Posted on 12/16/2013 6:20:55 AM PST by Kaslin
The SS Trust Fund has always operated the same way since the inception under FDR. Contributions are converted into interest bearing, non-market T-bills. As far as SS is concerned, these T-bills are the same as those held by the Chinese and are backed by the full faith and credit of the US.
By law, income to the trust funds must be invested, on a daily basis, in securities guaranteed as to both principal and interest by the Federal government. All securities held by the trust funds are "special issues" of the United States Treasury. Such securities are available only to the trust funds.
In the past, the trust funds have held marketable Treasury securities, which are available to the general public. Unlike marketable securities, special issues can be redeemed at any time at face value. Marketable securities are subject to the forces of the open market and may suffer a loss, or enjoy a gain, if sold before maturity. Investment in special issues gives the trust funds the same flexibility as holding cash.
However, in terms of the USG, the SSTF represents an unfunded liability and is part of the $17.3 trillion national debt and is held under "Intragovernmental Holdings" as distinct from the publicly held debt. All trust funds are treated similarly including the HI (Medicare) and federal employee pension funds.
JFK was the first to break open the piggy bank hand help himself.
This is a myth. The Social Security Trust Fund was created in 1939 as part of the Amendments enacted in that year. From its inception, the Trust Fund has always worked the same way. The Social Security Trust Fund has never been "put into the general fund of the government."
Most likely this myth comes from a confusion between the financing of the Social Security program and the way the Social Security Trust Fund is treated in federal budget accounting. Starting in 1969 (due to action by the Johnson Administration in 1968) the transactions to the Trust Fund were included in what is known as the "unified budget." This means that every function of the federal government is included in a single budget. This is sometimes described by saying that the Social Security Trust Funds are "on-budget." This budget treatment of the Social Security Trust Fund continued until 1990 when the Trust Funds were again taken "off-budget." This means only that they are shown as a separate account in the federal budget. But whether the Trust Funds are "on-budget" or "off-budget" is primarily a question of accounting practices--it has no affect on the actual operations of the Trust Fund itself.
Semantics and spin is what we got here. We may never know the truth.
In 2008, before the Great Recession started, almost 25% of Black Americans were employed by federal, state, or local governments, or by a government contractor.
Without that government connection, I will speculate that Black participation in retirement plans would be much lower than it already is.
The SSTF is included in our national debt. The "surplus" contributions were invested in T-bills. The USG is obligated to honor those T-bills in much the same way that it must honor the payment of the Chinese T-bills or those accumulated by the Fed.
The most important thing to remember is that even if those T-bills were exchanged for cash and deposited in a CD, SS will still go broke. It is unsustainable actuarily. In 1950 we had 16 workers for every retiree, now it is about three and in 20 years it will be 2 workers for every retiree.
Medicare is in even worse shape. It's trust funds will be exhausted in 2023. And the SS disability fund will be exhausted in 2016. Within the next few years, Congress must approve moving T-bills from the SSTF to the SSDI trust fund to continue making payments. This will impact the effective date the SSTF runs out T-bills.
Semantics and spin is what we got here. We may never know the truth.
The truth is known. You just have to read the annual Trustee Reports for SS and Medicare. What many people don't understand is that we must borrow money to continue to redeem the T-bills in the trust funds so we can pay full benefits.
Also, many do not know that by law, the premiums for Medicare Parts B and D (SMI Trust Fund) cover only 25% of the costs. The remaining 75% comes from the General Fund. In 2012 that amounted to $214.8 billion. In 2012 the GF also had to come up with $97.7 billion to redeem SSTF T-bills. With 10,000 baby boomers retiring every day for the next 20 years, Medicare and SS will eventually consume the entire federal budget if they are not reformed.
These programs are unsustainable because they pay out more in benefits than they collect in revenue. It has nothing to do with the USG "stealing" the money.
Here is the way it works: All of the revenue received from payroll taxes is immediately converted into non-market, interest bearing T-bills after benefits are paid. In essence, the USG gets the money right away.
On the other hand, the argument is that if they did not issue these T-bills then they would have to borrow the money from someone else like the Chinese. The rationale is that it is better to owe the money to ourselves rather some outsider. However, there is no doubt that Congress finds it far easier to use the trust funds to fund our debt than outside investors who must be persuaded to invest in our T-bills.
Do you really think any of the money “used to buy treasuries” will ever be repaid?
Of course. It is being done now with SS and Medicare, which are running in the red and must redeem some of their T-bills to make up the shortfall. Eventually, unless these programs are reformed, all of the T-bills held by the SSTF and HI Trust fund will be redeemed to make up the funding shortfalls for these programs. Medicare has been running in the red since 2008 and SS since 2010.
I think this mismanagement of the system will be used later to crash the retirement systems and the government will confiscate IRAs and 401ks to “save the system” which will really enslave us in socialism.
A distinct possibility that has already been talked about in academia. The idea is to seize the holdings of all 401ks and give the holders a credit similar to how SS and Medicare have been handled. When you are going bankrupt, you look for money from any source. This country is headed for fiscal disaster and the longer Congress kicks the can down the road, the more painful the solution.
Socialism is the least of our worries. It implies that there is some order and control. I am more concerned about a breakdown in our civil society if the economy crashes and the life savings of most people are wiped out. History is replete with such examples and it can happen here.
You see the laws and manipulating the fund and I see the theft of my future and resources enslavement of the country.
I am explaining to you how the system works, but I am not unaware of the consequences of what will happen if we don't get our fiscal house in order. We need to identify and understand the problem before we can solve it. Again, the entitlement programs are going bust for actuarial reasons, not because the government stole the money. These are Ponzi schemes that benefited those at the top of the pyramid, but there is not enough revenue to pay for those at the bottom of the pyramid. Wait until there are only two workers for every retiree. And these programs are just part of the problem as Medicaid, Obamacare, and food stamps are increasing even faster. The welfare state is unsustainable.
undoubtedly the obamas and other democrats have cronies who run investment funds and they would be happy to skim off hundreds of millions or billions of US tax dollars for a contract to invest the money of the poor, so, yeah, um, it will be there in 45 years. Put that lockbox in the hands of a democrat connected crony and hand them the key
uh huh
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.