blatantninja
Resident Redneck Facist
It never went into a truly separate fund. The 'fund', by law, invests only in treasury securities. So essentially, they took the excess social security receipts, loaned it to the government, and the government spent it. The backing of those notes is essentially the governments ability to tax enough in order to service and retire the debt, which is a function of future economic activity, not a store of current economic value.
For social security to cash out of those they need to either find a buyer for them (private market or other country) or the government has to redeem them(which means either they refinance that debt, ie sell it to someone else, or they pay it out of tax revenues).
Greenspan said it best when he went before Congress and told them that the problem was that essentially there is no way to transfer wealth of productivity between time periods. It works on a private basis only because we have an expectation that down the line we can sell our assets (whether they be stock, bonds, gold, etc.) to someone else. However if there are no buyers, we're poor, no matter how much 'wealth' we've socked away.
This was essentially a big concern in the stock market (before the current crash), that when the baby boomers began retiring en mass, not only would they strain the SS system, additionally there would be mass withdrawals from the equity markets as they either spent their savings or shifted them into less risky assets, which would in turn drive bond prices up and yields down, creating an even more vicious cycle of funds flowing out of equity into bonds as these investors chase a target dollar income with ever diminishing fixed income yields. With the current stock market crash, this is less of concern obviously.
Anyway, the taxpayers of the time that the benefits are paid are paying those benefits whether they come in the form of direct social security taxes or indirectly through the use of federal tax receipts.
The only way you could change this is if it was invested all in corporate debt. That scares people, but you'd be shifting that cash flow burden from the taxpayer to being more directly dependent on the current economic situation, though at least it would have some hard assets backing it.
If you changed all the names of the social security program to XYZ corp, etc. and evaluated it, not knowing what it really was, you'd say that it is a ponzi scheme of unimaginable levels. It puts Madoff to shame.
Rithrandil hit on it in that longevity is certainly the driving problem, but there is a larger problem, that prevents change of the system. Americans over the past 50 years have developed a belief that they have a right to retire at some point. We don't. Retirement is a privilege (if you have the funds) or a necessity (if you are unable to continue to work). The entire point of social security was to keep people that could no longer physically work from starving in the streets. However, the past two generations have decided that, at best it is a supplement to their retirement and at worst it IS their retirement. We think that we have some God-Given right to stop working in our mid-60's and live out the next 20 to 30 years being a drain on society.
For social security to cash out of those they need to either find a buyer for them (private market or other country) or the government has to redeem them(which means either they refinance that debt, ie sell it to someone else, or they pay it out of tax revenues).
Greenspan said it best when he went before Congress and told them that the problem was that essentially there is no way to transfer wealth of productivity between time periods. It works on a private basis only because we have an expectation that down the line we can sell our assets (whether they be stock, bonds, gold, etc.) to someone else. However if there are no buyers, we're poor, no matter how much 'wealth' we've socked away.
This was essentially a big concern in the stock market (before the current crash), that when the baby boomers began retiring en mass, not only would they strain the SS system, additionally there would be mass withdrawals from the equity markets as they either spent their savings or shifted them into less risky assets, which would in turn drive bond prices up and yields down, creating an even more vicious cycle of funds flowing out of equity into bonds as these investors chase a target dollar income with ever diminishing fixed income yields. With the current stock market crash, this is less of concern obviously.
Anyway, the taxpayers of the time that the benefits are paid are paying those benefits whether they come in the form of direct social security taxes or indirectly through the use of federal tax receipts.
The only way you could change this is if it was invested all in corporate debt. That scares people, but you'd be shifting that cash flow burden from the taxpayer to being more directly dependent on the current economic situation, though at least it would have some hard assets backing it.
If you changed all the names of the social security program to XYZ corp, etc. and evaluated it, not knowing what it really was, you'd say that it is a ponzi scheme of unimaginable levels. It puts Madoff to shame.
Rithrandil hit on it in that longevity is certainly the driving problem, but there is a larger problem, that prevents change of the system. Americans over the past 50 years have developed a belief that they have a right to retire at some point. We don't. Retirement is a privilege (if you have the funds) or a necessity (if you are unable to continue to work). The entire point of social security was to keep people that could no longer physically work from starving in the streets. However, the past two generations have decided that, at best it is a supplement to their retirement and at worst it IS their retirement. We think that we have some God-Given right to stop working in our mid-60's and live out the next 20 to 30 years being a drain on society.
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, in my revised system, my parents (whom I love dearly) would be some of the first in line to have their benefits cut, if not completely stopped, despite the effect it would have on my inheritance!
) but I wonder, what's your take on a solution? I agree what we have now is broken.
