The "raiding" of the Social Security Trust. What you don't know, and why you're probably an idiot.

[flacaltenn]

Phony analogies such as Ponzi Scheme and check kiting are neither legal, political nor economic arguments. They are merely fact-free name calling and not worth a response.

The simple-minded Lemonade Stand School of Economics works by (as the name implies) analogy. Real economics does not work by analogy, it works by quantitative data.

The Social Security law has a payroll tax at one end and a schedule of benefits at the other. The laws and policies connecting the two ends of Social Security are, apparently, too difficult for the Lemonade Stand School to grasp.

So-called conservatives have great difficulty understanding ideas with which they do not agree. American conservatives are actually reactionary anarchists. They hate government. They wish there was no government. They don't want to understand government. Instead, they prefer pretend that federal macroeconomic and fiscal policy is a form of consumer household economy writ large. They imagine that Social Security is a passbook savings account. They just don't get it. They don't want to get it. They are too mad at everything to analyze anything. These are the walking wounded from the great battle of Reaganomics. Sad

The response to Ponzi Scheme is ready-baked. You don't have a response for check kiting - so you are reduced to name calling. These aren't analogies.

The structure of Social Security is very similar to check kiting. We write a check to one person in order to cash the last check written. That is a fact about how the system works.

The laws and policies do not connect. That is why there is a nearly $26 trillion shortfall.

When you say that "the structure of Social Security is very similar to check kiting," you are making an analogy. I'll bet you didn't know that, did you? The analogy is a silly one for more reasons than I care to mention. The federal government is not a bank. Without getting into a lot of legal and fiscal details that will only make your head spin, I'll try to make this simple for you: when was the last time the federal government gave you a toaster for paying your taxes?

Given the inter-generational nature of the SS system, the shortfall is inevitable -- in fact, it was foreseen and provided for in 1990 -- but not critical. After all the right wing screaming and stalling is over, the solution to the shortfall is quick and simple: remove the income cap from the FICA tax and apply FICA to capital gains as well as earned income. Voila! Huge surpluses arrive immediately; so huge in fact that it will be possible to cut FICA tax rates substantially.

If that weren't spectacular enough, means testing payments and phasing out benefits to retirees with incomes in excess of 300% of poverty will allow very significant increases in benefits to the truly needy. When these proposals are made as solutions to a reduction in benefits the 10% or so fringe right congresscritters standing on the tracks as the Social Security Express thunders down on them will disappear.

Don't take my word for it. When was the last time that SS benefits were cut? Where are the politicians who ran on phasing out the program? See what I mean?

I see what you mean. You want to end Social Security, and replace it with a welfare program. You realize that FDR specifically warned against what you are proposing. Genius. Here is a better end. End Social Security, and transfer the assets to a welfare program of your choice. My guess is that you don't know what check kiting is.

I have never said anything that would lead anyone to think I want to end Social Security. I do think we need something like the negative income tax plan proposed by Richard Nixon. Lowering the ceiling in order to raise the floor is just good carpentry.

There IS a negative income tax. It's called EITC. And I don't want you as builder or a carpenter.

 

[Toro]

You left out the 3rd party guaranteeing the debt.. And that's the same taxpayers who paid the $100.

There is no third party that guarantees the debt. It is debt of the United States government.

It is also not the same taxpayer. There are 320 million Americans. About half pay FICA taxes. The benefits go to people who paid FICA taxes in the past but who, for the most part, don't pay FICA taxes anymore.

This is a basic misconception that kaz also keeps making. We are not "paying it to ourselves." It's not "the same" taxpayers. All government liabilities are claims on the taxation base of the American economy. The composition of those claims are not uniformly distributed across all 320 million Americans. For example, the 20 year-old worker paying FICA taxes so the 80 year-old person receives SS is not the same person.

And of course you know this is not a correct analogy -- because you focus on the benefits paid. And it's an insurance program with an actuarial table, not an investment. So folks get different effective returns and yields.

It is the correct analogy. The economics of the cash flow through the SS trusts are no different than a pool of government securities. The liabilities of the trusts compound at a rate of interest that is tied to a weighted average interest rate of the government bond market. An indexed government bond mutual fund will have a yield similar to the rate earned in the trust.

The ONLY part of the payout that even INVOLVES the Treasury is the annual income shortfall. The REST is paid thru direct transfer from SS income..

You also got the Treasury side of the deal wrong because what goes BACK to SS isn't just the book keeping note that subtracts from the IOUs. It also includes cold cash to pay the benefits with. And that cash is freed ONLY by issuing new debt instruments with the taxpayers guaranteeing future payments.

None of that changes the economics of the cash flows and the nature of the SS trusts. Shortfalls of the trusts are like a defined contribution plan with a growing unfunded liability. But a defined contribution plan composed of 100% government bonds can have the same problem.

 

[JoeTheEconomist]

Allowing individuals to retain their SS taxes would allow them to instead invest those funds into retirement plans that would yield better returns,

very true, an average American could retire with an estate of $1.4 million rather than the dog food money they get from SS, assuming they live long enough to collect any of it.

Do you have any data to back-up that claim? And I am not counting spam on the internet.

 

[flacaltenn]

You left out the 3rd party guaranteeing the debt.. And that's the same taxpayers who paid the $100.

There is no third party that guarantees the debt. It is debt of the United States government.

It is also not the same taxpayer. There are 320 million Americans. About half pay FICA taxes. The benefits go to people who paid FICA taxes in the past but who, for the most part, don't pay FICA taxes anymore.

This is a basic misconception that kaz also keeps making. We are not "paying it to ourselves." It's not "the same" taxpayers. All government liabilities are claims on the taxation base of the American economy. The composition of those claims are not uniformly distributed across all 320 million Americans. For example, the 20 year-old worker paying FICA taxes so the 80 year-old person receives SS is not the same person.

And of course you know this is not a correct analogy -- because you focus on the benefits paid. And it's an insurance program with an actuarial table, not an investment. So folks get different effective returns and yields.

It is the correct analogy. The economics of the cash flow through the SS trusts are no different than a pool of government securities. The liabilities of the trusts compound at a rate of interest that is tied to a weighted average interest rate of the government bond market. An indexed government bond mutual fund will have a yield similar to the rate earned in the trust.

The ONLY part of the payout that even INVOLVES the Treasury is the annual income shortfall. The REST is paid thru direct transfer from SS income..

You also got the Treasury side of the deal wrong because what goes BACK to SS isn't just the book keeping note that subtracts from the IOUs. It also includes cold cash to pay the benefits with. And that cash is freed ONLY by issuing new debt instruments with the taxpayers guaranteeing future payments.

None of that changes the economics of the cash flows and the nature of the SS trusts. Shortfalls of the trusts are like a defined contribution plan with a growing unfunded liability. But a defined contribution plan composed of 100% government bonds can have the same problem.

Aww c'mon. ALL Federal debt is NOT the debt of the government. It's the debt of the TAXPAYERS.. Until you realize where the money comes from -- you'll never realize the gigantic problem of debt. Or paying debts with debts. Which is how the SS shortfalls are handled.

 

[Flash]

[


Given the inter-generational nature of the SS system, the shortfall is inevitable -- in fact, it was foreseen and provided for in 1990 -- but not critical. After all the right wing screaming and stalling is over, the solution to the shortfall is quick and simple: remove the income cap from the FICA tax and apply FICA to capital gains as well as earned income. Voila! Huge surpluses arrive immediately; so huge in fact that it will be possible to cut FICA tax rates substantially.

How come you Moon Bats always think that the answer to everything is more taxes?

Yes you can always bring more money into the pockets of the bureaucrats if you raise taxes but not only is that damaging to our economy but it is the immoral thing to do.

These people that would get hit with that increase in taxation are the ones already paying the bulk of the trillion a year in come taxes while 50% of Americans pay none to that tax pool and you want to tax them even more. How come you are so greedy? Shame on you!

Back before retiring I usually met the income cap by late Spring or early summer. Then I had a 7.5% increase in take home pay. I spent that money in the productive economy instead of giving it to the filthy ass government and that was always a good thing.

If you need money then stop spending so much. Ron Paul's 2012 Restore America budget cut a trillion a year out of the Federal budget while maintaining defense and not touching Social Security or Medicare. That was a much better approach than raising taxes to provide even more money to an already bloated government.

Don't you think we need to cut out unnecessary government spending before we go raising taxes on the American people?

The combined Federal, State and Local government collects almost 40% of the GDP in taxes.

When is enough going to be enough for you Moon Bats?

 

[kaz]

Nope.. The surplus was an ASSET to the General Fund. Because it was stolen. The Treasury doesn't just register "a credit to SS" --- They issue NEW DEBT and then allow SS the ability to draw on based on that NEW debt. They SPENT the same $1 twice on the backs of the taxpayer.

I'm sorry. You don't understand this. And again, I don't blame you. It's confusing to people who don't work in pension finance.

The United States Treasury does NOT issue new debt to fund SS. If you think this is true, you are mis-informed.

Right, the guy who thinks the GENERAL FUND loaning the GENERAL FUND money is an asset is telling someone they "don't understand this." Now that's classic

The general fund is the borrower. Social Security is the lender. Since the General Fund is not liable for the promises of SS, it is not the lender. The bond is an asset to SS. It is a liability to the government. You might read the 2014 Trustees Report pages 256 and 257 in which the Trustees respond to critics of Trust-Fund Accounting.

A distinction without a difference. Money collected goes into the general fund, social security welfare checks are paid out of the general fund, the rest is moving paper. The "borrower" and the "lender" are the same, the Federal government. There is no asset, the sum of the positive and negative of any number is zero. And whether or not you call that paperwork masturbation a "trust fund" or not there is no difference, the bills go to your children. Calling it an "asset" changes zero. Look up what the word "asset" means. Then maybe you can share your dictionary with Toro so he learns. Apparently dictionaries don't make it all the way up to Canada

 

[kaz]

Actually, there is a major "practical difference." The government saved zero, it spent the money as it came in, and like if there was no trust fund, your children will be taxed to pay for it.

Whether there is a "trust fund" or not, there is no economic difference. The government has no assets other than those which are cancelled out by debt. When you add a number to it's negative, you get zero every time, and that's the net value of the the "trust fund." Read your post, you demonstrate exactly my point that you're lost in syntax and the actual meaning of assets and securities has been lost to you. A security based on an asset with an underlying value of zero isn't a real asset, it's a scam when it's treated as being an asset, and that's what social security is, a scam

The government's savings does not go up. The government's liabilities go up. Your savings go up. The government operates the trusts in the name of the recipients. It doesn't operate it in the name of itself.

When you pay FICA taxes, the accounting looks like this. Let's say you pay $100 in taxes. At that moment, the balance sheets look like this

You
Dr. $100 SS claim
Cr. $100 in cash

The SS Trust
Dr. $100 in government non-marketable liabilities
Cr. $100 owed to you

The Treasury
Dr. $100 in cash
Cr. $100 in government non-marketable liabilities owed to the Trust.

The Trust is the conduit through which your SS contributions pass. Eliminating the trust, the net effect is

Dr. $100 you are owed by the government
Cr. $100 the government owes to you.

That's the economic effect of SS. The government's debt is $100 it owes to you.

What I think you are getting confused on is what is in the Trust. In the Trust, there is a $100 asset, which is the debt owed to it by the government. I think this is where you are saying "you can't call a debt a liability." But that is netted out by the $100 the Trust owes to you. So if you count the debt owed to the Trust ($100) as an asset, you also have to count the amount owed by the government to the Trust and the liability owed to you ($100+$100=$200). The gross balance changes when running the cash flows through the Trust, but the net balance does not.

DEFINITION of 'Asset'
A resource with economic value that an individual, corporation or country owns or controls with the expectation that it will provide future benefit.

The trust fund is an asset - In this case, your welfare check from social security will be 100% taken from your children

The trust fund is not an asset - In this case, your welfare check from social security will be 100% taken from your children

Do you need a definition of "economic value" or do you need help with that as well?

 

[kaz]

This isn't how the government keeps its books. The $100 SS payment is processed by the Treasury. It uses the cash to pay for existing benefits. If there is anything left over, it is put into the SS Trust Fund

Actually, if there is $100 left over, the government spends it, it saves nothing. Calling a debt to yourself an asset is a game, no actual economic value is created in that

 

[Toro]

Allowing individuals to retain their SS taxes would allow them to instead invest those funds into retirement plans that would yield better returns,

very true, an average American could retire with an estate of $1.4 million rather than the dog food money they get from SS, assuming they live long enough to collect any of it.

Do you have any data to back-up that claim? And I am not counting spam on the internet.

You really don't want to go down that road.

You'll see what I mean if you persist with this conversation.

 

[Toro]

Actually, there is a major "practical difference." The government saved zero, it spent the money as it came in, and like if there was no trust fund, your children will be taxed to pay for it.

Whether there is a "trust fund" or not, there is no economic difference. The government has no assets other than those which are cancelled out by debt. When you add a number to it's negative, you get zero every time, and that's the net value of the the "trust fund." Read your post, you demonstrate exactly my point that you're lost in syntax and the actual meaning of assets and securities has been lost to you. A security based on an asset with an underlying value of zero isn't a real asset, it's a scam when it's treated as being an asset, and that's what social security is, a scam

The government's savings does not go up. The government's liabilities go up. Your savings go up. The government operates the trusts in the name of the recipients. It doesn't operate it in the name of itself.

When you pay FICA taxes, the accounting looks like this. Let's say you pay $100 in taxes. At that moment, the balance sheets look like this

You
Dr. $100 SS claim
Cr. $100 in cash

The SS Trust
Dr. $100 in government non-marketable liabilities
Cr. $100 owed to you

The Treasury
Dr. $100 in cash
Cr. $100 in government non-marketable liabilities owed to the Trust.

The Trust is the conduit through which your SS contributions pass. Eliminating the trust, the net effect is

Dr. $100 you are owed by the government
Cr. $100 the government owes to you.

That's the economic effect of SS. The government's debt is $100 it owes to you.

What I think you are getting confused on is what is in the Trust. In the Trust, there is a $100 asset, which is the debt owed to it by the government. I think this is where you are saying "you can't call a debt a liability." But that is netted out by the $100 the Trust owes to you. So if you count the debt owed to the Trust ($100) as an asset, you also have to count the amount owed by the government to the Trust and the liability owed to you ($100+$100=$200). The gross balance changes when running the cash flows through the Trust, but the net balance does not.

DEFINITION of 'Asset'
A resource with economic value that an individual, corporation or country owns or controls with the expectation that it will provide future benefit.

The trust fund is an asset - In this case, your welfare check from social security will be 100% taken from your children

The trust fund is not an asset - In this case, your welfare check from social security will be 100% taken from your children

Do you need a definition of "economic value" or do you need help with that as well?

The assets in the government trusts are held in trust for the recipients. It's no different than a trust held at a bank.

If you set up a $100 trust for yourself that could only hold government bonds, the economics would look like this

You
Dr. $100 claim on trust
Cr. $100 in cash

Trust held at bank
Dr. $100 in Treasury securities
Cr. $100 owed to you

The Treasury
Dr. $100 in cash
Cr. $100 in Treasury securities

The assets and liabilities of the trust are kept on the bank's balance sheet. The assets of the bank will increase by $100 and the liabilities of the bank will increase by $100 but the net balance of the bank will be $0. Because the government has sold the trust a $100 bond, which it then spends the proceeds, the net liability of the government will be $100.

Go back and look at the balance sheets of SS.

You
Dr. $100 SS claim
Cr. $100 in cash

The SS Trust
Dr. $100 in government non-marketable liabilities
Cr. $100 owed to you

The Treasury
Dr. $100 in cash
Cr. $100 in government non-marketable liabilities owed to the Trust.

It's the same balance sheet as the one held at bank. The only difference is the trust administrator.

The government is holding the liabilities and assets in trust, just like a bank holds liabilities and assets in trust. The difference is that because the government is holding the assets and liabilities for you in SS, it consolidates the SS trusts and counts its liability as an asset. But the asset is offset by a liability so the net indebtedness does not change. It is still $100.

The government holds the assets and liabilities of the SS trust on its balance sheet. A bank does the same thing.

 

[JoeTheEconomist]

Nope.. The surplus was an ASSET to the General Fund. Because it was stolen. The Treasury doesn't just register "a credit to SS" --- They issue NEW DEBT and then allow SS the ability to draw on based on that NEW debt. They SPENT the same $1 twice on the backs of the taxpayer.

I'm sorry. You don't understand this. And again, I don't blame you. It's confusing to people who don't work in pension finance.

The United States Treasury does NOT issue new debt to fund SS. If you think this is true, you are mis-informed.

Right, the guy who thinks the GENERAL FUND loaning the GENERAL FUND money is an asset is telling someone they "don't understand this." Now that's classic

The general fund is the borrower. Social Security is the lender. Since the General Fund is not liable for the promises of SS, it is not the lender. The bond is an asset to SS. It is a liability to the government. You might read the 2014 Trustees Report pages 256 and 257 in which the Trustees respond to critics of Trust-Fund Accounting.

A distinction without a difference. Money collected goes into the general fund, social security welfare checks are paid out of the general fund, the rest is moving paper. The "borrower" and the "lender" are the same, the Federal government. There is no asset, the sum of the positive and negative of any number is zero. And whether or not you call that paperwork masturbation a "trust fund" or not there is no difference, the bills go to your children. Calling it an "asset" changes zero. Look up what the word "asset" means. Then maybe you can share your dictionary with Toro so he learns. Apparently dictionaries don't make it all the way up to Canada

It is a distinction. Some simply do not grasp nuance. Legality means nothing to some. If I have a trust fund, and lend money to myself, it has to be repaid. If it isn't, someone can sue me and the legal boundaries of the my trust are broken. You can put general fund in ALL CAPS, BOLDs or a foreign language. Legally it isn't. But oh my I live the world where my ideology is fact.

As Moynihan once observed "Everyone is entitled to his own opinion, but not his own facts." Here you want your own facts, and demand that someone believe them.

 

[JoeTheEconomist]

Actually, there is a major "practical difference." The government saved zero, it spent the money as it came in, and like if there was no trust fund, your children will be taxed to pay for it.

Whether there is a "trust fund" or not, there is no economic difference. The government has no assets other than those which are cancelled out by debt. When you add a number to it's negative, you get zero every time, and that's the net value of the the "trust fund." Read your post, you demonstrate exactly my point that you're lost in syntax and the actual meaning of assets and securities has been lost to you. A security based on an asset with an underlying value of zero isn't a real asset, it's a scam when it's treated as being an asset, and that's what social security is, a scam

The government's savings does not go up. The government's liabilities go up. Your savings go up. The government operates the trusts in the name of the recipients. It doesn't operate it in the name of itself.

When you pay FICA taxes, the accounting looks like this. Let's say you pay $100 in taxes. At that moment, the balance sheets look like this

You
Dr. $100 SS claim
Cr. $100 in cash

The SS Trust
Dr. $100 in government non-marketable liabilities
Cr. $100 owed to you

The Treasury
Dr. $100 in cash
Cr. $100 in government non-marketable liabilities owed to the Trust.

The Trust is the conduit through which your SS contributions pass. Eliminating the trust, the net effect is

Dr. $100 you are owed by the government
Cr. $100 the government owes to you.

That's the economic effect of SS. The government's debt is $100 it owes to you.

What I think you are getting confused on is what is in the Trust. In the Trust, there is a $100 asset, which is the debt owed to it by the government. I think this is where you are saying "you can't call a debt a liability." But that is netted out by the $100 the Trust owes to you. So if you count the debt owed to the Trust ($100) as an asset, you also have to count the amount owed by the government to the Trust and the liability owed to you ($100+$100=$200). The gross balance changes when running the cash flows through the Trust, but the net balance does not.

DEFINITION of 'Asset'
A resource with economic value that an individual, corporation or country owns or controls with the expectation that it will provide future benefit.

The trust fund is an asset - In this case, your welfare check from social security will be 100% taken from your children

The trust fund is not an asset - In this case, your welfare check from social security will be 100% taken from your children

Do you need a definition of "economic value" or do you need help with that as well?

No more than you need a definition of welfare : "financial support given to people in need" Something like 20% of all benefits go to the wealthiest people in the nation.

 

[healthmyths]

Actually, there is a major "practical difference." The government saved zero, it spent the money as it came in, and like if there was no trust fund, your children will be taxed to pay for it.

Whether there is a "trust fund" or not, there is no economic difference. The government has no assets other than those which are cancelled out by debt. When you add a number to it's negative, you get zero every time, and that's the net value of the the "trust fund." Read your post, you demonstrate exactly my point that you're lost in syntax and the actual meaning of assets and securities has been lost to you. A security based on an asset with an underlying value of zero isn't a real asset, it's a scam when it's treated as being an asset, and that's what social security is, a scam

The government's savings does not go up. The government's liabilities go up. Your savings go up. The government operates the trusts in the name of the recipients. It doesn't operate it in the name of itself.

When you pay FICA taxes, the accounting looks like this. Let's say you pay $100 in taxes. At that moment, the balance sheets look like this

You
Dr. $100 SS claim
Cr. $100 in cash

The SS Trust
Dr. $100 in government non-marketable liabilities
Cr. $100 owed to you

The Treasury
Dr. $100 in cash
Cr. $100 in government non-marketable liabilities owed to the Trust.

The Trust is the conduit through which your SS contributions pass. Eliminating the trust, the net effect is

Dr. $100 you are owed by the government
Cr. $100 the government owes to you.

That's the economic effect of SS. The government's debt is $100 it owes to you.

What I think you are getting confused on is what is in the Trust. In the Trust, there is a $100 asset, which is the debt owed to it by the government. I think this is where you are saying "you can't call a debt a liability." But that is netted out by the $100 the Trust owes to you. So if you count the debt owed to the Trust ($100) as an asset, you also have to count the amount owed by the government to the Trust and the liability owed to you ($100+$100=$200). The gross balance changes when running the cash flows through the Trust, but the net balance does not.

DEFINITION of 'Asset'
A resource with economic value that an individual, corporation or country owns or controls with the expectation that it will provide future benefit.

The trust fund is an asset - In this case, your welfare check from social security will be 100% taken from your children

The trust fund is not an asset - In this case, your welfare check from social security will be 100% taken from your children

Do you need a definition of "economic value" or do you need help with that as well?

No more than you need a definition of welfare : "financial support given to people in need" Something like 20% of all benefits go to the wealthiest people in the nation.

I don't believe you. What is your source for "20%" benefits go to the wealthiest.
Facts: So you say $168 billion of the $840 billion goes to the wealthiest people.
A) How many people make up the "wealthiest"... because 1% of 310 million would be 3.1 million divided into $168 billion is $54,194 or $4,516 per person.
B) For example, if you retire at full retirement age in 2015, your maximum benefit would be $2,663.
What is the maximum Social Security retirement benefit payable?

So ONCE again hyperbole, exaggeration made out of total ignorance! YOU stated each of the wealthiest people make almost 70% MORE then allowed!
How can that be? Easy you don't know crap because It doesn't take anytime to blow your comment out of the water with FACTS!!!

 

[kaz]

Actually, there is a major "practical difference." The government saved zero, it spent the money as it came in, and like if there was no trust fund, your children will be taxed to pay for it.

Whether there is a "trust fund" or not, there is no economic difference. The government has no assets other than those which are cancelled out by debt. When you add a number to it's negative, you get zero every time, and that's the net value of the the "trust fund." Read your post, you demonstrate exactly my point that you're lost in syntax and the actual meaning of assets and securities has been lost to you. A security based on an asset with an underlying value of zero isn't a real asset, it's a scam when it's treated as being an asset, and that's what social security is, a scam

The government's savings does not go up. The government's liabilities go up. Your savings go up. The government operates the trusts in the name of the recipients. It doesn't operate it in the name of itself.

When you pay FICA taxes, the accounting looks like this. Let's say you pay $100 in taxes. At that moment, the balance sheets look like this

You
Dr. $100 SS claim
Cr. $100 in cash

The SS Trust
Dr. $100 in government non-marketable liabilities
Cr. $100 owed to you

The Treasury
Dr. $100 in cash
Cr. $100 in government non-marketable liabilities owed to the Trust.

The Trust is the conduit through which your SS contributions pass. Eliminating the trust, the net effect is

Dr. $100 you are owed by the government
Cr. $100 the government owes to you.

That's the economic effect of SS. The government's debt is $100 it owes to you.

What I think you are getting confused on is what is in the Trust. In the Trust, there is a $100 asset, which is the debt owed to it by the government. I think this is where you are saying "you can't call a debt a liability." But that is netted out by the $100 the Trust owes to you. So if you count the debt owed to the Trust ($100) as an asset, you also have to count the amount owed by the government to the Trust and the liability owed to you ($100+$100=$200). The gross balance changes when running the cash flows through the Trust, but the net balance does not.

DEFINITION of 'Asset'
A resource with economic value that an individual, corporation or country owns or controls with the expectation that it will provide future benefit.

The trust fund is an asset - In this case, your welfare check from social security will be 100% taken from your children

The trust fund is not an asset - In this case, your welfare check from social security will be 100% taken from your children

Do you need a definition of "economic value" or do you need help with that as well?

The assets in the government trusts are held in trust for the recipients. It's no different than a trust held at a bank.

If you set up a $100 trust for yourself that could only hold government bonds, the economics would look like this

You
Dr. $100 claim on trust
Cr. $100 in cash

Trust held at bank
Dr. $100 in Treasury securities
Cr. $100 owed to you

The Treasury
Dr. $100 in cash
Cr. $100 in Treasury securities

The assets and liabilities of the trust are kept on the bank's balance sheet. The assets of the bank will increase by $100 and the liabilities of the bank will increase by $100 but the net balance of the bank will be $0. Because the government has sold the trust a $100 bond, which it then spends the proceeds, the net liability of the government will be $100.

Go back and look at the balance sheets of SS.

You
Dr. $100 SS claim
Cr. $100 in cash

The SS Trust
Dr. $100 in government non-marketable liabilities
Cr. $100 owed to you

The Treasury
Dr. $100 in cash
Cr. $100 in government non-marketable liabilities owed to the Trust.

It's the same balance sheet as the one held at bank. The only difference is the trust administrator.

The government is holding the liabilities and assets in trust, just like a bank holds liabilities and assets in trust. The difference is that because the government is holding the assets and liabilities for you in SS, it consolidates the SS trusts and counts its liability as an asset. But the asset is offset by a liability so the net indebtedness does not change. It is still $100.

The government holds the assets and liabilities of the SS trust on its balance sheet. A bank does the same thing.

No, it's completely different, the bank is holding an asset that belongs to one entity (person, company, ...) and a liability that belongs to another entity. They don't create an asset and a liability, one from the other to the same entity.

Again, your children will write a check to government that goes to you. Well, some of it will, whatever isn't just wasted.

Whether you call the trust fund real or not is immaterial to that equation. I understand all the securities you're talking about, always did, that isn't the point in question.

My question is, if the social security fund is a trust, an asset, where is the economic value that makes it an asset? The money is going to be taken from your children in the future. You're being stubborn on this, clearly there is zero economic value, and that means it's not an asset and not a trust fund

 

[kaz]

Nope.. The surplus was an ASSET to the General Fund. Because it was stolen. The Treasury doesn't just register "a credit to SS" --- They issue NEW DEBT and then allow SS the ability to draw on based on that NEW debt. They SPENT the same $1 twice on the backs of the taxpayer.

I'm sorry. You don't understand this. And again, I don't blame you. It's confusing to people who don't work in pension finance.

The United States Treasury does NOT issue new debt to fund SS. If you think this is true, you are mis-informed.

Right, the guy who thinks the GENERAL FUND loaning the GENERAL FUND money is an asset is telling someone they "don't understand this." Now that's classic

The general fund is the borrower. Social Security is the lender. Since the General Fund is not liable for the promises of SS, it is not the lender. The bond is an asset to SS. It is a liability to the government. You might read the 2014 Trustees Report pages 256 and 257 in which the Trustees respond to critics of Trust-Fund Accounting.

A distinction without a difference. Money collected goes into the general fund, social security welfare checks are paid out of the general fund, the rest is moving paper. The "borrower" and the "lender" are the same, the Federal government. There is no asset, the sum of the positive and negative of any number is zero. And whether or not you call that paperwork masturbation a "trust fund" or not there is no difference, the bills go to your children. Calling it an "asset" changes zero. Look up what the word "asset" means. Then maybe you can share your dictionary with Toro so he learns. Apparently dictionaries don't make it all the way up to Canada

It is a distinction. Some simply do not grasp nuance. Legality means nothing to some. If I have a trust fund, and lend money to myself, it has to be repaid. If it isn't, someone can sue me and the legal boundaries of the my trust are broken. You can put general fund in ALL CAPS, BOLDs or a foreign language. Legally it isn't. But oh my I live the world where my ideology is fact.

As Moynihan once observed "Everyone is entitled to his own opinion, but not his own facts." Here you want your own facts, and demand that someone believe them.

Bull (no offense, Toro...). Tell me where the asset is since the money will be taken from your children and given to you regardless of whether than money flows through a fictitious trust fund or not.

Hey kids, you know how you were about to have to send in the government a chuck of your paychecks to go to overhead, bureaucrats and me? Well, good news, there is actually a trust fund i'm giving you. So now, you send you rmoney to the trust fund to pay for overhead, bureaucrats and me.

Thanks Dad, so we can pay less at least?

No, it's the same amount, but I wanted to help you out and give you a trust fund to do it

So where is the money going if you're giving me the trust fund then?

To pay the trust fund for the money they are paying on your behalf.

The same amount?

Yes, the exact same amount.

Um...thanks Dad. This explains a lot of birthdays...

 

[kaz]

Actually, there is a major "practical difference." The government saved zero, it spent the money as it came in, and like if there was no trust fund, your children will be taxed to pay for it.

Whether there is a "trust fund" or not, there is no economic difference. The government has no assets other than those which are cancelled out by debt. When you add a number to it's negative, you get zero every time, and that's the net value of the the "trust fund." Read your post, you demonstrate exactly my point that you're lost in syntax and the actual meaning of assets and securities has been lost to you. A security based on an asset with an underlying value of zero isn't a real asset, it's a scam when it's treated as being an asset, and that's what social security is, a scam

The government's savings does not go up. The government's liabilities go up. Your savings go up. The government operates the trusts in the name of the recipients. It doesn't operate it in the name of itself.

When you pay FICA taxes, the accounting looks like this. Let's say you pay $100 in taxes. At that moment, the balance sheets look like this

You
Dr. $100 SS claim
Cr. $100 in cash

The SS Trust
Dr. $100 in government non-marketable liabilities
Cr. $100 owed to you

The Treasury
Dr. $100 in cash
Cr. $100 in government non-marketable liabilities owed to the Trust.

The Trust is the conduit through which your SS contributions pass. Eliminating the trust, the net effect is

Dr. $100 you are owed by the government
Cr. $100 the government owes to you.

That's the economic effect of SS. The government's debt is $100 it owes to you.

What I think you are getting confused on is what is in the Trust. In the Trust, there is a $100 asset, which is the debt owed to it by the government. I think this is where you are saying "you can't call a debt a liability." But that is netted out by the $100 the Trust owes to you. So if you count the debt owed to the Trust ($100) as an asset, you also have to count the amount owed by the government to the Trust and the liability owed to you ($100+$100=$200). The gross balance changes when running the cash flows through the Trust, but the net balance does not.

DEFINITION of 'Asset'
A resource with economic value that an individual, corporation or country owns or controls with the expectation that it will provide future benefit.

The trust fund is an asset - In this case, your welfare check from social security will be 100% taken from your children

The trust fund is not an asset - In this case, your welfare check from social security will be 100% taken from your children

Do you need a definition of "economic value" or do you need help with that as well?

No more than you need a definition of welfare : "financial support given to people in need" Something like 20% of all benefits go to the wealthiest people in the nation.

Wow, I don't get any government checks, what am I doing wrong? How do I get in on this?


You are full of shit, the government plunders us, Karl

 

[Toro]

In my trust example, the asset is a government Treasury security. That is debt owed to you by the United States government. In my SS example, you have debits in the SS trust. That is debt owed to you by the United States government.

They are both debt owed to you by the United States government. The only difference is the administrator of the trust - in one case the government, the other case the bank. If the government went and bought the bank, then that difference would effectively disappear.

And of course government debt has value. The 2.25% November 15, 2025 Treasury Bond is being quoted at 99-20 on my Bloomberg screen with a bid yield of 2.294%.

According to your argument, that bond is worth $0 because "we owe it to ourselves" and thus has no economic value. You better call the bond market and tell them about your exciting news. I'm sure they'd like to know!

 

[Toro]

I'm sorry. You don't understand this. And again, I don't blame you. It's confusing to people who don't work in pension finance.

The United States Treasury does NOT issue new debt to fund SS. If you think this is true, you are mis-informed.

Right, the guy who thinks the GENERAL FUND loaning the GENERAL FUND money is an asset is telling someone they "don't understand this." Now that's classic

The general fund is the borrower. Social Security is the lender. Since the General Fund is not liable for the promises of SS, it is not the lender. The bond is an asset to SS. It is a liability to the government. You might read the 2014 Trustees Report pages 256 and 257 in which the Trustees respond to critics of Trust-Fund Accounting.

A distinction without a difference. Money collected goes into the general fund, social security welfare checks are paid out of the general fund, the rest is moving paper. The "borrower" and the "lender" are the same, the Federal government. There is no asset, the sum of the positive and negative of any number is zero. And whether or not you call that paperwork masturbation a "trust fund" or not there is no difference, the bills go to your children. Calling it an "asset" changes zero. Look up what the word "asset" means. Then maybe you can share your dictionary with Toro so he learns. Apparently dictionaries don't make it all the way up to Canada

It is a distinction. Some simply do not grasp nuance. Legality means nothing to some. If I have a trust fund, and lend money to myself, it has to be repaid. If it isn't, someone can sue me and the legal boundaries of the my trust are broken. You can put general fund in ALL CAPS, BOLDs or a foreign language. Legally it isn't. But oh my I live the world where my ideology is fact.

As Moynihan once observed "Everyone is entitled to his own opinion, but not his own facts." Here you want your own facts, and demand that someone believe them.

Bull (no offense, Toro...). Tell me where the asset is since the money will be taken from your children and given to you regardless of whether than money flows through a fictitious trust fund or not.

Hey kids, you know how you were about to have to send in the government a chuck of your paychecks to go to overhead, bureaucrats and me? Well, good news, there is actually a trust fund i'm giving you. So now, you send you rmoney to the trust fund to pay for overhead, bureaucrats and me.

Thanks Dad, so we can pay less at least?

No, it's the same amount, but I wanted to help you out and give you a trust fund to do it

So where is the money going if you're giving me the trust fund then?

To pay the trust fund for the money they are paying on your behalf.

The same amount?

Yes, the exact same amount.

Um...thanks Dad. This explains a lot of birthdays...

If you lend your kids $100 and they spend it, they have a liability of $100 and you have an asset of $100. They now owe you $100. Now, they have to go get a job and create economic activity to pay you back $100.

ALL financial assets are claims on economic activity, no matter what the security. Government securities are no different. Government has the power of taxation on the economic production of the nation. That is why they are (usually) the highest rated issuer in the country.

 

[JoeTheEconomist]

Actually, there is a major "practical difference." The government saved zero, it spent the money as it came in, and like if there was no trust fund, your children will be taxed to pay for it.

Whether there is a "trust fund" or not, there is no economic difference. The government has no assets other than those which are cancelled out by debt. When you add a number to it's negative, you get zero every time, and that's the net value of the the "trust fund." Read your post, you demonstrate exactly my point that you're lost in syntax and the actual meaning of assets and securities has been lost to you. A security based on an asset with an underlying value of zero isn't a real asset, it's a scam when it's treated as being an asset, and that's what social security is, a scam

The government's savings does not go up. The government's liabilities go up. Your savings go up. The government operates the trusts in the name of the recipients. It doesn't operate it in the name of itself.

When you pay FICA taxes, the accounting looks like this. Let's say you pay $100 in taxes. At that moment, the balance sheets look like this

You
Dr. $100 SS claim
Cr. $100 in cash

The SS Trust
Dr. $100 in government non-marketable liabilities
Cr. $100 owed to you

The Treasury
Dr. $100 in cash
Cr. $100 in government non-marketable liabilities owed to the Trust.

The Trust is the conduit through which your SS contributions pass. Eliminating the trust, the net effect is

Dr. $100 you are owed by the government
Cr. $100 the government owes to you.

That's the economic effect of SS. The government's debt is $100 it owes to you.

What I think you are getting confused on is what is in the Trust. In the Trust, there is a $100 asset, which is the debt owed to it by the government. I think this is where you are saying "you can't call a debt a liability." But that is netted out by the $100 the Trust owes to you. So if you count the debt owed to the Trust ($100) as an asset, you also have to count the amount owed by the government to the Trust and the liability owed to you ($100+$100=$200). The gross balance changes when running the cash flows through the Trust, but the net balance does not.

DEFINITION of 'Asset'
A resource with economic value that an individual, corporation or country owns or controls with the expectation that it will provide future benefit.

The trust fund is an asset - In this case, your welfare check from social security will be 100% taken from your children

The trust fund is not an asset - In this case, your welfare check from social security will be 100% taken from your children

Do you need a definition of "economic value" or do you need help with that as well?

No more than you need a definition of welfare : "financial support given to people in need" Something like 20% of all benefits go to the wealthiest people in the nation.

I don't believe you. What is your source for "20%" benefits go to the wealthiest.
Facts: So you say $168 billion of the $840 billion goes to the wealthiest people.
A) How many people make up the "wealthiest"... because 1% of 310 million would be 3.1 million divided into $168 billion is $54,194 or $4,516 per person.
B) For example, if you retire at full retirement age in 2015, your maximum benefit would be $2,663.
What is the maximum Social Security retirement benefit payable?

So ONCE again hyperbole, exaggeration made out of total ignorance! YOU stated each of the wealthiest people make almost 70% MORE then allowed!
How can that be? Easy you don't know crap because It doesn't take anytime to blow your comment out of the water with FACTS!!!
View attachment 54969

My source is IRS tax returns, source of income. When I talk about wealthiest, it is based on income. If you can earn $50,000 per year while you are retired, chances are you are wealthy. Mind you this is just income that is recognized during the year. Fed data shows that the elderly are the wealthiest of any age demographic. Census data says the same thing.

Benefits are based on career work history, the highest benefits go to those with the most successful work history. If you actually knew how SS worked, you would realize that $2,663 is not the maximum. That is the max for a single person who retires at NRA. People are married, have kids, defer benefits. When you talk about ignorance, you are stepping beyond your understanding.

 

[healthmyths]

Actually, there is a major "practical difference." The government saved zero, it spent the money as it came in, and like if there was no trust fund, your children will be taxed to pay for it.

Whether there is a "trust fund" or not, there is no economic difference. The government has no assets other than those which are cancelled out by debt. When you add a number to it's negative, you get zero every time, and that's the net value of the the "trust fund." Read your post, you demonstrate exactly my point that you're lost in syntax and the actual meaning of assets and securities has been lost to you. A security based on an asset with an underlying value of zero isn't a real asset, it's a scam when it's treated as being an asset, and that's what social security is, a scam

The government's savings does not go up. The government's liabilities go up. Your savings go up. The government operates the trusts in the name of the recipients. It doesn't operate it in the name of itself.

When you pay FICA taxes, the accounting looks like this. Let's say you pay $100 in taxes. At that moment, the balance sheets look like this

You
Dr. $100 SS claim
Cr. $100 in cash

The SS Trust
Dr. $100 in government non-marketable liabilities
Cr. $100 owed to you

The Treasury
Dr. $100 in cash
Cr. $100 in government non-marketable liabilities owed to the Trust.

The Trust is the conduit through which your SS contributions pass. Eliminating the trust, the net effect is

Dr. $100 you are owed by the government
Cr. $100 the government owes to you.

That's the economic effect of SS. The government's debt is $100 it owes to you.

What I think you are getting confused on is what is in the Trust. In the Trust, there is a $100 asset, which is the debt owed to it by the government. I think this is where you are saying "you can't call a debt a liability." But that is netted out by the $100 the Trust owes to you. So if you count the debt owed to the Trust ($100) as an asset, you also have to count the amount owed by the government to the Trust and the liability owed to you ($100+$100=$200). The gross balance changes when running the cash flows through the Trust, but the net balance does not.

DEFINITION of 'Asset'
A resource with economic value that an individual, corporation or country owns or controls with the expectation that it will provide future benefit.

The trust fund is an asset - In this case, your welfare check from social security will be 100% taken from your children

The trust fund is not an asset - In this case, your welfare check from social security will be 100% taken from your children

Do you need a definition of "economic value" or do you need help with that as well?

No more than you need a definition of welfare : "financial support given to people in need" Something like 20% of all benefits go to the wealthiest people in the nation.

I don't believe you. What is your source for "20%" benefits go to the wealthiest.
Facts: So you say $168 billion of the $840 billion goes to the wealthiest people.
A) How many people make up the "wealthiest"... because 1% of 310 million would be 3.1 million divided into $168 billion is $54,194 or $4,516 per person.
B) For example, if you retire at full retirement age in 2015, your maximum benefit would be $2,663.
What is the maximum Social Security retirement benefit payable?

So ONCE again hyperbole, exaggeration made out of total ignorance! YOU stated each of the wealthiest people make almost 70% MORE then allowed!
How can that be? Easy you don't know crap because It doesn't take anytime to blow your comment out of the water with FACTS!!!
View attachment 54969

My source is IRS tax returns, source of income. When I talk about wealthiest, it is based on income. If you can earn $50,000 per year while you are retired, chances are you are wealthy. Mind you this is just income that is recognized during the year. Fed data shows that the elderly are the wealthiest of any age demographic. Census data says the same thing.

Benefits are based on career work history, the highest benefits go to those with the most successful work history. If you actually knew how SS worked, you would realize that $2,663 is not the maximum. That is the max for a single person who retires at NRA. People are married, have kids, defer benefits. When you talk about ignorance, you are stepping beyond your understanding.