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From: Bill Bowden on 18 Jun 2010 23:56
On Jun 17, 6:21 pm, "JosephKK"<quiettechb...(a)yahoo.com> wrote:
> On Tue, 15 Jun 2010 17:10:13 -0700 (PDT), Bill Bowden
>
>
>
> <wrongaddr...(a)att.net> wrote:
> >On Jun 15, 6:54 am, dagmargoodb...(a)yahoo.com wrote:
> >> On Jun 14, 11:48 pm, Bill Bowden <wrongaddr...(a)att.net> wrote:
>
> >> > On Jun 14, 7:51 pm, "amdx" <a...(a)knology.net> wrote:
>
> >> > > Liberals will say "but they pay payroll taxes," these are
> >> > > social security and medicare. First SS is a retirement/disability
> >> > > program that they will most likely get more dollars back than they
> >> > > ever pay in, and Medicare is a medical insurance program
> >> > > while they will be collecting during retirement/disability.
>
> >> > > This has nothing to do with federal income taxes.
>
> >> > Yes, but if they paid in say $50,000 over 40 years,  the investment
> >> > would double every 10 years at a 7% return. So, figuring the average
> >> > amount of $25,000 doubling every 10 years for 40 years you get
> >> > $400,000 and maybe 15k benefit which is less than a 5% return. Should
> >> > last forever.
>
> >> > So, you probably won't get back what you paid in, unless you paid very
> >> > little in, in which case you win the game.
>
> >> > -Bill
>
> >> Except that no one saves and invests your money, so those returns
> >> don't apply.  It's not a savings plan when you send your money to the
> >> world's ultimate spendthrift.  Uncle Sam sends it out the door to
> >> someone else the moment you send it in.
>
> >> So, there are no investment gains.
>
> >> An easy double-check is this--where is that big pile of people's
> >> accumulated contributions?  It's with Santa Claus and the Easter
> >> Bunny--it never existed.  It's gone.  So, you're not getting your
> >> money back.  You might get someone else's money, if you can elect a
> >> government to take it for you.
>
> >> It puzzles me that Washington's Gang of Three constantly points to
> >> Social Security as a giant accomplishment.  It's a disaster, the
> >> world's 2nd biggest Ponzi scheme & largest unfunded pension plan.
>
> >> Fortunately, unlike real pension plans, the government can just change
> >> the terms and benefits of the plan whenever it wants.
>
> >> All this nuisance can be cured by simply raising the retirement age to
> >> 97.
>
> >> --
> >> Cheers,
> >> James Arthur
>
> >Actually, the income from payroll taxes is credited to the SS trust
> >fund in the form of "special-issue" securities", which are like
> >Treasury bonds and earn interest the same as Treasury notes.
> >Reference:
>
> >http://www.socialsecurity.gov/OACT/ProgData/fundFAQ.html#n2
>
> >"Far from being "worthless IOUs," the investments held by the trust
> >funds are backed by the full faith and credit of the U. S. Government.
> >The government has always repaid Social Security, with interest. The
> >special-issue securities are, therefore, just as safe as U.S. Savings
> >Bonds or other financial instruments of the Federal government. "
>
> >The only question is, when the SS fund runs out of money, who will get
> >paid first? the Chinese holding treasury bonds, or the SS trust fund
> >holding special-issue securities?
>
> >The Chinese don't vote, and all the retired people do. So, I would
> >imagine when things get tough, the politicians will know who to pay
> >first, if they want to stay in office.
>
> >-Bill
>
> Not the case at all Bill.  The SSA monetizes its net excess income as
> these "special-issue securities" which the rest of the Federal Government
> then buys to cover its deficits (at a rather favorable rate you should
> notice).  It is right there in YOUR link.
>
> Look at what happens just as soon as SSA has no net excess income; they
> most now make demand redemption these securities and the rest of the
> Gov't must look elsewhere to make up the difference.  Program reductions
> and tax hikes must result (eventually).

Yes, but in exchange for the favorable rate the government gets, I
would think the "special-issue securities" carry a better credit
rating than the usual treasury bonds traded on the market. It's sort
of like first and second mortgages where the first mortgage holder
gets paid first, and the second guy gets what's left over?

And as one investment guy once said, "in the long run, we are all
dead."

-Bill
From: amdx on 19 Jun 2010 07:36


> Not the case at all Bill. The SSA monetizes its net excess income as
> these "special-issue securities" which the rest of the Federal Government
> then buys to cover its deficits (at a rather favorable rate you should
> notice). It is right there in YOUR link.
>
> Look at what happens just as soon as SSA has no net excess income; they
> most now make demand redemption these securities and the rest of the
> Gov't must look elsewhere to make up the difference. Program reductions
> and tax hikes must result (eventually).

Yes, but in exchange for the favorable rate the government gets, I
would think the "special-issue securities" carry a better credit
rating than the usual treasury bonds traded on the market. It's sort
of like first and second mortgages where the first mortgage holder
gets paid first, and the second guy gets what's left over?

>And as one investment guy once said, "in the long run, we are all
>dead."

-Bill
Yes , and it has been suggested that if the "long run" was shorter,
the SS program would be in better financial condition.
Mike :-)


From: JosephKK on 19 Jun 2010 21:44
On Fri, 18 Jun 2010 20:56:23 -0700 (PDT), Bill Bowden
<wrongaddress(a)att.net> wrote:

>On Jun 17, 6:21 pm, "JosephKK"<quiettechb...(a)yahoo.com> wrote:
>> On Tue, 15 Jun 2010 17:10:13 -0700 (PDT), Bill Bowden
>>
>>
>>
>> <wrongaddr...(a)att.net> wrote:
>> >On Jun 15, 6:54 am, dagmargoodb...(a)yahoo.com wrote:
>> >> On Jun 14, 11:48 pm, Bill Bowden <wrongaddr...(a)att.net> wrote:
>>
<snip>
>> >> Except that no one saves and invests your money, so those returns
>> >> don't apply.  It's not a savings plan when you send your money to the
>> >> world's ultimate spendthrift.  Uncle Sam sends it out the door to
>> >> someone else the moment you send it in.
>>
>> >> So, there are no investment gains.
>>
>> >> An easy double-check is this--where is that big pile of people's
>> >> accumulated contributions?  It's with Santa Claus and the Easter
>> >> Bunny--it never existed.  It's gone.  So, you're not getting your
>> >> money back.  You might get someone else's money, if you can elect a
>> >> government to take it for you.
>>
>> >> It puzzles me that Washington's Gang of Three constantly points to
>> >> Social Security as a giant accomplishment.  It's a disaster, the
>> >> world's 2nd biggest Ponzi scheme & largest unfunded pension plan.
>>
>> >> Fortunately, unlike real pension plans, the government can just change
>> >> the terms and benefits of the plan whenever it wants.
>>
>> >> All this nuisance can be cured by simply raising the retirement age to
>> >> 97.
>>
>> >> --
>> >> Cheers,
>> >> James Arthur
>>
>> >Actually, the income from payroll taxes is credited to the SS trust
>> >fund in the form of "special-issue" securities", which are like
>> >Treasury bonds and earn interest the same as Treasury notes.
>> >Reference:
>>
>> >http://www.socialsecurity.gov/OACT/ProgData/fundFAQ.html#n2
>>
>> >"Far from being "worthless IOUs," the investments held by the trust
>> >funds are backed by the full faith and credit of the U. S. Government.
>> >The government has always repaid Social Security, with interest. The
>> >special-issue securities are, therefore, just as safe as U.S. Savings
>> >Bonds or other financial instruments of the Federal government. "
>>
>> >The only question is, when the SS fund runs out of money, who will get
>> >paid first? the Chinese holding treasury bonds, or the SS trust fund
>> >holding special-issue securities?
>>
>> >The Chinese don't vote, and all the retired people do. So, I would
>> >imagine when things get tough, the politicians will know who to pay
>> >first, if they want to stay in office.
>>
>> >-Bill
>>
>> Not the case at all Bill.  The SSA monetizes its net excess income as
>> these "special-issue securities" which the rest of the Federal Government
>> then buys to cover its deficits (at a rather favorable rate you should
>> notice).  It is right there in YOUR link.
>>
>> Look at what happens just as soon as SSA has no net excess income; they
>> most now make demand redemption these securities and the rest of the
>> Gov't must look elsewhere to make up the difference.  Program reductions
>> and tax hikes must result (eventually).
>
>Yes, but in exchange for the favorable rate the government gets, I
>would think the "special-issue securities" carry a better credit
>rating than the usual treasury bonds traded on the market. It's sort
>of like first and second mortgages where the first mortgage holder
>gets paid first, and the second guy gets what's left over?
>
>And as one investment guy once said, "in the long run, we are all
>dead."
>
>-Bill

No, Bill. Go read the very good Wikipedia article:

http://en.wikipedia.org/wiki/Social_Security_%28United_States%29

And pay particular attention to "current operation".

The SSA owns a significant part of the national debt. Thus when they
quit having surpluses, which are used to finance the national debt, it is
a double whammy as they start calling those securities, which have
precedence over all other government securities; and to finance the
redemptions the government borrows at much higher rates, then the deficit
bomb goes KABOOM.
SSA just had its first deficit year, 2009.
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