publicly marketable bonds have been purchased since Reagan.

Thanks for being polite -

so bonds sold to China have value, but bonds sold to a government agency do not have value. And a default on the agency bonds is not a default on all US bonds, including those China owned bonds.

interesting.

“General Fund money is paying Social Security”

Well the General fund pays all bond holders interest, so if that is what you mean, yes the Social Security Trust Fund receives interest on its bonds. If you are implying the General Fund is paying any part of Social Security benefits, that is wrong.

No it is not a budget item, but there is a presentation called the “unified budget” that subtracts the Social Security surplus from the General account deficit and gets the number that is announced as the “deficit”-

this number is useful as it expresses the strain from new bond sales on the public market – but it is not the true deficit. That number is the change in the national debt from year to year.

“When the payout to the trust fund begin it will go on the federal budget as an expense and the government then decides whether to raise taxes to pay it off or borrow the money and increase the deficit.”

No -

that is called a refinancing and is just replacing one bond with another.

Not really since the “re-distribution” required borrowing to get the money.

As to the framing, YMMV – but I find it useful. How is it not helpful? It makes a bit clearer the class war the rich are waging on the rest of us.

This has been an extremely valuable discussion. Thanks to all. FDL rocks!

I, for one, would like to welcome our inhuman Republican overlords! To the sugar mines…

Flat wrong. The money is no more “gone” than the money you put in your savings account is gone, even though the bank has loaned out money. You could go to the bank today and ask that the amounts in your savings account be transferred back to your checking account, to allow you to pay your bills. Or you could just transfer the accrued interest to your checking, if that’s all you needed to pay your bills. Same concept.

And if the bank has gone broke in the meantime? If it had been living on higher and higher piles of borrowed money, and its source of funding has now dried up?

so bonds sold to China have value, but bonds sold to a government agency do not have value. And a default on the agency bonds is not a default on all US bonds, including those China owned bonds.

It’s not that they wouldn’t be happy to default on the bonds to China if they thought they could get away with it. It’s not even that they fear China would invade us and force us to pay it back. It’s that they depend on China (i.e. the rest of the world) to continue buying bonds in the future to fund the endless stream of deficit spending they project into the future. They know that if they default to China today, the lending will stop. We’re already on the first steps of that road, as our creditworthiness becomes more suspect worldwide. Eventually no one will buy our bonds any more unless we raise the interest rate we offer, which will further explode our costs.

Scarecrow wrote:
When current payroll taxes alone are not enough to cover full benefit payments, as they have this year, which means payments are being debited from the account which includes accrued interest.
Correct, but the way the interest was credited was by issuing more debt.
The only way to redeem that debt is either with more revenues, lower expenses, or adding to debt held by the public.
I’ll take what’s behind door 3.

Papau wrote:
The Social Security holdings of bonds are credited by law with interest.
Correct, but that crediting is not done in cash, as interest is paid on debt held by the public, with an immediate budget impact.
Interest on intragovernmental debt is paid by issuing more debt, with no immediate budget impact.

Scarecrow wrote:
Sure, to ensure funding of scheduled benefits at 100%, you eventually have to do something in future years to pay for the army, the weather service, and the grounds keepers on the national mall.
We will.
Correct. Future Social Security benefits are not even considered as liabilities.
Of the 4 levels of government willingness to pay expenses, future Social Security and Medicare benefits are on level 4, the weakest obligation to fulfill, along with grounds keepers on the national mall.
Roosevelt intended Social Security to be self-supporting, with no use of general revenues.
The reason general revenues are being used now, to pay interrst, and eventually, to pay principal, is that the trust fund dollars have been lent to the Treasury – they are gone.
If the excess dollars remained in the trust fund, and interest was earned through a more traditional route, we would not have the problems we have today.
Because Social Security is operating virtually the same way as it started, I guess you can say it was set up to fail from the very start.
I have reputable government links to support these statements for anyone who is interested.
Don Levit

The American people have been double-crossed by their government! The “fix” of 1983 included a hefty payroll tax hike that required the baby boomers to prepay the cost of their own benefits, in addition to paying for the benefits of their parents’ generation. They were hit with a double whammy. The $2.6 trillion in surplus revenue generated by the 1983 payroll tax hike has all been spent for tax cuts, wars, and other government programs. The trust fund is empty! It does not hold a dime’s worth of real assets. Senator Tom Coburn from OK made this abundantly clear when he spoke on the Senate floor on March 11, 2011. He said, “Congresses under both Republican and Democrat control, both Republican and Democrat presidents, have stolen money from Social Security and spent it. The money’s gone. It’s been used for another purpose.”

I have been researching and writing about Social Security for more than a decade, and during that entire period, I have tried to expose the great Social Security theft. But it is a taboo subject that the mainstream media will not report because the government (both Republicans and Democrats) do not want the public to know about the crime.
Allen W. Smith, Ph.D.
http://www.thebiglie.net

In addition to his statment on the Senate floor on March 11, Senator Coburn appeared on MSNBC the following morning and added, “We have stolen $2.6 trillion from it. We put paper money in there. But the problem is we spent the money. We didn’t just take it. We took it and spent it.” Every word that Coburn spoke was absolutely true. He is a medical doctor who has personally delivered more than 4,000 babies, and he wants to look out for the future of those babies and the rest of us. So why did his words receive so little exposure in the media? Why didn’t his colleagues either support his statments or try to rebutt them? It was for the same reason that I have been offically banned from posting new comments on two major blogs and unoffically banned on many other blogs. It is also why my book, “The Looting of Social Security,” was censored and pulled from the market in 2004. That the government has stolen $2.6 trillion from the trust fund is an absolute fact. All members of Congress know about it and so does President Obama. But the American people are not supposed to know about the big dirty secret.
Allen W. Smith, Ph.D.
http://www.thebiglie.net
ironwoodas@aol.com

Contrary to popular myth, federal taxes do not pay for federal spending. FICA does not pay for Social Security. The U.S. is Monetarily Sovereign. It can pay any bill any time, without taxes.

Those who do not understand Monetary Sovereignty ( http://rodgermmitchell.wordpress.com/2010/08/13/monetarily-sovereign-the-key-to-understanding-economics/ ) do not understand economics.

Rodger Malcolm Mitchell

People need to understand Social Security before it’s stolen from them. There are no Social Security costs to the government. Social Security is a self-funded Trust Fund. Workers (and their employers) pay into it over their working lives, the government holds the money in trust, and then the fund pays out when each worker retires. It’s of, by & for the people. Social Security runs a surplus which the Treasury regularly borrows (loots) from in exchange for IOU’s. (How, and from who, they got permission to do this I do not know – but it certainly abrogates the meaning of “trust”.) Some people, not satisfied with with this golden egg, want to kill the goose.

The Fund is not in trouble and does not need reform. It is wildly successful and the most fiscally responsible component of the government. The cap on earnings could certainly be raised for fairness if nothing else. (At the moment workers only pay Social Security on the first $106,800 earned per year.) Also earnings from wealth should be taxed as income rather than at the lower capital gains rate.

The Social Security “crisis” is a sham, just another attempt to terrorize the public into accepting the unacceptable. (Same as 911 = PATRIOT Act, threat of WMD = Iraq War, threat of financial meltdown = Bank Bailout, threat of default = Debt Deal. Don’t fall for this ploy again.)

I urge you to follow the link below and scroll down to listen to Virginia Reno explain Social Security, why it’s so strong and why it shouldn’t be ended.

http://www.truthdig.com/report/item/kucinich_says_obama_got_the_deal_he_wanted_20110804/?utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed%3A+Truthdig+Truthdig%3A+Drilling+Beneath+the+Headlines&utm_content=Twitter

Let me be really clear. It wasn’t unreasonable for people to think that we were funding our retirements. The numbers related to the Social Security Trust Fund show the amounts we needed to plan for, and gave us a sensible way to plan. It wasn’t necessary that things turn out this way. For example, if George Bush had not been so dead set on tax cuts for his rich friends, and the worthless democrats had not been so craven, we would have paid down our other debt dramatically.

When the bad times came, we would have spare borrowing capacity to work with. We would have been intentionally planning for the future.

The rich thugs and their machinery made that impossible. When they saw the situation, they decided that the Trust Fund would be a great target. Now we see the culmination of their plans. You aren’t going to get what you were promised, and the people who did it will get your money. George Carlin was right.

tovangar2 says:
Social Security runs a surplus which the Treasury regularly borrows (loots) from in exchange for IOUs. How and who they got permission to do this I do not know but it certainly abrogates the meaning of “trust.”
I would like to know, too, how Treasury got this permission.
If the surplus FICA taxes had stayed in the fund, along with the interest, we could simply liquidate the trust fund just like any pension plan, to pay benefits.
Then, in spite of this lootimg, you say the fund is wildly successful and the most fiscally responsible component of the government.
There is one problem with the interest, though, for it was borrowed by the Treasury, too. It is not in the form of a liquid investment, but in the form of debt. In order to liquidate this debt to pay benefits, taxes must be raised, spending cut, or the trust fund must borrow from the public.
I’ll take what’s behind door number 3.
You seem to think that an unfunded Treasury security is similar to funded gold ingots.
Bruce Webb at Angry Bear thought unfunded Treasuries were actually more valuable than cash for the debt pays interest (which is also debt).
Do you agree with Bruce?
Why or why not?
Don Levit