The Trust Fund Lives, II

Max Sawicky sawicky at
Fri Jul 31 11:28:05 PDT 1998

Some corrections to Bro. Hayes:

>This is absurd; find me an employee of this "trust fund" --

It's called the Social Security Administration. You can even visit them. They're also on the Web.

>the Social Security system is funded with current contributions; these
>contributions presently are larger than current payments and the
>residuals wind up in the general fund. That is: they reduce the

No, they are borrowed by the 'general fund,' (actually known as "Federal Funds").

>current federal budget deficit.
>The residuals from previous years? That money is gone; it's not
>accounted for separately, and there is no such thing as a "fund"

Nonsense. The Trust Fund is an account. It's inflows, outgo, and balance are reported annually. That's being "accounted for."

>that _could_ be holding bonds (incredible: the govt. charging the govt.

Not ridiculous at all. Note: Rep. Kasich is trying to get all the interest in the Fund declared non-existent. This brings closer the day when the Fund runs into deficit.

>The supposed 'deficit' or 'bankrupting' of the system comes in years where
it is projected that current revenues will not cover projected outlays. The real picture is that FICA contributions are mixed in with "regular" tax revenues, and benefit payments are lumped in with things like "postal worker salaries" -- it's just two different rate schedules for a single purpose: funding the federal budget. I highly regressive one at that.>>

Not all that regressive, but that's another story. I can't make head or tail of the rest of this.

>But technically, it's already "bankrupt" -- if you don't count year-on-year
surplusses to some account, you can't say that really the present revenues are separate either. So if your overall federal budget has a deficit, so does SS. And for most of the last few decades, it has. (Interestingly this turns Tom's claim of 7% interest *earning* bonds in the "trust fund" into 7% interest *paying* bonds helping to fund the benefits that are paid).>

I can't imagine what definition of bankruptcy we are operating under here. The Fund can more than meet current expenses. Unlike a business whose loans can be called, when its deficit arrives, it can still pay 3/4 of benefits.

> . . .
>But: I see examples all the time of people who get benefits from this
program who probably should not for any other reason than it was promissed to them. The question of course is: will that happen?>>

People get benefits because they paid for them. Who could be undeserving in this context?

> . . .
>Tom says that "the trust fund" is a "macro economic tool" -- but to me,
it's just a "macro political tool" since it's near-mythical status as an actual "trust fund" is just a fiction; it can be shaped to appeal to any particular set of constituents.>>]

The Fund is not a macro tool, since what matters for macro policy is not the Trust Fund deficit or surplus but the unified budget deficit or surplus. The only thing that matters is the net effect of government borrowing, not transactions internal to a government.

As a political tool, it establishes workers' claims to a minimum retirement income. I'd say this is a constructive purpose.


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