Toro
Diamond Member
I'm going to switch your thoughts around.
I fundamentally disagree. Again, I would characterize SS as a pension fund invested 100% in government bonds, no different than any other pension fund invested 100% in government bonds. Virtually every pension fund in this country is invested in Treasury bonds (though, sanely, not at 100% of assets). A corporate pension fund that invests in government bonds is no different than the SS trust funds investing in government bonds, the only difference being that the terms of the "bonds" in the SS trusts are somewhat different. However, the economics of the bonds are exactly the same. Both are obligations with claims on future tax revenues of the government. Because of this, by definition, SS is not welfare.
Except that my friend didn't buy them "from himself." He bought them from people who borrow. He is a saver.
I am assuming you didn't read my link I originally posted, so I will re-post it here.
http://www.usmessageboard.com/polit...2000-when-we-had-a-surplus-7.html#post3825575
You have to go back to the premise of the discussion. I defined welfare as someone getting a check of other people's money. When you get social security, regardless of everything you said, it will be all your kids money and none of yours. The supposed trust fund that is paying your social security check is paid by them. Whether they write a check to SSA to give to you, or write a check to the treasury to give to you, it's their money. And the SSA doesn't even have it's own money, it's part of the general fund. Your money is gone. I appreciate your more serious attempt to address the question, but it clearly meets my standard of you are getting a check of someone else's money. You can define welfare differently, but this thread is based on my definition.
I fundamentally disagree. Again, I would characterize SS as a pension fund invested 100% in government bonds, no different than any other pension fund invested 100% in government bonds. Virtually every pension fund in this country is invested in Treasury bonds (though, sanely, not at 100% of assets). A corporate pension fund that invests in government bonds is no different than the SS trust funds investing in government bonds, the only difference being that the terms of the "bonds" in the SS trusts are somewhat different. However, the economics of the bonds are exactly the same. Both are obligations with claims on future tax revenues of the government. Because of this, by definition, SS is not welfare.
Except your friend didn't by the bonds from himself and then claim them as an asset.
Except that my friend didn't buy them "from himself." He bought them from people who borrow. He is a saver.
I am assuming you didn't read my link I originally posted, so I will re-post it here.
Let's say you, Mr. Trajan, start a retirement savings account, and you don't want the ups and downs of the stock market, you don't trust banks, and since your house fell by 50% in price, no way are you going into real estate. Instead, you decide to invest 100% in government bonds. You can call the Treasury and open account to buy government bonds. For the rest of your life, that's all you invest in, Treasury bonds. I wouldn't advise it, but hey, different strokes for different folks.
Now let's say you have the option of either doing it yourself or having someone else do it for you. You, for some odd reason, think the government is fabulous, so you select the government to do it for you. Instead of you calling the government every month and putting 6% into government bonds, the government just takes 6% off your paycheck and invests in government bonds for you.
What does the government do with that money that you've lent them? To you, you don't care. All you care about is that the government pays you back with the interest promised. The government will spend it anyway it wants. That's what it does now.
So you're following me here, right? Let's review.
1st option - you invest your money in government bonds yourself
2nd option - you have the government invest your money in government bonds for you.
In both options, the government spends that money in any way it sees fit. And in both options, you own an asset - a government bond - that is a liability of the government.
Now this is where it gets tricky, and this is where people generally get confused, like the people in this thread. Let's say the government approaches you and says "Mr. Trajan, I see that all you've ever done is buy government bonds. Government bonds have a cost. There are middle men that have to get paid. We have auctions. We have accounting for all these bonds. We have to pay a custodian. Let's make a deal. Instead of going to all the trouble of issuing these bonds that you buy every month, let's skip all the middle men and we'll debit your account the amount that you send to us every month. You will still compound the interest at the same rate but instead of owning the actual bond, we will pay you back your principal and accrued interest in the future when you need it." Thus, you have another option.
3rd option - you send the money directly to the government and the government enters into a contractual promise to pay you back in the future the amount of your investment plus accrued interest matching the rate of interest on government bonds.
And like the first two options, you have an asset - a contractual promise to pay you back plus interest - that is a liability of the government.
Economically, all three options are the same. In all three options, you are sending the government your savings and the government promises to pay you back plus interest. A bond is a contractual promise to pay you back plus interest in the future.
If you hadn't guessed, the third option most closely resembles how social security operates. Now take Mr. Trajan and 250 million other Americans and pool them all together in the third option and that's the SS trust fund. It's as if we are all buying government bonds together, but instead of going to the trouble of actually issuing the bonds, the government credits our accounts as if we were purchasing the bonds. And that pool of assets is run by the government, which is an asset credited against the liabilities of the Treasury.
Now, that's not how I would design a pension fund, but that's essentially how SS works.
Now let's say you have the option of either doing it yourself or having someone else do it for you. You, for some odd reason, think the government is fabulous, so you select the government to do it for you. Instead of you calling the government every month and putting 6% into government bonds, the government just takes 6% off your paycheck and invests in government bonds for you.
What does the government do with that money that you've lent them? To you, you don't care. All you care about is that the government pays you back with the interest promised. The government will spend it anyway it wants. That's what it does now.
So you're following me here, right? Let's review.
1st option - you invest your money in government bonds yourself
2nd option - you have the government invest your money in government bonds for you.
In both options, the government spends that money in any way it sees fit. And in both options, you own an asset - a government bond - that is a liability of the government.
Now this is where it gets tricky, and this is where people generally get confused, like the people in this thread. Let's say the government approaches you and says "Mr. Trajan, I see that all you've ever done is buy government bonds. Government bonds have a cost. There are middle men that have to get paid. We have auctions. We have accounting for all these bonds. We have to pay a custodian. Let's make a deal. Instead of going to all the trouble of issuing these bonds that you buy every month, let's skip all the middle men and we'll debit your account the amount that you send to us every month. You will still compound the interest at the same rate but instead of owning the actual bond, we will pay you back your principal and accrued interest in the future when you need it." Thus, you have another option.
3rd option - you send the money directly to the government and the government enters into a contractual promise to pay you back in the future the amount of your investment plus accrued interest matching the rate of interest on government bonds.
And like the first two options, you have an asset - a contractual promise to pay you back plus interest - that is a liability of the government.
Economically, all three options are the same. In all three options, you are sending the government your savings and the government promises to pay you back plus interest. A bond is a contractual promise to pay you back plus interest in the future.
If you hadn't guessed, the third option most closely resembles how social security operates. Now take Mr. Trajan and 250 million other Americans and pool them all together in the third option and that's the SS trust fund. It's as if we are all buying government bonds together, but instead of going to the trouble of actually issuing the bonds, the government credits our accounts as if we were purchasing the bonds. And that pool of assets is run by the government, which is an asset credited against the liabilities of the Treasury.
Now, that's not how I would design a pension fund, but that's essentially how SS works.
http://www.usmessageboard.com/polit...2000-when-we-had-a-surplus-7.html#post3825575