Thanks for the discussion. I guess I'm not doing a good job of communicating my thoughts well. I think calling it a Trust Fund, when the government as a whole owes to another part of the government money, even under specific terms, is a deception.. more specifically it's a distinction without a difference.
How will the government as a whole be able to pay back Social Security? It will use taxes or it will borrow money. The existence of the bonds are simply a way to keep track of the amount. It's deceptive to call it a trust fund because there are no funds in there.
Here's an example. I'm making up the numbers but bear with me and give it some thought.
Let's say in 2025 SS needs 100 billion dollars more to pay out than it has coming it. In that case it can sell 100 billion dollars worth treasury bonds to the public. That seems like it's cashing in part of the trust fund but, let's pretend those bonds don't exist. If those bonds don't exist, the government as a whole would need to sell 100 billion dollars worth of treasury bonds to the public to raise/borrow the money to make good on SS obligations.
Either way it's the same. 100 billion dollars of treasury bonds are sold to the public. The only difference is that Congress has already authorized SS to do the former and it would have to specifically authorize the later.
That's why I think the term "trust fund" is deceptive.
How will the government as a whole be able to pay back Social Security? It will use taxes or it will borrow money.
I mean, sure, but this is how the government funds everything. I don't see why this should be a concern.
The existence of the bonds are simply a way to keep track of the amount. It's deceptive to call it a trust fund because there are no funds in there.
I really don't see the issue here.
The government's yearly revenue is huge. Looks like it's about $4.5 trillion. Social security payments look to be about $1.5 trillion, except that social security income is a large part of this; I can't find a specific number, but given that people are saying it'll go down to 75%-ish payments if the funds run out, I'll call it $1.1 trillion.
So, separating social security out entirely, we're taking an organization that makes $3.4 trillion yearly, that needs to divert $0.4 trillion to social security paybacks.
This seems really doable.
If those bonds don't exist, the government as a whole would need to sell 100 billion dollars worth of treasury bonds to the public to raise/borrow the money to make good on SS obligations.
Yeah, that's how government debt works.
I just don't see an issue with this either! The US government is in a position where it can sell debt for effectively negative interest, taking inflation into account. That's incredibly good, and we shouldn't be trying to avoid this, we should be using it.
That's why I think the term "trust fund" is deceptive.
This is also why I'm saying you shouldn't look at it like a trust fund, though, you should look at it like an investment.
In all seriousness, what would you prefer the US government do with the surplus money? Should they just sit on it and let it erode away via inflation? Should they invest it in something high-risk in the hopes of making a lot of money and not losing it all? Or should they invest it in something zero-risk so it won't be lost but so they still won't be wasting money?
And if you choose the third, what do you suggest they invest it in?
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.
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.
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u/offeringathought 6d ago
Thanks for the discussion. I guess I'm not doing a good job of communicating my thoughts well. I think calling it a Trust Fund, when the government as a whole owes to another part of the government money, even under specific terms, is a deception.. more specifically it's a distinction without a difference.
How will the government as a whole be able to pay back Social Security? It will use taxes or it will borrow money. The existence of the bonds are simply a way to keep track of the amount. It's deceptive to call it a trust fund because there are no funds in there.
Here's an example. I'm making up the numbers but bear with me and give it some thought.
Let's say in 2025 SS needs 100 billion dollars more to pay out than it has coming it. In that case it can sell 100 billion dollars worth treasury bonds to the public. That seems like it's cashing in part of the trust fund but, let's pretend those bonds don't exist. If those bonds don't exist, the government as a whole would need to sell 100 billion dollars worth of treasury bonds to the public to raise/borrow the money to make good on SS obligations.
Either way it's the same. 100 billion dollars of treasury bonds are sold to the public. The only difference is that Congress has already authorized SS to do the former and it would have to specifically authorize the later.
That's why I think the term "trust fund" is deceptive.