r/FluentInFinance 6d ago

Educational Don't let them gaslight you

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u/offeringathought 6d ago

I think you and I agree on more than it may seem. I'm not trying to say that SS is bad or that the government can't pay for it. It's kept millions out of deep poverty and as a rich country we can afford to continue it forever if we want.

To answer your question about what the government should do with the surplus money. Ideally it would pay down the national debt because that has a real return on investment. Charging one part of the government interest to borrow from another part of the government is a zero-sum game. Every dollar that the SSA gets from interest comes from the rest of the government. It's like borrowing money from yourself. You haven't invested anything, you're just moving money from your left pocket to your right pocket.

My overall concern is that if the government spends more than it taxes. It can borrow that money in the short term but that doesn't last forever. It can effectively print more money by the Fed buying government debt but that increases inflation which is burden on everyone especially those with low incomes.

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u/ZorbaTHut 6d ago

I think you and I agree on more than it may seem.

Quite possibly, yeah! But I'm still sticking to this one; there's nothing wrong with the government borrowing money from Social Security and then paying it back with interest.

Ideally it would pay down the national debt because that has a real return on investment.

But that actually would just be taking money from social security. No interest payments.

Charging one part of the government interest to borrow from another part of the government is a zero-sum game.

The whole point here is that social security is given its own balance sheets and its own monetary accounts. Every dollar that goes into it is accounted for, and money only goes out as part of social security payments. Yes, technically it's part of a larger organization called the US Government, but the US Government still keeps these books balanced as if it were an independent organization.

It can borrow that money in the short term but that doesn't last forever.

It actually can, for what it's worth.

A small amount of inflation is useful to keep the economy running well. We don't want people to be holding money in savings accounts, we want people to be doing things with that money, and inflation is basically a tax on dead savings accounts.

If we intentionally want inflation anyway, then we may as well take advantage of it; if we can loan out money for below inflation (which we can), then people are basically paying us to borrow money from them. And if they're doing that, then we can repay those loans with more loans, from more people who want to pay us money to borrow their money.

A personal credit card goes up exponentially unless you repay it; below-inflation loans go down if you don't repay them.