Kaleva (1000+ posts) Fri Jul-29-11 02:40 AM
Original message
The Social Security Trust Fund doesn't and never will add to the federal debt.
Every dollar of special issue bonds the SS Board of Trustees cash in to help meet obligations reduces the Federal debt by 1 dollar. This then allows the U.S. Treasury to borrow another dollar without increasing the debt.
There is some quibble about what effect the interest paid to the Social Security Trust Fund has on the total debt though. This could easily be resolved though by making the special issue bonds non-interest bearing.
Kaleva (1000+ posts) Fri Jul-29-11 01:47 PM
Response to Reply #2
3. The interest paid to the Fund covers the shortfall
The shortfall is about 45 billion this year but the govt. paid the fund $116 billion in interest payment. Even without the interest payment, the shortfall in revenue could have been made up by cashing in the special bonds which wouldn't have increased the federal debt.
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=439x1600949Where to start?
To claim SS is intact because it owns $2.6TN in government bonds is not wealth. It's a claim to hold debt.
It's only an asset that IF the debtor repays.
However, this particular debtor is borrowing 40-plus percent of every dollar he spends and that not even counting debt service, i.e. paying interest only without reducing the principle. Once we cross the 50% borrowing mark that plus debt service will make the US borrow more than it can pay for.
The SSTF will lose its $2.6TN because bond it holds will not be honored or honored for less than their printed value or dollars will be printed
ex nihilo leading to inflation which will chew-up the value of the check written to grandma.
In short, there is a trust fund in name only. The rest of the government spending, i.e. your president's "stimulus" programs and all the other asinine spending you people concocted to buy your votes election-after-election.
Simply raising the debt ceiling in a so-called "clean bill" is no solution. All you're doing is continuing to race towards the 50% threshold without even making a pretense of applying the brakes.
Second, repaying the SS bonds does not reduce debt anymore than paying your Ambercrombie & Fitch credit card puts money in your IRA. Repaying SS bonds takes money out of the general fund. If the GF is spending all its money on studying the drinking habits of Taiwanese lesbian hookers then it has to borrow money to repay what it previously borrowed from SS. You're effectively saying that by borrowing a dollar, then repaying $1.05 (these things required interest, remember?) somehow leaves you with enough room to borrow another dollar except you forgot the $0.05 which also had to be borrowed. You can't borrow another dollar because you spent you more recent revenue commissioning teachers to teach native American studies to inner city polar bears so you still owe on the $1.05...which will be repaid only by borrowing $1.10525.
See where this is going?
The interest paid on the fund doesn't cover the shortfall it simply depletes the available pool of money than can be used to honor future repayments.
If you really cared about SS or any other of these insipid programs you'd un-ass yourself and learn some basic monetary facts.
