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SS Trust Fund Treasuries: due and payable

Discussion in 'Economics, Business, and Taxes' started by Days, Feb 25, 2013.

  1. Days

    Days Governor

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    oh, hey, issuing the place holder bonds to the beneficiaries adds a $3.75 trillion buffer to the garbage-in and garbage-out SS budget. Like you say, it makes the fund plenty solvent for a long, long time. In fact, what it does, is, it restores the fund to its original standing. IOW, those place holder bonds were placed for funds that originally were meant to be held in trust for the beneficiaries, so by issuing them to the beneficiaries, it restores the fund to its original design, once you do that, you discover whether or not the design was solvent... and we know damn well the SS trust fund design was solvent. Sure, we have a glut of retirement coming, that's why the fund was building up in front of that retirement. If Congress doesn't rob the fund, it goes through that period and keeps on functioning. If we take my plan and put it in motion, the same thing happens... plus bond rates are super low thanks to quantitative easing, so let's take advantage of that too. While the fund issues the place holder bonds, the incoming FICA taxes can be held in trust, same as always, so the entire fund would turn over in six years and return to its original state. Do it for all 155 government trust funds, the same way. Now's the time to pull this off.
     
  2. EatTheRich

    EatTheRich President

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    The debt is owed to some people (the working class and middle class) by others (the ruling class and its government). The reason I'd rather have my share paid in silver or gold is that I could sell those more easily on an international market if other countries lost faith in the U.S. government's credit.
     
  3. trapdoor

    trapdoor Governor

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    If you think this way, you never begin to shrink the deficit, or decrease the debt.
     
  4. trapdoor

    trapdoor Governor

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    That is not how Social Security works today, nor how it has ever worked in its messed up 80-year history. People working today provide the money that pays benefits to those who are retired today.
     
  5. fairsheet

    fairsheet Senator

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    "Messed up 80-year history"? As you say, the original design for Social Security, was that this generation would cover the benefits for the one preceding it. Some call that a "Ponzi Scheme", but the people who are telling it that are either lying or ignorant of what constitutes a Ponzi Scheme.

    Social Security "works" because its future funding is guaranteed. There WILL be more total workers and they WILL be earning generationally inflated dollars. By definition, a Ponzi Scheme relies on non-existent future funding. But rather than being "messed up", Social Security has actually exceeded its original design, in that it's created a massive surplus.

    BUT, as Woolley notes above - and perhaps you didn't understand - for EVERY dollar Social Security creates by way of surplus, it creates a coincident dollar in DEBT! Now some of us tend to think that since a positive plus its equal-opposite negative equals zero, Social Security shouldn't even be being discussed in this debt/deficit obsession equation.

    On the other hand, IF you're one of those who's convinced that the future of all that's good depends on reducing "debt" - whatEVER form that debt may take - then Woolley's right. The only way we can reduce the Social Security "debt", is by drawing down its surplus.
     
  6. connorbug

    connorbug Council Member

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    The bonds are marketable, but not easily divisable, they would sell the bonds on the open market, raise cash, then pay you the money.
     
  7. fairsheet

    fairsheet Senator

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    Bullshit. You tell ME to whom we should sell our bonds. And then, tell me how that doesn't represent fascism in spades.
     
  8. connorbug

    connorbug Council Member

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    You realize bonds are bought and sold every day, depending on interest rates bonds can trade at what's called a 'premium' where they fetch more than face value or at a 'discount' less than face value.

    Right now if you have treasury bill, note, whatever, you can sell it. As a matter of fact you probably already have if you've shifted funds around in your 401(k) if you go from the safe fund to an equity fund, that move likely triggered some portion of that days activity in e mutual fund.

    So do yourself a favor, get off your high horse, and learn about bond markets. The Social Trust Fund could sell existing bonds to raise cash, just like you can. To whom? The buyers in the bond markets.

    http://www.bloomberg.com/quote/USGG30YR:IND

    The yield gives all 30 year bond holders a yard stick against which they can value their own bond. To list them out by issue date would be too much information to display.
     
  9. trapdoor

    trapdoor Governor

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  10. fairsheet

    fairsheet Senator

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    As to "high horse", I guess it didn't occur to me that you were proposing to redeem and resell these Treasury Bonds within the typical Treasury Bond markets? Gee.....I guess I'd need to see some theory as to how THAT would be to anyone's benefit!

    After all - at least in terms of current interest rates, this would be a matter of redeeming them at a higher rate and reselling them at a lower one. And again....since Treasury Bonds represent BOTH a liability AND an asset, I'm not seeing how that pencils out.
     
  11. fairsheet

    fairsheet Senator

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    Your "no money to redeem the debt" line says it all. For after all - per capitalism's design - there's "no money to redeem" ANY debt!......except maybe, for the USPS's retirement accounts.

    ALL "money to redeem...debt", is prospective. If the borrower had the money on hand to redeem the debt, the borrower wouldn't need to borrow it.
     
  12. connorbug

    connorbug Council Member

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    The bonds are a liabioity to the general government, but an asset to the Social Security trust fund. Whether or not they should have or shouldn't have invested exclusively in bonds is a separate question (only a grade A moron would invest like that), but that's a sunk cost. They did.

    And now the Social Security trust fund has a portfolio of bonds. If they run a deficit and benefits owed exceeds receipts in, that's how they're going to raise cash, they're going to sell the bonds. That's what they mean colloquially by Social Security going "broke" by the way, its a reference to exhausting the assets in the trust fund.

    I'm not sure what you mean by the last paragraph. This isn't magic. When the trust fund sells the bond, they're just assigning the bond to the buyer, you, me, the Magellan Fund or the Saudi
    Arabian sovereign wealth fund, it doesn't cancel the general government's liability, obligation to pay the bond and whether or not they recognize a gain or loss on the sale is again, a secondary inquiry.
     
  13. trapdoor

    trapdoor Governor

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    But loans come due -- and these loans are due now. Is it good policy to increase your debt in order to pay off an older debt?
     
  14. fairsheet

    fairsheet Senator

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    You lost me there. I know what bonds are, and you seem to be suggesting that we should be approaching the bonds in question, differently. But, you're not telling us either how we should approach them differently, or WHY we should approach them differently.
     
  15. fairsheet

    fairsheet Senator

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    It's good policy to increase cheap debt, in order to pay off expensive debt. I'm not prepared to ajudge the specific cost of one debt over another. But, it's not some sort of "given", that we shouldn't borrow to pay off debt.
     
  16. connorbug

    connorbug Council Member

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    You're the one suggesting that Social Security will wind up distributing outstanding bonds in lieu of benefits. They're not going to do that? Do you understand that? They'll sell the bonds in the trust fund to raise cash on the bond markets and then distribute the cash.

    "Approaching the bonds in question, differently?" I don't know what you mean by that. With respect to the trust fund, the bonds are an asset, in a cash flow deficit, the trust fund can liquidate those assets (sell them on the bond market) and now, armed with cash, meet the benefit payments authorized by law. In theory, they could be GM's bonds, or stocks even (except for the fact that the law compels surpluses in the trust fund to be spent on US govt bonds)
     
  17. fairsheet

    fairsheet Senator

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    Yer still losing me, since you seem compelled to shout some ridiculous straw man at me..."distributing outstanding bonds in lieu of benefits"? in order to prop up your own feel-goodness around this one?

    Turn off the Fox for a minute, and try making a rational case for yourself, withOUT assigning such ridiculousness to me. I want to know to WHOM you want to reassign this debt, and WHY you think this reassignation of your dreams, makes sense. How hard is THAT for you to address?
     
  18. Days

    Days Governor

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    You can't sell the bonds in the SS Trust fund (or any other govt trust fund) ... they are in trust! That's why it was illegal for Congress to touch those funds in the first place; the very act of adding the trust funds to the general fund was a violation of trust... a criminal act. I didn't propose selling the place holder bonds directly at auction because that would be illegal. Otherwise, it would be infinitely smarter to do that, than my crazy idea of issuing the bonds to the beneficiaries (as benefit payments). But the idea of issuing the bonds to the beneficiaries is totally legal... that's what the top post is all about. Now, when you do that, it forces the bonds on the open market, not even the bond market, those benefit payments are going to be deposited in local savings & loans. So, I am goosing the market from the bottom. To compensate, I would restrict bonds from auction... in essence, filtering the bonds into the banks from the bottom up in millions of tiny bites. It's an accounting nightmare for the Treasury. But it would flesh out those $4.8 Trillion of bonds in the government Trust Funds. Why write more debt on top of that debt? We are running the deficits, so the debt is going to be written, let's use the opportunity to flush through the Trust Fund bonds... that's the idea.

    Now, the Treasury and Congress do not give a damn about breaking the Law, they've already done that in spades. so what they should do with this idea is go ahead and sell those bonds to the bond market; and by that I mean, simply subtract their new bonds at auction from the place holder bonds in trust.

    Cleans up the books, reduces the national debt by $4.8 Trillion.... it is good accounting.
     
  19. connorbug

    connorbug Council Member

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    Well, fair enough, actually 'Days', was suggesting that [On the first post, I was reading his comments and yours was the first avatar that I saw so I do apologize for that]

    "The folks at the USTreasury all know perfectly well how to pay off those bonds... just give them out to the beneficiaries. That's who they are owed to. Instead of writing checks from the general fund (aka the checking account at the Federal Reserve) all these Social Security payments could be arriving in the form of US Treasuries"

    That's just an absurd proposition.

    When you sell a stock on the market you don't know who bought it. You don't care. To WHOM do you want to 'reassign' the stock? The highest bidder of course. Same with the bond. The Social Security Trust Fund won't care who buys it.

    Why is this 'in my dreams'? Where are you getting that from. I'm merely observing that the bonds exist and are held in the trust fund.

    If current benefits owed exceed cash on hand. You'll either default on the obligation or sell the assets in the investment portfolio, which in this case are all bonds.

    I haven't been saying ANYTHING more than that. This other poster was just making some bizarre recommendation that the Social Security Trust fund would actually mail the bonds themselves to the Social Security beneficiaries.

    Me, personally? Of course not, Social Security can though. They were running surpluses, they used the surplus to buy the bonds. Now if they have a deficit they can sell those bonds. Those bonds are an asset of the trust. What did you think they were going to do, just pull those dollars in and store them in Ft. Knox until they were ready to pay them out? No.

    http://www.ssa.gov/oact/trsum/index.html

    "Social Security’s expenditures exceeded non-interest income in 2010 and 2011, the first such occurrences since 1983, and the Trustees estimate that these expenditures will remain greater than non-interest income throughout the 75-year projection period. The deficit of non-interest income relative to expenditures was about $49 billion in 2010 and $45 billion in 2011, and the Trustees project that it will average about $66 billion between 2012 and 2018 before rising steeply as the economy slows after the recovery is complete and the number of beneficiaries continues to grow at a substantially faster rate than the number of covered workers. Redemption of trust fund assets from the General Fund of the Treasury will provide the resources needed to offset the annual cash-flow deficits. Since these redemptions will be less than interest earnings through 2020, nominal trust fund balances will continue to grow. The trust fund ratio, which indicates the number of years of program cost that could be financed solely with current trust fund reserves, peaked in 2008, declined through 2011, and is expected to decline further in future years. After 2020, Treasury will redeem trust fund assets in amounts that exceed interest earnings until exhaustion of trust fund reserves in 2033, three years earlier than projected last year. Thereafter, tax income would be sufficient to pay only about three-quarters of scheduled benefits through 2086. "

    And actually I'm sorry, I was wrong, they're not going to sell them on the bond market. They're going to redeem them at the Treasury and the Treasury is going to issue bonds or tax the public accordingly. But they're still 'selling' the bonds, just only to the Treasury. Its actually just an indirect way to do it of course, my guess is that the SSA just isn't set up to engage in this sort of activity, the Treasury is, so instead of having the SSA sell bonds on the open market, just deal with the Treasury who already is doing that with newly issued bonds.
     
  20. Days

    Days Governor

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    The reason the SS Trust Fund is considered broke is because it no longer runs a surplus from the FICA taxes. Redeeming Treasuries in house is just another way of saying, the bonds are worthless. Which they are... in as much as they are scheduled to be redeemed in house. Since, we are writing new debt for the foreseeable future, and quite likely to write enough of it to account for all trust fund debt within the next six to seven years; I want to write new debt against those place holder bonds; aka, put those bonds on the open market. That way the frickin' banks can't hold those bonds against our credit rating... which they are presently doing.

    this isn't that hard, these guys just don't understand the bond market.
     

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