US Debt and Social Security....an idea

ssd

Registered User
Forum Member
Aug 2, 2000
1,834
48
48
Ohio
My thoughts on the US Debt and Social Security?..

A ?fix? for both.

United States Deficit Bonds. Very similar to the War bonds sold for WWII with a longer duration.

Bear with me ? just trying to flesh out this idea and any thoughts are appreciated. I was thinking about this late last night and failed to write down my thoughts as I had them.

War bonds were sold for $18.75 and matured in 10 years and at maturation, you received $25.

My thoughts are this:

A person, age 25, would purchase a 40 year United States Deficit Bond. The purchase price would go against the deficit. The bond would mature at age 65. The bonds would have to be a zero coupon bond, meaning there would be no annual coupon payments - if they bought a zero coupon bond at $1000, it would mature in 40 years at $10000 (arbitrary number ? would have to figure this out) Or, there could be bi-annual interest payments that would be put into an IRA-type fund
The following year, the same person, now age 26, would buy a 39 year United States Deficit Bond. The amount that the person would purchase would be equal to what their yearly contribution to Social Security would have been. To keep the social security system solvent, employers would continue to pay their portion of the worker?s Social Security into the system but would receive a tax credit for doing so. Also, the maximum cap on contributions for salaries would be removed.

There would have to be an age limit set for who would still receive benefits from the old SS system and who would only receive money from the bond system. The age for maturation of the bonds would have to be set ? I used 65 as a retirement age. The bond maturation dates could also vary so the retiree would have bonds maturing every year during their retirement.

This would not ?solve? the US deficit problem but it would have the debt be held by Americans rather than foreign countries. It would also remove the SS payments from the General Fund ? not allowing Congress to spend the money for other programs. I would imagine that Congress would want the zero coupon bond as they would not want to have to fund the IRA?s on a biannual basis as that would further remove $ from their hands.

Just a rambling thought I had last night ? thought I would share and perhaps we could improve on the idea.
 

Duff Miver

Registered User
Forum Member
Jul 29, 2009
6,521
55
0
Right behind you
My thoughts on the US Debt and Social Security?..

A ?fix? for both.

United States Deficit Bonds. Very similar to the War bonds sold for WWII with a longer duration.

Bear with me ? just trying to flesh out this idea and any thoughts are appreciated. I was thinking about this late last night and failed to write down my thoughts as I had them.

War bonds were sold for $18.75 and matured in 10 years and at maturation, you received $25.

My thoughts are this:

A person, age 25, would purchase a 40 year United States Deficit Bond. The purchase price would go against the deficit. The bond would mature at age 65. The bonds would have to be a zero coupon bond, meaning there would be no annual coupon payments - if they bought a zero coupon bond at $1000, it would mature in 40 years at $10000 (arbitrary number ? would have to figure this out) Or, there could be bi-annual interest payments that would be put into an IRA-type fund
The following year, the same person, now age 26, would buy a 39 year United States Deficit Bond. The amount that the person would purchase would be equal to what their yearly contribution to Social Security would have been. To keep the social security system solvent, employers would continue to pay their portion of the worker?s Social Security into the system but would receive a tax credit for doing so. Also, the maximum cap on contributions for salaries would be removed.

There would have to be an age limit set for who would still receive benefits from the old SS system and who would only receive money from the bond system. The age for maturation of the bonds would have to be set ? I used 65 as a retirement age. The bond maturation dates could also vary so the retiree would have bonds maturing every year during their retirement.

This would not ?solve? the US deficit problem but it would have the debt be held by Americans rather than foreign countries. It would also remove the SS payments from the General Fund ? not allowing Congress to spend the money for other programs. I would imagine that Congress would want the zero coupon bond as they would not want to have to fund the IRA?s on a biannual basis as that would further remove $ from their hands.

Just a rambling thought I had last night ? thought I would share and perhaps we could improve on the idea.

I don't see the purpose.

If Americans buy new "debt bonds" and those funds are used to buy back foreign held debt, then the money is gone (to pay foreigners) and the total debt remains the same. I don't see how it much matters whether our debt is held by foreigners or US citizens. A dollar owed is still a dollar owed, and US citizens can already buy all the g'mint bonds they want anyway.

As far as Social Security, you have to remember than it is a transfer program. People pay in while they work, and collect (from younger workers) later. You can't just stop collection from young folks because there is a long line of folks who have paid in, some close to retirement, and some further away, but still in the 45 year long line. If young folks stop paying in today, what happens to the guy who has already paid in for 25 years and retires 20 years from now?

Present SS payments don't go into the general fund. They are separate, although they have been used to purchase government bonds, the same sort of bonds your proposal would have young folks purchase. If we can't pay SS now, we won't be able to pay those debt bonds in the future.

There are only two ways to solve deficit spending. Tax more and/or spend less.

There's no free lunch.

Nobody wants to pay more, and nobody wants to get less, not farmers, not retirees, not the military, not schools...nobody.

It's a quandry.
 
Last edited:

The Sponge

Registered User
Forum Member
Aug 24, 2006
17,263
97
0
I got a fix for social security. How about the money that comes in from it, pay's for it. Go get the other money that was stolen from it and put it back in the fund. A simple fix with a huge surplus. There was a reason Gore talked about a lock Box.
 

Duff Miver

Registered User
Forum Member
Jul 29, 2009
6,521
55
0
Right behind you
I got a fix for social security. How about the money that comes in from it, pay's for it. Go get the other money that was stolen from it and put it back in the fund. A simple fix with a huge surplus. There was a reason Gore talked about a lock Box.

Sorry, Sponge but if you add up all the surplus which has been accumulated, plus all that's presently being paid in, the fund will be able to pay full benefits for about another 20 years. After that, it will have only what is coming in, and will be able to pay about 75% benefits.

Not that I really give a shit what happens 20 years from now. :violin:
 

The Sponge

Registered User
Forum Member
Aug 24, 2006
17,263
97
0
Sorry, Sponge but if you add up all the surplus which has been accumulated, plus all that's presently being paid in, the fund will be able to pay full benefits for about another 20 years. After that, it will have only what is coming in, and will be able to pay about 75% benefits.

Not that I really give a shit what happens 20 years from now. :violin:

From day one if this money was only going to SS and not any other bill, u are telling me we it still wouldn't have enuf?? i find that hard to believe Duff.
 
Last edited:

Duff Miver

Registered User
Forum Member
Jul 29, 2009
6,521
55
0
Right behind you
i find that hard to believe Duff. From day one if this money was only going to SS and not any other bill, u are telling me we still wouldn't have enuf?? i find that hard to believe Duff.

The trust funds are "off-budget" and treated separately in certain ways from other Federal spending, and other trust funds of the Federal Government. From the U.S. Code:

EXCLUSION OF SOCIAL SECURITY FROM ALL BUDGETS Pub. L. 101-508, title XIII, Sec. 13301(a), Nov. 5, 1990, 104Stat. 1388-623, provided that: Notwithstanding any other provision of law, the receipts and disbursements of the Federal Old-Age and Survivors Insurance Trust Fund and the Federal Disability Insurance Trust Fund shall not be counted as new budget authority, outlays, receipts, or deficit or surplus for purposes of - (1) the budget of the United States Government as submitted by the President, (2) the congressional budget, or (3) the Balanced Budget and Emergency Deficit Control Act of 1985.

The trust funds run surpluses in that the amount paid in by current workers is more than the amount paid out to current beneficiaries. These surpluses are given to the U.S. Treasury (and thus become part of the general federal budget) in exchange for special U.S. government securities, which are deposited into the trust funds. If the trust funds begin running deficits, meaning more in benefits are paid out than contributions paid in, the Social Security Administration is empowered to redeem the securities and use those funds to cover the deficit.
[edit] History of the Social Security Trust Fund

The Social Security system is primarily a pay-as-you-go system, meaning that payments to current retirees come from current payments into the system.

http://en.wikipedia.org/wiki/Social_Security_Trust_Fund
 

ssd

Registered User
Forum Member
Aug 2, 2000
1,834
48
48
Ohio
Duff:
I haven't put a pencil to the math but...
you would still have employers paying the 3.2% ( their current portion) into the current SSA as is to cover continuing benefits for people currently collecting SSA benefits. The younger workers' portion would be the amount going to the Budget Bonds and would be their retirement savings.

Yes- it would not fix the budget deficit. However, it would transfer ownership from foreign nations (some of which are not friendly to the US) to Americans. A lower interest rate might even be applied to the Budget Bonds. I would rather the US debt be held by Americans.
Britain was the last great empire prior to the US - it switched during /after WWII - why? The US was a creditor nation and Britain turned into a debtor nation.....now, the US is the debtor nation and China is the creditor.
History repeats itself but doesn't duplicate itself.
 

Chadman

Realist
Forum Member
Apr 2, 2000
7,501
42
48
SW Missouri
Interesting concept, ssd. I'll try to wrap my head around it and give you my thoughts. I am not well versed in economic theory (insert liberal joke here... :SIB ) but I'll try to comment. I admire you for proposing something - especially in here - instead of the usual complaining that most of us do - myself included.
 

Duff Miver

Registered User
Forum Member
Jul 29, 2009
6,521
55
0
Right behind you
Duff:
I haven't put a pencil to the math but...
you would still have employers paying the 3.2% ( their current portion) into the current SSA as is to cover continuing benefits for people currently collecting SSA benefits. The younger workers' portion would be the amount going to the Budget Bonds and would be their retirement savings.

Yes- it would not fix the budget deficit. However, it would transfer ownership from foreign nations (some of which are not friendly to the US) to Americans. A lower interest rate might even be applied to the Budget Bonds. I would rather the US debt be held by Americans.
Britain was the last great empire prior to the US - it switched during /after WWII - why? The US was a creditor nation and Britain turned into a debtor nation.....now, the US is the debtor nation and China is the creditor.
History repeats itself but doesn't duplicate itself.

At present employer/employee tax rates, the entire SS surplus will be gone in abut 20 years. If younger folks stop paying in, it will be gone sooner. So what about the guy who is now, say 50, and will retire at 65, then live to 85?

And, if employees pay their share into "debt bonds", but the employer does not, then, obviously those younger employees will find they have much less in their "account" when they reach retirement age.

And, what about those widows and orphans who are also beneficiaries of the present SS? Cut them off cold?

You can arrange the deck chairs on the Titanic forever...but SS cannot be preserved unless folks pay in more, or take out less. That's the bottom line.

Put the pencil to it.

For 2011 employee tax rate is temporarily 4.2%, reduced (stimulus*) from 6.2%. It is scheduled to return to 6.2% in 2013. Employer rate is 6.2%

* A stupid idea IMO, since it only makes things worse down the road.
 

ssd

Registered User
Forum Member
Aug 2, 2000
1,834
48
48
Ohio
Muff:
I guess you are not seeing it how I am planning it. The young worker will get their retirement funds from the maturing deficit bonds that they hold...the same contribution that they would be normally putting in + the interest on the bond. So, they would not be pulling out of the SSA ever. The current recepients of SS would be funded by the employer paying in the normal 6.2% on the younger workers.

Perhaps it is a bad idea. just something I came up as a possible solution
 

Duff Miver

Registered User
Forum Member
Jul 29, 2009
6,521
55
0
Right behind you
Muff:
I guess you are not seeing it how I am planning it. The young worker will get their retirement funds from the maturing deficit bonds that they hold...the same contribution that they would be normally putting in + the interest on the bond. So, they would not be pulling out of the SSA ever. The current recepients of SS would be funded by the employer paying in the normal 6.2% on the younger workers.

Perhaps it is a bad idea. just something I came up as a possible solution

I can't follow you. Right now employee + employer pay in 12.4% total, and that is not quite enough to pay existing retirees.

And you're assuming that just the employee 6.2% will be enough to fund retirement for them?

And that just the employer 6.2% will be enough to fund all present and future retires for a long time?

Voodoo math?


I think you need to put the pencil to your proposal.
 
Bet on MyBookie
Top