Social Security numbers to think about

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2010-08-14 09:50 AM

Schmidt
Colorado Springs, CO
Posts: 1057

Reference: Social Security Administration tables

I collected the following numbers from the Social Security Administration tables. It shows the breakdown of the Social Security taxes collected, the interest earned on SS Trust Fund balances, total revenue, benefits paid, costs and the annual surpluses including interest earned.

The surplus funds are spent and reported every year as a part of the Unified Budget of Congress. There are no real funds in the SS Trust Fund. The money has been "borrowed" by the government using special bonds that will be repaid from the general fund when needed, but this requires the "good faith of the government." Would a conservative government necessarily honor that debt without extracting concessions?

The numbers are huge, and to put it them in perspective, the total expenditures for the Iraq War as of February 2010 are estimated at $704 billion. So one might make the case that the entire cost of the Iraq War to date has been funded by the surplus funds in the Social Security Trust Fund. That's one way of looking at it. I'm sure there are many others. Thoughts?

Social Security Funds Allocations, Last 10 Years
Year	Tax Collected	Interest	Revenue	Benefits Pd	Expenses	Other Costs	Surplus	Trust Fund
	$ million	$ million	$ million	$ million	$ million	$ million	$ million	$ million

2000	503,962	64,471	568,433	407,635	3,788	3,698	153,312	1,049,445
2001	529,108	72,895	602,003	431,931	3,702	3,282	163,088	1,212,533
2002	546,723	80,362	627,085	453,821	4,185	3,647	165,432	1,377,965
2003	546,960	84,926	631,886	470,778	4,562	3,747	152,799	1,530,764
2004	568,743	88,975	657,718	493,263	4,536	3,844	156,075	1,686,839
2005	607,506	94,252	701,758	520,748	5,272	3,917	171,821	1,858,660
2006	642,453	102,420	744,873	546,238	5,337	3,846	189,452	2,048,112
2007	674,713	110,176	784,889	584,939	5,542	4,020	190,388	2,238,500
2008	689,001	116,301	805,302	615,344	5,749	4,050	180,159	2,418,658
2009	689,141	118,349	807,490	675,482	6,182	4,137	121,689	2,540,348

Totals	5,998,310	933,127	6,931,437	5,200,179	48,855	38,188	1,644,215

Pct of Rev	86.538%	13.462%	100.000%	75.023%	0.705%	0.551%	23.721%
Source: http://www.ssa.gov/OACT/STATS/table4a3.html

2010-08-15 07:59 AM

Schmidt
Colorado Springs, CO
Posts: 1057

In case someone is confused about the "Interest" column above, it represents the amount of interest earned by the balance in the Trust Fund in any one year. It is bond type interest. If you want to see the actual interest rates paid by new bonds over the last 10 years these are summarized in this SSA table of Nominal Interest Rates on Special Issues.

The interest rate paid on new special interest bonds issued in the year 2000 averaged 6.24 percent. The average rate on new bonds issued in 2009 was 2.917 percent, reflecting the lower inflation rates for 2009.

In 2001, the Trust Fund increased in value by $163.1 billion, but 45 percent of that increase was due to interest earned on special issue bonds issued in the past.

In 2009, the Trust Fund increased in value by $121.7 billion, but 97 percent of that increase was due to interest earned on special interest bonds issued in the past. The 2009 numbers reflect the effects of the recession with unemployment cutting revenues.

The weighted average interest in 2009 by all bonds issued after 1983 was 5.03 percent. That's the $118.3 billion interest earned in 2009 on the yearend 2008 Trust Fund balance.

The reason I posted this table in the first place was to not only stimulate discussion about how the Trust Fund surpluses are being spent, but also as a reference point for those that think that excess funds after 1983 should have been spent on tangible assets like precious metals or the S&P 500 instead of special issue bonds that can only be redeemed by issuing new taxes or more borrowing.

So the question is, would the SS Trust Fund have been better served by investing half of the surplus in precious metals (gold, silver, platinum) and the other half in the S&P 500? The starting date would be 1983 when SS was revamped to provide for annual surpluses to cover the future "baby boomer retirement problem."

Even if the earnings were about the same in either case, would it be politically more acceptable to have real assets to cash in to pay for baby boomer retirements as opposed to increasing taxes for everyone to repay the $2.54 trillion in borrowed money plus interest (increasing to $3.7 trillion by 2019)?

Of course this is another "would have, could have" 20:20 hindsight type of question that has little meaning for today's reality. However, when some Republicans keep talking about privatization of part of Social Security with personal accounts for the those that want to manage their own money , it does raise additional questions. If a portion of the tax revenues dedicated to Social Security were diverted to personal accounts, it takes away money that would otherwise have been used to pay the benefits of current retirees. Would that necessitate an increase in general taxes? Or more borrowing? It was a question that the Bush administration would never answer when Bush proposed private accounts. Where would the extra funds come from?
I expect that we'll hear more and more about Social Security in the years to come, much of it political baloney to buy votes. I hope that if nothing else the above table is reference point that can be used in understanding those arguments.

2010-10-16 12:01 PM

Jekyll Island
Dallas, TX
Posts: 5

How about these
Average salary $50,000
Social Sec tax of 6.205% + employer match = $3200 a year
Employee pays into Social Security for the 35 years = $112,000
But if get 3% compound interest in the course of those 35 years = $208,287.38
at 7% = $507,488.13

Average life span for a heathy male = 17 years
208,287.38/17 = $12,252.20 or $1021.1 a month

In reality going forward we as citizens will be funding our own retirement through Social Security.

There is no issue or funding issue with Soc Sec. what we have is a government ripping us off problem.

Please just do the math

2010-10-16 12:25 PM

chipper
siskiyou county, CA
Posts: 41

If all SS did was pay retirees you would be right.

You are forgetting the survivors benefits. There are a lot of kids going to college because of SS.

Keep the trust fund in Government bonds. When the gov defaults it's all over anyway. In 1980 gold was $800/oz. A couple years later it was down to$400. Not a good investment. it will happen again.

2010-10-16 01:45 PM

CARLITOS BAM-BAM
Dallas, TX
Posts: 897

Yeah...there's a lot of stuff wrong with Boobycock's said scenario...
....right from the get-go....an assumption of $50,000 average pay? that's right around the average HOUSEHOLD income in the USA...
.....secondly......the Social Security Trust Fund is all fucked up because Reaganomics involved robbing it to offset high marginal tax cuts for the rich. It should never have been made apart of the Budget! They rose payroll taxes and spent it on the general budget. Sans payroll-tax outlays.. 56% of the budget is military and defense related. Social Security contributions are the people's money, the Lizard Beasts chose to spend it on bombs.

Gonzo Forever!
Mahalo,
El Prezidente Kaboom
Viva Raoul Duke!

2010-10-16 02:13 PM

Schmidt
Colorado Springs, CO
Posts: 1057

Take a look at the numbers in the table above. In 2009, the government collected $689 billion in Social Security taxes, but they paid out in benefits $675 billion for a surplus of $14 billion.

Now suppose people were offered the option of investing their SS taxes in the market and manage it as a "private fund." If just 25 percent of the population chose to do so, that would remove $172 billion from the money pool that is used to pay benefits. Factor in the $14 billion of surplus and you have a shortfall of $158 billion for just one year. This is what George Bush could never explain in his plan to privatize Social Security. How would this shortfall be made up? Reducing benefits to retirees? Huh? Try that on.

How about that SS Trust Fund with $2.5 trillion in assets? Well those assets are in special interest bonds that cannot be redeemed without making an equvalent increase in general income taxes. Those Trust Fund bonds, when redeemed, must be paid for out of the general taxes much the same as other bonds...unless of course that you borrow it. Yeah that's it...borrow it. Borrowing is something that the Republicans always do when in power. It's their trade mark...Reagan, Bush I and Bush II...borrow and spenders.

But borrowing is now frowned upon as well by Republicans campaigning to be reelected. So just where would that kind of money come from to pay current benefits if Social Security were privatized? I have yet to find a Republican who can do that math without hitting sacrosanct budget items. You cannot privatize Social Security, reduce taxes for the rich, and balance the budget all at the same time...unless you drastically cut military expenditures, and even then you are short. Hey but there is always that favorite whipping post...Earmarks!!. It makes good election rhetoric.

In the end if the Republicans "take back their government" and implement a privatization plan for Social Security, they will get their funds where they have always gotten them...they borrow them. Republicans are against PAYGO.

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