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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: GraceZ who wrote (12853)8/21/2003 5:35:59 PM
From: Don LloydRead Replies (1) of 306849
 
Grace,

If you don't know the difference maybe you spend some time going over the history around the time when SS was set up and how it was purposely set up to be separate from general revenues. It's run a surplus since it's inception. The surplus goes into a trust fund which invests that money into a special Treasury bond. (they're worth about 1.4 trillion right about now)

This is all technically correct, but the economic reality at the end of the day is nuanced.

The surplus that is invested in the special Treasury bond is then immediately spent in the same way and in parallel with general revenues.

When it eventually becomes time to make payouts from the Trust Fund, the money must come from then current taxing or new borrowing to redeem the special Treasury bonds.

Thus the special Treasury bonds are nothing more than a bookkeeping device. The money borrowed or taxed to redeem them could just have easily been paid out directly.

The government buys things on the market with money in its left pocket and makes SS payouts with money in its right pocket. The special Treasury bonds are held in the right pocket until they are exchanged for money from the left pocket.

No actual economic investment of any kind is involved.

Regards, Don
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