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Politics : Sharks in the Septic Tank -- Ignore unavailable to you. Want to Upgrade?

To: Lane3 who wrote (21207)	8/9/2001 4:02:31 PM
From: Win Smith	Read Replies (1) \| Respond to of 82486

Karen, I sure hope government gridlock does its magic on that one. Under current tax rates and economic projections, SS is supposed to be solvent till 2035 or something, which is approximately forever considering the general time horizon the government works on and the accuracy of past projections. The current line seems to be that the treasury bonds in the trust fund are somehow worth less than the treasury bonds in general circulation, and therefore the treasury is free to default on them, or something. "Fixing" SS by dumping money into the stock markets would be good for the people running the stock markets, which somewhat explains the popularity of the idea in certain circles.

To: Lane3 who wrote (21207)	8/9/2001 4:42:07 PM
From: TimF	Read Replies (3) \| Respond to of 82486

But he was more specific: The trust fund is worthless, he said, because it is invested in U.S. government bonds. If it were invested in German bonds, the trust fund could indeed be used to pay benefits. Let's see: Last year the Social Security system collected about $90 billion more in payroll taxes than it paid in benefits. Saving says that if that money had been invested in German bonds it would have made a real contribution to the system's future; but because it was used to buy U.S. bonds it somehow disappeared into a black hole. It did not disappear into a black hole. It was spent. Since the money was spent it no longer is held by the entity (the US government) that spent it. The assets would be worth money if they where invested in German bonds (unless you think the Germans would default) and not if it is invested in government bonds. I'll explain why. The US government can not have its cake and eat it too but those who say their is an actual trust fund out there are saying this is possible. The government took in money in Social Security taxes, lent it to itself and then spent it. Lets say I tried the same thing. I take my next pay check but I do not spend it. Instead I lend it to myself. After receiving this loan I promise myself I will pay it back. Does moving my money from my right pocket to my left before I spend it mean I still have the cash (or trust fund) after I spend it? Someone who doesn't understand the reasoning above might say "but if it was invested in German bonds the German government would spend it". True but then the German government would still have an obligation to pay it back and Germany would have to come up with the money to pay it back. You can lend money to someone else who spends it and if they don't default you have an asset even after they spend it. If you lend it to yourself and then spend it you no longer have an asset, or trust fund or whatever it is you want to call it. Tim