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Politics : I Will Continue to Continue, to Pretend....
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To: Brumar89 who wrote (20084)5/20/2006 4:59:06 PM
From: rich evans  Read Replies (1) of 35834
 
SS's trust fund will be gone around 2040 give or take a few years. Somewhere between then and now, benefits will have to be slashed. When the SS system stops purchasing Treasury debt securities every year as it does now and begins selling off the supply they've accumulated over decades, I see enormous pressure being put on interest rates.

This is incorrect way of looking at it IMO. The bonds/notes held by SS are special and not marketable. They are just there to show what excess FICA funds the US has used for general purposes which were paid into FICA by us workers. They are an accounting entry only.
The US would pay the SS liabilities from FICA taxes plus general taxes regardless. There is no asset. It is just like you wrote yourself a note for $100,000 and put it in your pocket. You do not have anything as you must pay it from yourself. The notes cannot be sold legally. When FICA current taxes cannot fund SS out go then US will pay the balance from general taxes and take credit against the "notes" held by SS just as they created them when they took the excess FICA funds. It is accounting book entries only . Do we have a problem. Sure. Just like other countries we can not maintain our pension/welfare/medicare benefits when demographics change as you pointed out. Our problem is less than the EU countries but still big. Will immigration solve it. Probably not. A lower standard of living is in the cards. Tax increases will hurt the economy/employment and result in less revenues. Compare Ireland, Hungary , Estonia, Slovakia ,Czech with the France, Germany etc. The low tax rate countries are growing and creating wealth. That is our only hope. We must grow the economy and create wealth to fund these obligations and also try to rationalize them to cut down expense of these obligations. This is a tough problem because of politics and whose OX gets gored. Bush has dissappointed conservatives fiscally. But most of the budget is entitlements which he can do nothing about. In fact he has added to them with the Drug Plan . Hopefully helping people pay for Drugs with cut down on the Part A and B Medicare expenses.

Anyway, these SS notes will have no effect on interest rates or finanical matters. Tax rates will though so maybe in the end you will be right from taxing changes not sale of SS notes.
Rich
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