Social Security is Not a Ponzi Scheme, Mr. Perry

[flacaltenn]

SS is taking in less money than paying out due to a massive payroll tax cut and a massive recession. And the trust fund contains a couple of trillion dollars of US bonds, which as recent events have showed are the safest investment on the planet......

Cue retarded comments about S&P's downgrade......

Cue a graph showing the yield curve on the ten year note for the few weeks before and after the downgrade. Mr. Market believes in US bonds more than any other investment.

Also, too. The bonds in the trust fund are actually preferred bonds. They have senior debt status compared to regular bonds and have to be paid by the government before any other bond-related debt is paid.

You're making all kinds of whacky claims that are blatantly false here. A while back you said that SS never claimed to invest the excess contributions and now you claim that there are actual bonds in the Trust Fund. They are NOT "preferred". THey are not even transferable or negotiable. Furthermore REAL bonds are actual debt that HAS been issued. What's in the TF is only a promise to ISSUE future debt obligations paid for by the same taxpayers who had REAL FICA cash stolen from them in the 1st place.. Stop the spinning and lying..

Charles Krauthammer: 'Special issue' bonds don't change the fact that the lockbox is empty

Krautheimer::::

Really? If these trust fund bonds represent anything real, why is it that in calculating national indebtedness they are not even included? We measure national solvency by debt/GDP ratio. As calculated by everyone from the OMB to the CIA, from the Simpson-Bowles to the Domenici-Rivlin commissions, the debt/GDP ratio counts only publicly held debt. This means bonds held by China, Saudi Arabia, you and me. The debt ratio completely ignores the kind of intragovernmental bonds that Mr. Lew insists are the equivalent of publicly held bonds.

Why? Because the intragovernmental bond is nothing more than a bookkeeping device that records how much one part of the U.S. government (Treasury) owes another part of the same government (the Social Security Administration). In judging the creditworthiness of the United States, the world doesn't care what the left hand owes the right. It's all one entity. It cares only what that one entity owes the world.

That's why publicly held bonds are so radically different from intragovernmental bonds. If we default on Chinese-held debt, decades of AAA creditworthiness is destroyed, the world stops lending to us, the dollar collapses, the economy goes into a spiral and we become Argentina. That's why such a default is inconceivable.

On the other hand, what would happen to financial markets if the Treasury stopped honoring the "special issue" bonds in the Social Security trust fund? A lot of angry grumbling at home for sure. But externally? Nothing.

This "default" would simply be the Treasury telling the Social Security Administration that henceforth it would have to fend for itself in covering its annual shortfall. How? By means-testing (cutting the benefits to the rich), changing the inflation formula, raising the retirement age and, if necessary, hiking the cap on income subject to the payroll tax

 

[Raoul_Duke]

Insurance is a transfer of risk. SS is currently a retirement program, not an insurance program.



What I am saying is very clear. SS security works like a Ponzi game in that it takes money from workers and uses it to pay retirees. I can provide links to multiple economists, two of whom have one Nobel Prizes, multitudes of politicians from both parties, and the current sitting president of the US, all of whom agree with me. All you can do is try to parse language and insist that, because SS is honest about being a Ponzi game, and is run by the government, that proves that it is not one.

Please, keep arguing, it is fun.

It's social insurance. Let's say you're 23. You have a car accident that's not your fault and you're disabled and unable to pay for care or work anymore. SS provides a basic level of care for you, even paying for a nursing home if that's what you need.


Ponzi schemes are unsustainable because you need an ever-growing number of investors tp pay off current investors. That isn't the case with SS. Here is the CBO's 75 year estimate of SS funding requirements :

No ever-growing number of investors needed, see?

No hidden accounts like every other ponzi scheme. Can you name a single Ponzi scheme that makes its accounts public, hmmm?

Funny how many economists, and even the SS actuaries, disagree. They are saying that SS is unsustainable the way it works now. Tweaking it the way some people here keep saying will delay the inevitable, but eventually someone is going to have to deal with the outright collapse of the system.

Yet, for some reason I am unable to fathom, people want to focus on semantics rather than admit there is a problem and fix it.

Can you show me where the SS actuaries disagree please? I'm sure you can find ojne or two economists, but these will be the kind of perfect markets Chicago guys who cheerled us into the 2008 economic meltdown, guys who are absolutely ideologically opposed to anything the government does and have recently seen the events of 2008 obliterate their entire ideology.

There really isn't a problem. The "problem" requires an increase in SS funding of about 0.6% of GDP to make SS fully solvent for at least the next 75 years. To put 0.6% in perspective we increased military and homeland security spending by about four times that much after 9/11 without the end of the world happening.

 

[Raoul_Duke]

Cue retarded comments about S&P's downgrade......

Cue a graph showing the yield curve on the ten year note for the few weeks before and after the downgrade. Mr. Market believes in US bonds more than any other investment.

Also, too. The bonds in the trust fund are actually preferred bonds. They have senior debt status compared to regular bonds and have to be paid by the government before any other bond-related debt is paid.

You're making all kinds of whacky claims that are blatantly false here. A while back you said that SS never claimed to invest the excess contributions and now you claim that there are actual bonds in the Trust Fund. They are NOT "preferred". THey are not even transferable or negotiable. Furthermore REAL bonds are actual debt that HAS been issued. What's in the TF is only a promise to ISSUE future debt obligations paid for by the same taxpayers who had REAL FICA cash stolen from them in the 1st place.. Stop the spinning and lying..

Charles Krauthammer: 'Special issue' bonds don't change the fact that the lockbox is empty

Krautheimer::::

Really? If these trust fund bonds represent anything real, why is it that in calculating national indebtedness they are not even included? We measure national solvency by debt/GDP ratio. As calculated by everyone from the OMB to the CIA, from the Simpson-Bowles to the Domenici-Rivlin commissions, the debt/GDP ratio counts only publicly held debt. This means bonds held by China, Saudi Arabia, you and me. The debt ratio completely ignores the kind of intragovernmental bonds that Mr. Lew insists are the equivalent of publicly held bonds.

Why? Because the intragovernmental bond is nothing more than a bookkeeping device that records how much one part of the U.S. government (Treasury) owes another part of the same government (the Social Security Administration). In judging the creditworthiness of the United States, the world doesn't care what the left hand owes the right. It's all one entity. It cares only what that one entity owes the world.

That's why publicly held bonds are so radically different from intragovernmental bonds. If we default on Chinese-held debt, decades of AAA creditworthiness is destroyed, the world stops lending to us, the dollar collapses, the economy goes into a spiral and we become Argentina. That's why such a default is inconceivable.

On the other hand, what would happen to financial markets if the Treasury stopped honoring the "special issue" bonds in the Social Security trust fund? A lot of angry grumbling at home for sure. But externally? Nothing.

This "default" would simply be the Treasury telling the Social Security Administration that henceforth it would have to fend for itself in covering its annual shortfall. How? By means-testing (cutting the benefits to the rich), changing the inflation formula, raising the retirement age and, if necessary, hiking the cap on income subject to the payroll tax

When did I ever claim that SS never invested their surplus?

And as for the preferred bonds that are held by the SS trust fund :

Debt held by government accounts represents the cumulative surpluses, including interest earnings, of these accounts that have been invested in Treasury securities. The special Treasury securities held in these government accounts represent legal obligations of the Treasury and are guaranteed for principal and interest by the full faith and credit of the U.S. government. This debt reflects a burden on taxpayers and the economy in the future.

Whenever a government account needs to spend more than it takes in from the public, the Treasury must provide cash to redeem debt held by the government account. The government must obtain this cash by increasing taxes, cutting spending, borrowing more from the public, retiring less debt (if the budget is in surplus), or some combination thereof.

Federal Debt Basics


and


What does the trust fund do? The Social Security Administration itself describes it as “budget authority.” That is, until the fund runs out, the program can order the Treasury to come up with the money to pay benefits, even if FICA taxes don’t cover benefits (and they don’t, starting this year), without asking Congress for more money.

The Real Risk to Social Security - CBS MoneyWatch.com



and


Government accounts are known as intragovernmental debt, which takes the form of bonds known as special securities. The Social Security trust funds make up 52 percent of these special securities. The remainder are held by Civil Service Retirement and Disability trust fund (21 percent), Medicare trust funds (10 percent), Military Retirement (6 percent)and other trust funds. According to the Government Accounting Office,"special federal securities held in the accounts represent legal obligations of the Treasury and are guaranteed for principal and interest by full faith and credit of the U.S. government."

Special securities are not only utilized by government trusts. Private sector money mangers entrusted with large amounts of capital are permitted to negotiate placements of similarly structured securities. Unlike publically traded federal securities, special securities offer a higher degree of safety and are not subject to the fluctuations evident in the Chicago trading pits.

The Social Security trust funds, as well as other trust funds, are required by law to hold special federal securities. In the case of the Social Security trust funds, the rate of interest on special issues is determined by a formula enacted in 1960. The principle amount of the security remains constant. The interest rate is calculated by an average rate of publically traded securities of less than four years maturity. The Social Security Administration reported that "The effective interest rate for the OASI and DI Trust Funds, combined, was 6.4 percent in 2002. This higher rate resulted because the funds hold special-issue bonds acquired in past years when interest rates were higher."

During the 1970's the Social Security trusts were drawn down. The special bonds were redeemed and honored without question. Defaulting on a trust bond is not an option. No U. S. Congress would ever electorally survive such a travesty of the public trust.




uc's Blog | Talking Points Memo | The Trust Funds and Special Bonds


And Krauthammer, the guy with a track record of being wrong about everything as a cite?

 

[saveliberty]

All that crap and not word one about PREFERRED bonds. Fail for Rouhl Flake.

 

[Raoul_Duke]

All that crap and not word one about PREFERRED bonds. Fail for Rouhl Flake.

They call them "special" bonds, I call them "preferred" bonds. If language semantics is the best you can do to reply to my post it looks like i made a pretty good post.

 

[saveliberty]

All that crap and not word one about PREFERRED bonds. Fail for Rouhl Flake.

They call them "special" bonds, I call them "preferred" bonds. If language semantics is the best you can do to reply to my post it looks like i made a pretty good post.

Your ignorance of what a preferred bond is was evident. If you want to pursue a career in message board stupidity, feel free. You have a fair number of competitors though.

 

[Raoul_Duke]

All that crap and not word one about PREFERRED bonds. Fail for Rouhl Flake.

They call them "special" bonds, I call them "preferred" bonds. If language semantics is the best you can do to reply to my post it looks like i made a pretty good post.

Your ignorance of what a preferred bond is was evident. If you want to pursue a career in message board stupidity, feel free. You have a fair number of competitors though.

Because I used the word "preferred" instead of "special" to describe trust fund bonds?

How does that make me ignorant about preferred securities?

 

[saveliberty]

Surprise me, look it up yourself.

 

[OohPooPahDoo]

The last three words are supposed to be capitalized grammer nazi.

...and just what does the government have to collateralize our currency? Certainly not tax dollars or tangible products. Full faith and CREDIT?

The fact that it can tax the people?

You know exactly the same as every other government in the world?

Kid you GOTTA go read a book.

Seriously, you so don't get it.

Collateralize requires something of value to back the note. Gold WAS a standard in the past. Sometimes its real property in some loans. Credit has no business being collateral, particualrly for an over extended country like the US.

Credit as collateral is the entire basis of banking. What do you think happens when you make a deposit in a checking account?

 

[saveliberty]

The fact that it can tax the people?

You know exactly the same as every other government in the world?

Kid you GOTTA go read a book.

Seriously, you so don't get it.

Collateralize requires something of value to back the note. Gold WAS a standard in the past. Sometimes its real property in some loans. Credit has no business being collateral, particualrly for an over extended country like the US.

Credit as collateral is the entire basis of banking. What do you think happens when you make a deposit in a checking account?

Most banks wait at least twenty-fours for the check to clear before you have access to it. That is the first fail on your example. Then there is the point we are discussing the federal government, not banks. Got any more straws to throw out there?

 

[OohPooPahDoo]

Collateralize requires something of value to back the note. Gold WAS a standard in the past. Sometimes its real property in some loans. Credit has no business being collateral, particualrly for an over extended country like the US.

Credit as collateral is the entire basis of banking. What do you think happens when you make a deposit in a checking account?

Most banks wait at least twenty-fours for the check to clear before you have access to it. That is the first fail on your example.

LOL! I never said they didn't!

Then there is the point we are discussing the federal government, not banks. Got any more straws to throw out there?

You're such a moron. The Federal Reserve IS banks.

 

[Raoul_Duke]

Surprise me, look it up yourself.

I really don't see your point here.

 

[saveliberty]

Credit as collateral is the entire basis of banking. What do you think happens when you make a deposit in a checking account?

Most banks wait at least twenty-fours for the check to clear before you have access to it. That is the first fail on your example.

LOL! I never said they didn't!

Then there is the point we are discussing the federal government, not banks. Got any more straws to throw out there?

You're such a moron. The Federal Reserve IS banks.

No dipshit, its composed of member banks. Individual banks set their own polices outside specific government regulation. You suggested banks extended credit based on a written check, you were wrong. Nice try at a dodge. You lose.

 

[saveliberty]

In a related note, I see Obama is pulling Social Security cuts from the deficit talks. WOnder how we are suppose to reach the spendig cut mark without a change there?

 

[Quantum Windbag]

The Congress has specified that Federal Reserve Banks must hold collateral equal in value to the Federal Reserve notes that the Federal Reserve Bank puts in to circulation. This collateral is chiefly held in the form of U.S. Treasury, federal agency, and government-sponsored enterprise securities.

Although the collateral is mostly in non-gold, as shown on the balance sheet above, the Fed still maintains part of its collateral in gold.

They are technically borrowing the money from the government, so the government requires that the loan be secured, mostly by pieces of paper that says the government owes them money. That does not mean the collateral backs the money, it backs the loan of the money.

Can you explain why the government would require a private bank to carry collateral that backs government currency? Once you get over that little hump in your comprehension you will see that US dollars are not backed by anything other than the government.

 

[Quantum Windbag]

It's social insurance. Let's say you're 23. You have a car accident that's not your fault and you're disabled and unable to pay for care or work anymore. SS provides a basic level of care for you, even paying for a nursing home if that's what you need.


Ponzi schemes are unsustainable because you need an ever-growing number of investors tp pay off current investors. That isn't the case with SS. Here is the CBO's 75 year estimate of SS funding requirements :

No ever-growing number of investors needed, see?

No hidden accounts like every other ponzi scheme. Can you name a single Ponzi scheme that makes its accounts public, hmmm?

Funny how many economists, and even the SS actuaries, disagree. They are saying that SS is unsustainable the way it works now. Tweaking it the way some people here keep saying will delay the inevitable, but eventually someone is going to have to deal with the outright collapse of the system.

Yet, for some reason I am unable to fathom, people want to focus on semantics rather than admit there is a problem and fix it.

And do "they" have names?

Yes, and links were posted to both Krugman and Samuelson saying so. I am pretty sure the SS actuaries have names also, I just have not looked them up, and have no plans to do so.

 

[Quantum Windbag]

It's social insurance. Let's say you're 23. You have a car accident that's not your fault and you're disabled and unable to pay for care or work anymore. SS provides a basic level of care for you, even paying for a nursing home if that's what you need.


Ponzi schemes are unsustainable because you need an ever-growing number of investors tp pay off current investors. That isn't the case with SS. Here is the CBO's 75 year estimate of SS funding requirements :

No ever-growing number of investors needed, see?

No hidden accounts like every other ponzi scheme. Can you name a single Ponzi scheme that makes its accounts public, hmmm?

Funny how many economists, and even the SS actuaries, disagree. They are saying that SS is unsustainable the way it works now. Tweaking it the way some people here keep saying will delay the inevitable, but eventually someone is going to have to deal with the outright collapse of the system.

Yet, for some reason I am unable to fathom, people want to focus on semantics rather than admit there is a problem and fix it.

Can you show me where the SS actuaries disagree please? I'm sure you can find ojne or two economists, but these will be the kind of perfect markets Chicago guys who cheerled us into the 2008 economic meltdown, guys who are absolutely ideologically opposed to anything the government does and have recently seen the events of 2008 obliterate their entire ideology.

There really isn't a problem. The "problem" requires an increase in SS funding of about 0.6% of GDP to make SS fully solvent for at least the next 75 years. To put 0.6% in perspective we increased military and homeland security spending by about four times that much after 9/11 without the end of the world happening.

The current actuary report says that, unless Congress fixes it, SS will collapse next year, and SS will collapse by 2035. You cited it yourself, if that is your definition sustainable then you have to go back to school.

 

[Raoul_Duke]

Funny how many economists, and even the SS actuaries, disagree. They are saying that SS is unsustainable the way it works now. Tweaking it the way some people here keep saying will delay the inevitable, but eventually someone is going to have to deal with the outright collapse of the system.

Yet, for some reason I am unable to fathom, people want to focus on semantics rather than admit there is a problem and fix it.

Can you show me where the SS actuaries disagree please? I'm sure you can find ojne or two economists, but these will be the kind of perfect markets Chicago guys who cheerled us into the 2008 economic meltdown, guys who are absolutely ideologically opposed to anything the government does and have recently seen the events of 2008 obliterate their entire ideology.

There really isn't a problem. The "problem" requires an increase in SS funding of about 0.6% of GDP to make SS fully solvent for at least the next 75 years. To put 0.6% in perspective we increased military and homeland security spending by about four times that much after 9/11 without the end of the world happening.

The current actuary report says that, unless Congress fixes it, SS will collapse next year, and SS will collapse by 2035. You cited it yourself, if that is your definition sustainable then you have to go back to school.

Show me where it says that in the current report. With an actual link and everything.

 

[Raoul_Duke]

Funny how many economists, and even the SS actuaries, disagree. They are saying that SS is unsustainable the way it works now. Tweaking it the way some people here keep saying will delay the inevitable, but eventually someone is going to have to deal with the outright collapse of the system.

Yet, for some reason I am unable to fathom, people want to focus on semantics rather than admit there is a problem and fix it.

And do "they" have names?

Yes, and links were posted to both Krugman and Samuelson saying so. I am pretty sure the SS actuaries have names also, I just have not looked them up, and have no plans to do so.

Krugman and Samuelson did not say what you said they said :

The Ponzi Thing - NYTimes.com

 

[Quantum Windbag]

And do "they" have names?

Yes, and links were posted to both Krugman and Samuelson saying so. I am pretty sure the SS actuaries have names also, I just have not looked them up, and have no plans to do so.

Krugman and Samuelson did not say what you said they said :

The Ponzi Thing - NYTimes.com

From your link.

Well, the Ponzi game will soon be over, thanks to changing demographics, so that the typical recipient henceforth will get only about as much as he or she put in (and today’s young may well get less than they put in).

Does that not sound like he is saying it is unsustainable, which is the exact thing you are trying to tell me he is not saying?