CBO says Social Security is in trouble

[Wahbooz]

The figure comes from the Trustees of the system who have urged immediate reform for years. Having worked with the subject for years, I find no other source that is as reliable. They make mistakes, but at least they are not paid to make mistakes.

The 3 trillion is the 'surplus', which is cash onhand. Technically it is a reserve against 27 trillion in promises for which the system will not generate cash.

Well first of all, when Bush was president he promised to pay down the debt that could be retired, and went on to build onto the debt to the tune of close to $5 trillion. That money could have been used for Social Security, instead of hiring so many contractors in Iraq. Good god, our spending has become ridiculous on things we never spent on before. Millions being spent every month to feed and launder our service personnel, something we did ourselves during Vietnam. We didn't have cooks serving us or washing our laundry. If we wanted our uniforms laundered, we did it out of pocket. We also do not need to build ships the Navy department says they don't want, nor do we need to pay contractors for planes that don't fly. But I still question the validity of the $27 trillion.

 

[Wahbooz]

The tax was 90% when the tax structure included deductions and corporate tax rates that were basically nothing. No one who was bright enough to keep their body warm paid 90%. Either you know that, and are delibrately trying to mislead people or you don't really understand the economics of taxes.

Woo, woo, woo, what are you talking about. And what deductions were available to business that is not available to them now? Yes, I do understand taxation, which was one of my studies at Walsh.

 

[Wahbooz]

We could begin by stopping the practice of letting business tie up the IRS in tax court and settling their debts to the tune of $0.10 on a dollar.

 

[Joe Economist]

Well first of all, when Bush was president he promised to pay down the debt that could be retired, and went on to build onto the debt to the tune of close to $5 trillion. That money could have been used for Social Security, instead of hiring so many contractors in Iraq. Good god, our spending has become ridiculous on things we never spent on before. Millions being spent every month to feed and launder our service personnel, something we did ourselves during Vietnam. We didn't have cooks serving us or washing our laundry. If we wanted our uniforms laundered, we did it out of pocket. We also do not need to build ships the Navy department says they don't want, nor do we need to pay contractors for planes that don't fly. But I still question the validity of the $27 trillion.

Social Security is a closed financial system with dedicated revenue and expense. The money you are discussing cannot be 'used for Social Security'. Social Security collects a portion of payroll taxes, and pays benefits based on what it collects.

"Through the infinite horizon, the unfunded obligation, or shortfall, equals $23.1 trillion in present value, which represents 4.0 percent of future taxable payroll or 1.4 percent of future GDP."

http://www.ssa.gov/oact/TR/2013/tr2013.pdf#page=25

 

[Joe Economist]

Woo, woo, woo, what are you talking about. And what deductions were available to business that is not available to them now? Yes, I do understand taxation, which was one of my studies at Walsh.

The 1986 tax reform act reformed personal taxes. It lowered tax rates in exchange for a narrowing of tax deductions and loopholes. It removed passive losses and depreciation. It also increased corporate income taxes, removing the incentive to create a corporate shell for income. Why pay 90% when the corporate shell pays 25%. The 1986 tax reform deal removed that incentive. If you raise taxes back to 90%, you will simply see people go back to create unnecessary corporate shells.

It is a vivid imagination that believes people paid 90% income taxes.

 

[Wahbooz]

One of the arguments against Social Security is the countries debt. Pay down the debt and that argument goes away.

Not on what it collects, but based on your highest earnings and age. Adjustments can be made, as they have in the past, not only in the age one qualifies, but as well the ceiling for paying FICA taxes.

And how do we know how much of the money collected over the life of Social Security wasn't diverted for other purposes.

 

[Wahbooz]

The 1986 tax reform act reformed personal taxes. It lowered tax rates in exchange for a narrowing of tax deductions and loopholes. It removed passive losses and depreciation. It also increased corporate income taxes, removing the incentive to create a corporate shell for income. Why pay 90% when the corporate shell pays 25%. The 1986 tax reform deal removed that incentive. If you raise taxes back to 90%, you will simply see people go back to create unnecessary corporate shells.

It is a vivid imagination that believes people paid 90% income taxes.

What do you think people do today with off shore tax shelters? And as far as corporate taxation, there are still far more deductions for corporations than there is for the average working person.

 

[Wahbooz]

Wait a minute, when was depreciation deductions removed? It happens to still be part of the tax code, unless you have something different than this white paper dated 2013.

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/A-Brief-Overview-of-Depreciation

 

[Wahbooz]

Some people should understand that there are Social Security recipients who are still working. People should educate themselves on how these things work.

 

[Joe Economist]

Wait a minute, when was depreciation deductions removed? It happens to still be part of the tax code, unless you have something different than this white paper dated 2013.

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/A-Brief-Overview-of-Depreciation

And for the other 100 million people they were removed.

 

[Joe Economist]

What do you think people do today with off shore tax shelters? And as far as corporate taxation, there are still far more deductions for corporations than there is for the average working person.

So are you trying to make the point that no one did pay 90% tax rates or that no one will.

The discussion at hand is your belief that we should return to the land of 90% tax rates. To which I said that we had those tax rates under a completely different set of rules.

 

[Joe Economist]

One of the arguments against Social Security is the countries debt. Pay down the debt and that argument goes away.

This argument is a strawman generally created by liberals who realize that it is easily defeated. I am sure that you have heard "Social Security has not added 1 penny to the deficit... blah, blah, blah"

And how do we know how much of the money collected over the life of Social Security wasn't diverted for other purposes.

Well... Here is your answer : http://www.ssa.gov/history/tftable.html Social Security has been cashflow negative since 2010. So there was no excess cash to divert.

The excess cash that has been loaned to the government was loaned on terms better than your private pension gets. So do you ever ask, how much of your private pension wasn't diverted for other purposes?

The Trust Fund is a pool of money, but it isn't large enough to pay for the shortfall of Social Security.

 

[Wahbooz]

This argument is a strawman generally created by liberals who realize that it is easily defeated. I am sure that you have heard "Social Security has not added 1 penny to the deficit... blah, blah, blah"

And how has Social Security added anything to the deficit. And you can stick that 'liberal' bullshit 'where the sun don't shine'. If the trust fund is cashing in bonds or some other form of economic vehicle, it is simply retrieving what was already Social Securities. What added to the deficit was the politicians who spent that money. And I like how your link conveniently fails to show evidence to your claim, but it pretty well states where shortages comes from.

(Note: In actual practice the Trust Funds are cashing-in bonds all the time, not just in periods of income shortfalls. The Trust Funds regularly purchase new bonds and redeem mature ones ("rolling over" much of the debt) and the benefits paid are from a combination of new tax revenues and redeemed bonds. It is difficult in any given year to say precisely what part of the benefits paid come from new tax revenues and what part form redeemed bonds. However, in the 11 years identified below, since payroll taxes could not cover the benefits paid out, we can say fairly precisely that at least this amount of the benefits paid came from redeemed government bonds.)

Well... Here is your answer : http://www.ssa.gov/history/tftable.html Social Security has been cashflow negative since 2010. So there was no excess cash to divert.

The excess cash that has been loaned to the government was loaned on terms better than your private pension gets. So do you ever ask, how much of your private pension wasn't diverted for other purposes?

The Trust Fund is a pool of money, but it isn't large enough to pay for the shortfall of Social Security.

And how do you know that some form of fee wasn't deducted from the sale and purchase of bonds? How do you KNOW the receipts side is all the money collected from FICA taxes, as well as revenues from bonds?

It's interesting that you say that Social Security operated with a cash flow negative since 2010, and yet the 2012 annual statement shows:

What Were the Trust Fund Results in 2011? Trust fund operations, in
billions of dollars, are shown below. (Totals may not add due to rounding.)
The OASI and SMI Trust Funds each showed a net increase in assets
in 2011; DI and HI Trust Fund assets declined.
OASI
Assets (end of 2010) . . . . . . . . . . $2,429.0
Income during 2011 . . . . . . . . . . 698.8
Outgo during 2011 . . . . . . . . . . . 603.8
Net change in assets . . . . . . . . 95.0
Assets (end of 2011) . . . . . . . . . . 2,524.1


Looks to me like the assets still increased by $95 billion.

 

[Wahbooz]

[quote="Joe Economist, post: 1024894, member: 7302"]So are you trying to make the point that no one did pay 90% tax rates or that no one will.

The discussion at hand is your belief that we should return to the land of 90% tax rates. To which I said that we had those tax rates under a completely different set of rules.[/quote]

Get rid of the loopholes that have been added to the tax code, that is pretty damn easy to figure out.

 

[Wahbooz]

And for the other 100 million people they were removed.

You show me the 100 million people who were denied the depreciation deduction, who had that deduction in the beginning. I asked you for a white paper, and all I get is an assertive comment which I could just as easily say is a wingnut talking point.

 

[Wahbooz]

The excess cash that has been loaned to the government was loaned on terms better than your private pension gets. So do you ever ask, how much of your private pension wasn't diverted for other purposes?

And how do you determine that? The interest rate on securities held by Social Security is determined on a monthly basis. Maybe you don't know as much as you claim to know.

Interest rates
Special-issue investments bear interest rates determined monthly by a formula. An interest rate is determined on the last business day of a month and applies to securities issued in the following month. Tables of such monthly interest rates provide rates back to 1937—the beginning of the Social Security program.

http://www.ssa.gov/OACT/ProgData/intRates.html

And here is a listing of the yearly interest rates Social Security has earned over it's lifetime. Not very impressive, considering my private retirement fund had interest rates as much as 14%, until Bush's great economy.

http://www.ssa.gov/OACT/ProgData/newIssueRates.html

And my private pension has administrative costs, which is a diversion of funds. As well the State of Michigan SERE retirement fund, has administrative costs; which were to the tune of $28+ million in 2013, so I wouldn't doubt Social Security incurs costs above and beyond expenditures incurred paying out benefits since the fund is required by law to be invested in non-marketable securities issued and guaranteed by the "full faith and credit" of the federal government.

 

[Wahbooz]

Well... Here is your answer : http://www.ssa.gov/history/tftable.html Social Security has been cashflow negative since 2010. So there was no excess cash to divert.

Then maybe you better show me evidence, not simply some statement from you, because my information is that the trust fund increased by $69 billion in 2011.

The assets of the combined OASDI Trust Funds increased by $69 billion in 2011 to a total of $2.7 trillion.

http://www.ssa.gov/pressoffice/pr/trustee12-pr.html

So there is one year of your claim right out the window.

And perhaps you can also add to that the fact there was a temporary reduction in the FICA tax for tax year 2011 and 2o12, which resulted in a $200+ billions loss in revenues.

 

[Joe Economist]

The excess cash that has been loaned to the government was loaned on terms better than your private pension gets. So do you ever ask, how much of your private pension wasn't diverted for other purposes?

And how do you determine that? The interest rate on securities held by Social Security is determined on a monthly basis. Maybe you don't know as much as you claim to know.

Interest rates
Special-issue investments bear interest rates determined monthly by a formula. An interest rate is determined on the last business day of a month and applies to securities issued in the following month. Tables of such monthly interest rates provide rates back to 1937—the beginning of the Social Security program.

http://www.ssa.gov/OACT/ProgData/intRates.html

And here is a listing of the yearly interest rates Social Security has earned over it's lifetime. Not very impressive, considering my private retirement fund had interest rates as much as 14%, until Bush's great economy.

http://www.ssa.gov/OACT/ProgData/newIssueRates.html

And my private pension has administrative costs, which is a diversion of funds. As well the State of Michigan SERE retirement fund, has administrative costs; which were to the tune of $28+ million in 2013, so I wouldn't doubt Social Security incurs costs above and beyond expenditures incurred paying out benefits since the fund is required by law to be invested in non-marketable securities issued and guaranteed by the "full faith and credit" of the federal government.

On one hand you ask a question, and then you provide your own answer. The interest rate is set at the average of all debt with a maturity longer than 5 years. That debt is given a maturity of equal weight over 15 years. That looks like a favorable rate, and the bonds are redeemable. Your private pension does not get that option.

"Not very impressive, considering my private retirement fund had interest rates as much as 14%, until Bush's great economy."

Not in US Government securities.

 

[Wahbooz]

And your point? You still insist SS is in trouble, but you choose not to touch the issue you claimed SS is running at a negative cash flow. As I have shown, with more years than you, that SS has actually had a positive cash flow. Your claim may be true, if you were only considering non interest income.

 

[Joe Economist]

This argument is a strawman generally created by liberals who realize that it is easily defeated. I am sure that you have heard "Social Security has not added 1 penny to the deficit... blah, blah, blah"

And how has Social Security added anything to the deficit. And you can stick that 'liberal' bullshit 'where the sun don't shine'. If the trust fund is cashing in bonds or some other form of economic vehicle, it is simply retrieving what was already Social Securities. What added to the deficit was the politicians who spent that money. And I like how your link conveniently fails to show evidence to your claim, but it pretty well states where shortages comes from.

(Note: In actual practice the Trust Funds are cashing-in bonds all the time, not just in periods of income shortfalls. The Trust Funds regularly purchase new bonds and redeem mature ones ("rolling over" much of the debt) and the benefits paid are from a combination of new tax revenues and redeemed bonds. It is difficult in any given year to say precisely what part of the benefits paid come from new tax revenues and what part form redeemed bonds. However, in the 11 years identified below, since payroll taxes could not cover the benefits paid out, we can say fairly precisely that at least this amount of the benefits paid came from redeemed government bonds.)

I opened a thread on the idea that Social Security doesn't add to the deficit. https://www.politicaljack.com/threads/yes-social-security-adds-to-the-deficit.67938/#post-1028430

The argument that it doesn't add to the deficit basically only works in academia where you can hold the consequences of taxation to zero.

"It is difficult in any given year to say precisely what part of the benefits paid come from new tax revenues and what part form redeemed bonds. "

Honestly, we will run into a larger disagreement. The way that the government accounts for the spending and revenue of Social Security is stupid beyond words. benefits are entirely paid from tax revenue, the bonds portion is simply a reflection of past tax revenue. Trying to distinguish between the two is pointless. As I understand it, the Treasury pays benefit out of current tax revenue first. Excess cash is then invested or needed cash is withdrawn from the Trust Fund.