Social Security to start cashing Uncle Sam's IOUs - DFWstangs Forums
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post #1 of 17 (permalink) Old 03-15-2010, 09:58 AM Thread Starter
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Social Security to start cashing Uncle Sam's IOUs


PARKERSBURG, W.Va. The retirement nest egg of an entire generation is stashed away in this small town along the Ohio River: $2.5 trillion in IOUs from the federal government, payable to the Social Security Administration.

It's time to start cashing them in.

For more than two decades, Social Security collected more money in payroll taxes than it paid out in benefits billions more each year.

Not anymore. This year, for the first time since the 1980s, when Congress last overhauled Social Security, the retirement program is projected to pay out more in benefits than it collects in taxes nearly $29 billion more.

Sounds like a good time to start tapping the nest egg. Too bad the federal government already spent that money over the years on other programs, preferring to borrow from Social Security rather than foreign creditors. In return, the Treasury Department issued a stack of IOUs in the form of Treasury bonds which are kept in a nondescript office building just down the street from Parkersburg's municipal offices.

Now the government will have to borrow even more money, much of it abroad, to start paying back the IOUs, and the timing couldn't be worse. The government is projected to post a record $1.5 trillion budget deficit this year, followed by trillion dollar deficits for years to come.

Social Security's shortfall will not affect current benefits. As long as the IOUs last, benefits will keep flowing. But experts say it is a warning sign that the program's finances are deteriorating. Social Security is projected to drain its trust funds by 2037 unless Congress acts, and there's concern that the looming crisis will lead to reduced benefits.

"This is not just a wake-up call, this is it. We're here," said Mary Johnson, a policy analyst with The Senior Citizens League, an advocacy group. "We are not going to be able to put it off any more."

For more than two decades, regardless of which political party was in power, Congress has been accused of raiding the Social Security trust funds to pay for other programs, masking the size of the budget deficit.

Remember Al Gore's "lockbox," the one he was going to use to protect Social Security? The former vice president talked about it so much during the 2000 presidential campaign that he was parodied on "Saturday Night Live."

Gore lost the election and never got his lockbox. But to illustrate the government's commitment to repaying Social Security, the Treasury Department has been issuing special bonds that earn interest for the retirement program. The bonds are unique because they are actually printed on paper, while other government bonds exist only in electronic form.

They are stored in a three-ring binder, locked in the bottom drawer of a white metal filing cabinet in the Parkersburg offices of Bureau of Public Debt. The agency, which is part of the Treasury Department, opened offices in Parkersburg in the 1950s as part of a plan to locate important government functions away from Washington, D.C., in case of an attack during the Cold War.

One bond is worth a little more than $15.1 billion and another is valued at just under $10.7 billion. In all, the agency has about $2.5 trillion in bonds, all backed by the full faith and credit of the U.S. government. But don't bother trying to steal them; they're nonnegotiable, which means they are worthless on the open market.

More than 52 million people receive old age or disability benefits from Social Security. The average benefit for retirees is a little under $1,200 a month. Disabled workers get an average of $1,100 a month.

Social Security is financed by payroll taxes employers and employees must each pay a 6.2 percent tax on workers' earnings up to $106,800. Retirees can start getting early, reduced benefits at age 62. They get full benefits if they wait until they turn 66. Those born after 1960 will have to wait until they turn 67.

Social Security's financial problems have been looming for years as the nation's 78 million baby boomers approached retirement age. The oldest are already there. As that huge group of people starts collecting benefits and stops paying payroll taxes Social Security's trust funds will shrink, running out of money by 2037, according to the latest projection from the trustees who oversee the program.

The recession is making things worse, at least in the short term. Tax receipts are down from the loss of more than 8 million jobs, and applications for early retirement benefits have spiked from older workers who were laid off and forced to retire.

Stephen C. Goss, chief actuary for the Social Security Administration, says the crisis has been years in the making. "If this helps get people to look more seriously at that in the nearer term, that's probably a good thing. But it's only really a punctuation mark on the fact that we have longer-term financial issues that need to be addressed."

In the short term, the nonpartisan Congressional Budget Office projects that Social Security will continue to pay out more in benefits than it collects in taxes for the next three years. It is projected to post small surpluses of $6 billion each in 2014 and 2015, before returning to indefinite deficits in 2016.

For the budget year that ends in September, Social Security is projected to collect $677 million in taxes and spend $706 million on benefits and expenses.

Social Security will also collect about $120 billion in interest on the trust funds, according to the CBO projections, meaning its overall balance sheet will continue to grow. The interest, however, is paid by the government, adding even more to the budget deficit.

While Congress must shore up the program, action is unlikely this year, said Rep. Earl Pomeroy, D-N.D., who just took over last week as chairman of the House subcommittee that oversees Social Security.

"The issues required to address the long-term solvency needs of Social Security can be done in a careful, thoughtful and orderly way and they don't need to be done in the next few months," Pomeroy said.

The national debt the amount of money the government owes its creditors is about $12.5 trillion, or nearly $42,000 for every man, woman and child in the country. About $8 trillion has been borrowed in public debt markets, much of it from foreign creditors. The rest came from various government trust funds, including retirement funds for civil servants and the military. About $2.5 trillion is owed to Social Security.

Good luck to the politician who reneges on that debt, said Barbara Kennelly, a former Democratic congresswoman from Connecticut who is now president of the National Committee to Preserve Social Security and Medicare.

"Those bonds are protected by the full faith and credit of the United States of America," Kennelly said. "They're as solid as what we owe China and Japan."
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post #2 of 17 (permalink) Old 03-15-2010, 10:07 AM
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I want mine now
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post #3 of 17 (permalink) Old 03-15-2010, 10:12 AM
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I guess I should stop paying in on mine since it won't be there by the time I retire.

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post #4 of 17 (permalink) Old 03-15-2010, 10:13 AM
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post #5 of 17 (permalink) Old 03-15-2010, 10:21 AM
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post #6 of 17 (permalink) Old 03-15-2010, 10:50 AM
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Can we just do away with this system already? The government can't be trusted with money so I don't know why you would let them run a retirement business in the first place.

If this was a private enterprise it would be called a Ponzi scheme.
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post #7 of 17 (permalink) Old 03-15-2010, 12:29 PM
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Originally Posted by AL P View Post
If this was a private enterprise it would be called a Ponzi scheme.
i was just having this conversation the other day, and that was my point...the government is doing the same thing as what madoff did. the sad thing is that everybody knows it and nothing is being done about it.
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post #8 of 17 (permalink) Old 03-15-2010, 12:50 PM
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Originally Posted by bjtheman1 View Post
I guess I should stop paying in on mine since it won't be there by the time I retire.
When SS was originally started it was voluntary.
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post #9 of 17 (permalink) Old 03-15-2010, 01:58 PM
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What should happen is a steady roll back of benefits to wean the public off SS and start them down the path of private retirement planning along with the federal government getting their hands out of the existing funds.

What will happen is something else entirely. The retirement age will eventually go to 70. SS taxes will be taken from income over that $80K mark. The FICA tax itself will rise. Benefits will be cut drastically. COLA rates will be artificially altered. etc. etc. The Democrats want it forever and the Republican never put together a reasonable plan to get rid of it.

There is a reason the Feds don't have the SS IOUs as part of the national debt. They can cancel that debt any time they feel like it.

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post #10 of 17 (permalink) Old 03-15-2010, 04:16 PM
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SS is the only income alot of older folks have/will have cause we as a nation are broke. Someday they are gonna really have to fess up and protect jobs for americans. Cant afford a private retirement fund if youre living paycheck to paycheck.

I dont have a problem with it, you get out what you put in. The problem is that, like everything else they do, they spend too god damn much. SS would be fine if they hadnt raided it and used to it lie about the countrys true debt.

The trouble with doing something right the first time is that nobody appreciates how difficult it was.

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post #11 of 17 (permalink) Old 03-15-2010, 04:32 PM
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My grandparents never collected a dime of Social Security. (My grandfather was born in 1900) As farmers they never paid into it. I expect Social Security to disappear or be greatly diminished before I reach retirement age. The dream of liberalism lasted exactly one generation before it bankrupted itself and America.
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post #12 of 17 (permalink) Old 03-15-2010, 04:55 PM
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It sure must suck to pay into a system knowing you will never see a dime out of it. It's great knowing I will never have to experience that feeling.

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post #13 of 17 (permalink) Old 03-15-2010, 06:14 PM
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I am so glad I don't pay SS, being an educator I pay into TRS(Teacher Retirement System). So by blind luck I have no interest or desire to pay into or take from SS, as a matter of fact they can have the 9 years I paid into it while in the Army, LOL.
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post #14 of 17 (permalink) Old 03-15-2010, 06:47 PM
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I already collect Social Security. What is interesting is I got a letter stating that those who contribute 1k worth of benefits today, that same benefit as of today is only worth 760.
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post #15 of 17 (permalink) Old 03-16-2010, 09:49 PM
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SS will run out before I get old enough to collect. If i were able to collect i would get far less than i paid in. It's a ponzi scheme created by the "greatest generation" to pay themselves a retirement, and screw the young people. And, the same generation drained away the SS surplus too.
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post #16 of 17 (permalink) Old 03-17-2010, 08:20 AM
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Originally Posted by FreightTrain View Post
It sure must suck to pay into a system knowing you will never see a dime out of it. It's great knowing I will never have to experience that feeling.
Since you pay the Medicare portion of the Social Security tax, does that feel great too?
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post #17 of 17 (permalink) Old 03-17-2010, 08:47 AM
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Hey it's a good thing we have a fuckin' swingin' ape in office, at a time of national financial crisis. It will be interesting to see if this country ever recovers from all this. Maybe that is what 2012 is all about lol. Just a total, complete global financial meltdown. God help us.

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