SS Trust Fund Treasuries: due and payable

[trapdoor]

Grow up -- both of you.

 

[fairsheet]

My question is really quite simple (at least in my mind!), but I'll allow that I may be missing some fundamental factoid. But, here's how I see - put as simply as possible:

We citizens, taxpayers, or whatever...currently own both the debt AND the asset, in the form of the Social Security "surplus" which is "invested" in US Treasuries. You seem to be suggesting that we should sell, transfer, or whatever...that debt to some entity other than we citizens. For the sake of THIS discussion, it's really not so important to know to whom we transfer that debt, except to know that it's someone other than "us".

All I want to know is what your thinking is on why that would be better than the current arrangement?

 

[fairsheet]

Days,

You write, "it was illegal for Congress to touch those funds in the first place". I'll suggest that you're operating under a VERY common MISperception. Social Security's "charter" required it to invest its surplus in US Treasuries and by extension, it required the US to borrow from that fund. Congress actually have been in violation of the law, if it HADN'T touched that dough.

 

[Days]

my understanding is that the fund bought Treasuries with its excess. That's not the same as having its excess directed into the general fund and recording the diverted excess funds with the special bonds that are in there now. Either way, it is a problem with fiat currency, because fiat currency doesn't store value. When you stop to think about it, the currency doesn't need to be taxed, it would be easier for the government to just print new paper, and in so doing, everyone is equally taxed... through the devaluation of the currency. But now we are taxed and the banks devalue the currency way beyond any budget would have done... did you know there's over a quadrillion dollars created by the banks?

 

[Days]

Because the bonds in trust are not getting redeemed by the Treasury, they just roll them over into new bonds. Money not in circulation isn't money. If the bonds in the trust fund was money, why can't they pay the benefits with that money?

All I'm trying to do is put those bonds into circulation... turn them into money.

 

[gabriel]

are the bonds paying dividends to the bondholders?

 

[fairsheet]

"Treasuries" ARE the "general fund". There's a VERY common albeit EASILY disproven assumption out there, that sometime back in the 60's, Congress legislated itself access to the Social Security Trust Fund.

Truth be told though, that access goes clear back to the very inception of Social Security. And, Congress wasn't just "granted access", Congress was REQUIRED to advantage itself (us, the general fund) of this dough. Congress could have gone one of 3 ways with Social Security....

-They could've required some sort of "lockbox". That would've been silly as inflation would've consumed the fund.

-They could've required that Social Security sell instruments on the open market. There are two problems with that. One is that - even as some don't agree - U.S. Treasuries are STILL the world's most stable and trusted invesment. Therefore, any investment other than Treasuries, would be less secure. But perhaps more importantly, if the US Guvmint were to sell these instruments on the open market, they would necessarily be picking winners and losers within the private/free market. If we don't already, we SHOULD know just how untenable THAT would be.

-Or Congress could do exactly as it did - require the U.S. to invest this surplus in itself. And for sure...a whole lotta people don't appreciate the way a succession of duly-elected Congresses have chosen to invest these funds. But..thems the breaks in a functioning democracy.

 

[gabriel]

well said

 

[connorbug]

My question is really quite simple (at least in my mind!), but I'll allow that I may be missing some fundamental factoid. But, here's how I see - put as simply as possible:

We citizens, taxpayers, or whatever...currently own both the debt AND the asset, in the form of the Social Security "surplus" which is "invested" in US Treasuries. You seem to be suggesting that we
should sell, transfer, or whatever...that debt to some entity other than we citizens. For the sake of THIS discussion, it's really not so important to know to whom we transfer that debt, except to know that it's someone other than "us".

All I want to know is what your thinking is on why that would be better than the current arrangement?

Better is subjective, if you spend a 1,000 dollars on a bond, you give your dollars and you get the bond. You have made the decision to defer your consumption, the seller of the bond has deemed it better to consume/invest today and to push up tomorrow's consumption tp today. Who made the better choice?

So if Social Security faces a deficit, and given that contributions are fixed in the short term, you have a choice, don't pay the benefit or sell the assets of the fund. Which is better? If you don't sell the bond, you won't have the cash to pay the benefit.

 

[gabriel]

why are contributions fixed??

 

[fairsheet]

C'mon...the bond - by definition - represents a "balance due". Please....take a shot at explaining how transferring that "balance due", from the citizen/taxpayer, to some entity OTHER than the citizen/taxpayer, is a positive?

I don't think you can do it. Nothing personal....but it's a pretty godamned obvious "math" thing. Have a go at - crunch your numbers - and be a man....come back and say that as hard as you tried, you CAN'T make it pencil out.

 

[connorbug]

C'mon...the bond - by definition - represents a "balance due". Please....take a shot at explaining how transferring that "balance due", from the citizen/taxpayer, to some entity OTHER than the citizen/taxpayer, is a positive?

I don't think you can do it. Nothing personal....but it's a pretty godamned obvious "math" thing. Have a go at - crunch your numbers - and be a man....come back and say that as hard as you
tried, you CAN'T make it pencil out.

BECAUSE YOU GET THE CASH. You're choosing the cash today over the bond (cash in the future).

 

[fairsheet]

Your response suggests that maybe....even as your horse may be lower than mine, you may not be up to this train. We'd best drop it and call you the wonderous winner!

Cash?...really...the best you can come up with is "cash"?

 

[connorbug]

Your response suggests that maybe....even as your horse may be lower than mine, you may not be up to this train. We'd best drop it and call you the wonderous winner!

Cash?...really...the best you can come up with is "cash"?

They originally bought the bond with cash, by doing so, they deferred spending that money until some future date because they had a surplus, in theory they didn't need to run a surplus, they could've paid out more money or eventually decided to take less money in (they would need a law to do this). They didn't they took the cash and bought bonds. The cash for the bonds, the bonds for the cash, that's the tradeoff.

Cash? Yes, cash, what would you settle for? Non-cash prizes?

You're going to do the same thing when you retire, you'll start cashing in, liquidating or otherwise selling the assets in your 401k, IRA, etc.

Social security is in a deficit and unless Congress raises the amount we have to contribute, they will pay the benefits with the cash coming in, which won't be enough and to meet the benefit payments they will have to start eating into the trust fund. The positive is that they will have the cash to meet the benefit payments, the negative is that they will have incrementally less income producing assets. If they don't sell the assets, the positive is they will have the asset, but the negative is that they will not have enough cash to pay the benefit. Dollar today is worth more than the same dollar tomorrow.

 

[gabriel]

so raise the amount and reduce the benefits

 

[fairsheet]

Hillbillies sell their debt for whatever "cash in hand" is offered. Real money demands that the numbers be crunched and that the cash in hand exceeds the debt's value. You've made no effort whatsoever, to suggest how your theoretical "cash in hand" might be of greater value than the current deal.

Have a go at that one. And again, IF you understand the question and IF you have an answer to it, let's have it. I might challenge it, but at least there'd be something to challenge!

 

[connorbug]

Hillbillies sell their debt for whatever "cash in hand" is offered. Real money demands that the numbers be crunched and that the cash in hand exceeds the debt's value. You've made no effort whatsoever, to suggest how your theoretical "cash in hand" might be of greater value than the current deal.

Have a go at that one. And again, IF you understand the question and IF you have an answer to it, let's have it. I might challenge it, but at least there'd be something to challenge!

Well, right now for any given bond there's a market and you can look it up even. That number represents the aggregate actions of many, many market participants. You say that you should trade the debt for cash that is worth more than the debt. Fantastic, why would a buyer give you something that is worth more than what he's getting? That's not rational. As a market participant your actions will have that incremental marginal effect on the market. The buyer is willing to trade you a sum of cash for the bond. Is it worth it, or not, that's up to you. And if you say no, and of course you're only doing this indirectly, the market will trend ever so slightly higher as a result.

Keep the bond, or sell the bond, choice is yours, but if you keep it, you will not have the cash to spend today and nobody is going to give you 'more' cash than what the bond is worth. That's just an absurd proposition from the get go.

 

[gabriel]

you two aren't even discussing the same subject.

 

[fairsheet]

The bond I might keep, has a value. If I chose to sell the bond, I'll realize the value someone else perceives in it. So AGAIN...what's YOUR analysis of the former value as compared with the latter value? Man-o-man, you're some kinda spittle on a skillet!

 

[Days]

Fairsheet, there's a big difference between the Treasury's checking account with the FED and a Treasury Bond. What Congress did was spend funds layed up in trust... and then placed the bonds in the trust as place holders of funds they owed the trust fund. You are completely missing that point.