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ThePurpleDuckling t1_jc1qp8l wrote

This is rather interesting. It makes all the talk about it failing seem a bit trivial.

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mikevago t1_jc25ick wrote

If anyone's talking about Social Security failing, it's because they want to shake confidence in the system so they can carve it up somehow. The Social Security trust fund is one of the biggest piles of money on Earth, so a lot of Republicans look at it the way Wile E. Coyote looks at the Road Runner.

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detox665 t1_jc2z4vr wrote

One small detail that gets overlooked is that the fund is empty. All of the money put into it was exchanged for IOUs from Congress and then spent. It wasn't invested. It was spent.

The only way turn those IOUs back into cash are to tax current and future taxpayers to raise the money.

Pushing total tax rates to over 50% might not be a great plan if we want to have a growing economy.

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thunder-thumbs t1_jc33f9m wrote

That’s part of the messaging meant to shake confidence. That messaging had its peak when GWB was trying to introduce private accounts, back when SS was about to dip into those reserves. Lots of rhetoric about how those reserves didn’t exist, and why we therefore urgently needed those private accounts now.

The fund is very much real; its value is backed by the most stable investment that exists. It’s empty only in the same way that your “mortgage” or “rent” account is empty, if it is paid out of an account that other expenses come out of too.

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detox665 t1_jc3fld4 wrote

The bonds that the trust fund holds are a unique series issued to the trust fund. You cannot buy them anywhere else. Makes it easy to default on them without harming the value/credit associated with other US bond series.

"The full faith and credit of the United States" is valuable only for as long as we can levy sufficient taxes to cover our bills. After that point, very bad things start happening very quickly.

I've been advocating for privatization since the Reagan administration. As things stand right now, I and my cohort are about to take it in the shorts because propaganda beats facts.

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windershinwishes t1_jc459n7 wrote

OK so just eliminate the income cap that the SS tax is applicable to. Or collect more from 401ks and IRAs.

Privatization of Social Security is non-sense. It would cease to be Social Security, as it would no longer provide a guaranteed income to all Americans.

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TracyMorganFreeman t1_jc48qng wrote

Sweden privatized its social security decades ago.

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windershinwishes t1_jc7tub6 wrote

Is a person in Sweden guaranteed a certain income from it upon retirement, regardless of how much they paid in?

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TracyMorganFreeman t1_jc7x3bc wrote

Given that isn't the case for any retirement plan, SS included, no.

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windershinwishes t1_jc80sns wrote

"Regardless" was a bit too broad, sure. So how about "even if it is much much more than they paid in?"

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detox665 t1_jc6o2ts wrote

Eliminating the income cap will not generate enough revenue to cover the shortage. It isn't even close.

A privatized plan could still provide a minimum guaranteed income to all workers. (the "workers" part there is important, IMO).

If you take the FICA taxes that I generated (taken directly from my paycheck and my employer's "share"), and pretend that it was invested in a variety of index funds with a long-term growth of 5% (actual long-term growth is closer to 7%), I should have a bit over a million dollars at retirement age (+/-65). That includes the various "crashes" that have happened over the years.

If my retirement income is kept to less than long-term growth, I would have roughly $50k per year. Right now I'm projected to get $20-$25k depending on when the "haircut" hits and I have to work until almost 68.

Make it so half of any unused funds go back to the feds to cover those with lower lifetime earnings.

Even a person that works for nearly the minimum wage can generate $500-700k of retirement. But we can sweeten that a little from the government.

In the case of people with significant old-age issues (i.e. dementia) there is a pile of money that can be used for their care. That reduces the amount of money that the government must pay.

Social security as currently established is a Ponzi scheme. Sweden has privatized successfully as has Columbia. The only thing Social Security does well is to ensure that seniors are as equally poor as possible.

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windershinwishes t1_jc7vq7r wrote

Calling SS a Ponzi scheme while calling for all of that money to instead be injected into the financial market to be managed by private bankers is just funny.

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detox665 t1_jc8ofvd wrote

Private bankers have a better track record for fiscal responsibility that congresscritters. I know that isn’t saying much but it is true.

The important thing is that the money be actually invested in something real and not just congress’s ability to tax future citizens.

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TheBioethicist87 t1_jc2cxt3 wrote

IIRC the plurality of US debt is held be social security, so the people whining about the debt are creating 2 problems out of nothing.

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NoPeach180 t1_jc2ky5a wrote

And not raising the debt limit means not paying the interest to social security funds and thus destroying it. I think some republicans see it getting two birds with one strike. Destroying the social security funds and wrecking up u.s. economy while democrats hold the white house. Perhaps getting some nice golden parachute from russian or chinese oligarchs.

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TracyMorganFreeman t1_jc48ilu wrote

And yet there are hundreds of trillions of unfunded liabilities, and not just for SS.

The system needs reform, not kicking the can 2 generations down the road.

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SsurebreC t1_jc8e40l wrote

Every single time I read "hundreds of trillions of unfunded liabilities", it's always a sum of these liabilities over decades.

Sure, that's a lot of money and the number can also be true. However, that's weighted against quadrillions of government income.

It's always used as a big scary number to make it seem like we need to fuck with future generations because they don't matter since they don't vote.

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TracyMorganFreeman t1_jc8h6zf wrote

>Sure, that's a lot of money and the number can also be true. However,that's weighted against quadrillions of government income.

No it isn't. It's *unfunded* liabilities. It's taking into account current government income trends. It's speaking to insolvent programs for people *who current exist* for which there is no funding to speak of in the future.

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SsurebreC t1_jc8kiry wrote

OK, say your income is one quadrillion dollars. Your liabilities are 900 trillion. You have 200 trillion in unfunded liabilities. Is it a scary number now?

You can't take into account current government income trends. We simply have no idea what the budget will be like in, say, 50 years. In addition, the number usually doesn't mention which programs and what levels they're currently funded or will be funded in the future and what is an actual liability. Case in point: Social Security is a liability - it's literally our money - but welfare is not because it's an optional social program.

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TracyMorganFreeman t1_jc9d6gu wrote

Oh you can't predict it, but somehow you can assume the budget of the US government will be in the quadrillions?

Their predictions are impossible, but your handwaving is sufficient. Got it.

The assumption is current levels, and it is only liabilities, as in entitlements.

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bostwickenator t1_jc1th2t wrote

That cost curve looks exponential.

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ButterflyCatastrophe t1_jc2alfc wrote

Almost anything reported in dollars is going to lookbe exponential because of inflation and population growth.

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warren_stupidity t1_jc2e3ky wrote

sure, as it is a population model. The boomer bulge is entering its dearth slope not coincidentally at the same time it is peaking at retirement. The point is that it corrects. All on its own, But we should abolish the cap on FICA taxes, put the full retirement age back to 65, use a better CPI index, COLA the earnings threshold for taxation that was set back in 1984, and increase the minimum benefits. And medicare needs to be rolled into a comprehensive universal health insurance system.

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bostwickenator t1_jc2fnii wrote

Agreed. My point is anything tied to an exponential factor will eat anything not defined against the same. I am no expert here but I'd think legislation which sets non population based caps or doesn't compensate for inflation will be a problem.

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w4ffl3 t1_jc2hcx1 wrote

The US isn't expected to grow any further in population so SS and similar funds have to deal with the disproportionate size of boomers and generations after them, but after that it won't be an issue without a significant demographic change

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TracyMorganFreeman t1_jc49480 wrote

Solvency dwindles if you're going to expand benefits and lower the retirement age.

>use a better CPI index.

Redundancy aside, I don't know what that means.

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Scary_Princess t1_jc3enw9 wrote

Exactly that cost curve is going to continue going up and the income isn’t going to trend the same way. Currently the fund is collecting 95% of what it needs to pay annually. If we run a 5% deficit against the trust, the trust will be emptied in 20 years. Because the of the difference between incoming money and outgoing benefits the trust is expected to be exhausted by 2033-2035.

It can be solved at anytime, but solutions today will be far less painful than solutions in 2032

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BasilExposition75 t1_jc24hsd wrote

Well, considering those "assets" are really just IOUs from the taxpayer, who is already on the hook if SS goes belly up, I am not sure this graph is really a good interpretation of reality.

It isn't like they have a stock portfolio for this-- it is treasuries. The money has been spent already.

And look at when those assets were acquired. We just saw a huge bank fail because they were holding treasuries with low interest rates. With treasury rates around 4% or higher, we should probably discount some of that asset line.

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warren_stupidity t1_jc2eclr wrote

They are 'IOUs' they same way a t-bill is an IOU.

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BasilExposition75 t1_jc3jzs2 wrote

Yes. A T-Bill is an IOU. When it is the government that holds them, it is an "I Owe Myself".

If a company claimed their internals accounting were assets, they would be prosecuted for fraud.

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ktxhopem3276 t1_jc2gwcg wrote

>Well, considering those "assets" are really just IOUs from the taxpayer, who is already on the hook if SS goes belly up, I am not sure this graph is really a good interpretation of reality. It isn't like they have a stock portfolio for this-- it is treasuries. The money has been spent already.

The trust fund will sell the bonds and someone else will buy them. Demand for us bonds is immense bc it is the exchange currency of the world.

> And look at when those assets were acquired. We just saw a huge bank fail because they were holding treasuries with low interest rates. With treasury rates around 4% or higher, we should probably discount some of that asset line.

The bank failed due to a run on deposits triggered by a concentrated customer base in ventures capital startups. Bonds only decrease in value if they are sold before maturity so the slow and predictable draw down of the trust fund is a non issue with regards to interest rate fluctuations

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tristanjones t1_jc3bkn6 wrote

We know that by 2035 something will have to give. Everyone who is going to pay into it is born already, and we know who will be retiring and how long they will live on average between now and then.

Unless we drastically increase our young legal immigrant labor force, increase retirement age, reduce benefits, or add funds another way, that Asset Reserves line will start and exponential decline.

It isnt a trivial matter, but if we do something now, it may never be an issue. But it is a real and valid problem that is getting worse everyday.

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Bells_Ringing t1_jc4p540 wrote

Depends on how you interpret the facts. If nothing changes, all SS beneficiaries receive a 20-30% reduction in benefits when the funds are depleted. What republicans say is that the cuts are coming. We can either plan for them or it’s an across the board cut.

Obviously for political reasons, that turns into pushing granny off a cliff

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