Break-even SS 62 vs 66 vs 70 calculators ?

[MichaelB]

My surely oversimplified understanding of things is that the current payments to SS recipients come from1) current SS taxes on those still working and 2) the "cashing out" of the special bonds that SS received from the Treasury in previous years when SS taxes exceeded outgo. That money was spent by the government, and SS received these bonds in return.

So, when those bonds are redeemed for real money (used to pay SS recipients their checks)--the funds have to come from somewhere, and I would think it would be the US government's "general fund." If that's right, then these bonds may serve an important role in helping to "keep track" of which "pot" is owed by which "pot," but the money (represented by the special bonds) is >already< coming from the US Government. From now until these bonds run out the government will will be borrowing, printing, extracting through taxation, or in some other way getting the money to back the redemption of these bonds so that SS recipients can get their checks. So, as a practical matter, how do things change when the bonds run out? If the line item is already in the budget to pay this money in 2033 before the bonds run out, why will it be fiscally impossible to make the same payment the following year when the bonds are gone? I'm sure legislation would be required, and I'd bet someone's ox gets gored, but it doesn't seem that there's anything fundamentally different about the USG balance sheet when these bonds run out. They are an accounting device between various parts of the government, they don't represent a box of gold that exists independent of the federal balance sheet.

But, I am very far from an expert.

This is really a cashflow question, not a budget issue. The bonds held by the SS fund are, from a flow perspective, no different than any other bond, except they are not public and do not have to compete for funds in an open market auction. Today, when a Treasury bond matures, it is simply rolled over in the fixed income markets.

The impact here would be how it affects the total amount of Treasury borrowing in financial markets. The key to that is not the total amount of IOUs in the SS trust fund but their maturity dates, and how much additional debt goes out to auction per month.

 

[pb4uski]

+1 that is what I was thinking. FWIW,the National Debt of $21 trillion includes both $15.3 trillion of U.S. government securities issued to the public and $5.7 trillion of intergovernmental borrowings.... including about $2.9 trillion owed to the SS Trust Fund.

 

[beowulf]

I never understood why intragovernmental borrowing was counted as part of the national debt. Having dealt with the subject as a Fed, how does DoD owing DOJ money for agents protected high level folks in certain situations add to the national debt? In effect, DoD is borrowing manpower from one agency and owes that agency funds or goods for the services. When, and if, they pay the other agency, it can be in the form of a funds transfer, or more commonly, in the form of weapons, comms equipment or the like. DoD already has the funds for this, so why does it add to the debt? It’s funny money - if it’s never paid, nothing happens - the other agency eats it. I didn’t work in the comptrollers office and I never could figure out their machinations - especially the use of supposedly expired funds that couldn’t be spent - but were.

 

[Lawrencewendall]

Because the desire to retire early (no matter what) is what brings a lot of people to this forum.

Otherwise, many wouldn't be here.

Not there yet, but from what i’ve read, the FREEDOM outweighs the dollars, so i’ve Been told. Struggling with this right now. Was great going to a ballgame yesterday with the DSs and their SO and not caring how much the beer and brats cost. It’s all about the experiences for me now. Willing to put in the 3 more years to afford the experiences for the future. My .02

 

[braumeister]

But, the fact is that Congress will do something.

Which is always the problem, isn't it?

 

[pb4uski]

I never understood why intragovernmental borrowing was counted as part of the national debt. Having dealt with the subject as a Fed, how does DoD owing DOJ money for agents protected high level folks in certain situations add to the national debt? In effect, DoD is borrowing manpower from one agency and owes that agency funds or goods for the services. When, and if, they pay the other agency, it can be in the form of a funds transfer, or more commonly, in the form of weapons, comms equipment or the like. DoD already has the funds for this, so why does it add to the debt? It’s funny money - if it’s never paid, nothing happens - the other agency eats it. I didn’t work in the comptrollers office and I never could figure out their machinations - especially the use of supposedly expired funds that couldn’t be spent - but were.

I don't think all intragovernmental borrowing is counted....IOW normal interagency receivables/payables as you describe effectively offset each other... the SS Trust Fund is different... taxes have been collected and earmarked for a particular use but since the cash doesn't yet have to go out the door then it can be used to reduce public debt.... I suspect that other intragovernmental borrowing is similar...cash flow timing that the general fund borrows from a ring-fenced fund rather than issuing bonds.

 

[beowulf]

Still confusing. I would assume savings bond interest is part of the debt. But would unpaid federal retirement benefits be included? They are a future obligation, but not a debt?

 

[Independent]

A distinction without much difference... if everyone gets 9 of 12 payments then they get 75% of what they were expecting, which is effectively a 25% haircut, right?

Right. I was using this as an example of how little authority for "reasonable adjustments" that the SS administrators believe(d) they have.

 

[Independent]

My surely oversimplified understanding of things is that the current payments to SS recipients come from1) current SS taxes on those still working and 2) the "cashing out" of the special bonds that SS received from the Treasury in previous years when SS taxes exceeded outgo. That money was spent by the government, and SS received these bonds in return.

So, when those bonds are redeemed for real money (used to pay SS recipients their checks)--the funds have to come from somewhere, and I would think it would be the US government's "general fund." If that's right, then these bonds may serve an important role in helping to "keep track" of which "pot" is owed by which "pot," but the money (represented by the special bonds) is >already< coming from the US Government. From now until these bonds run out the government will will be borrowing, printing, extracting through taxation, or in some other way getting the money to back the redemption of these bonds so that SS recipients can get their checks. So, as a practical matter, how do things change when the bonds run out? If the line item is already in the budget to pay this money in 2033 before the bonds run out, why will it be fiscally impossible to make the same payment the following year when the bonds are gone? I'm sure legislation would be required, and I'd bet someone's ox gets gored, but it doesn't seem that there's anything fundamentally different about the USG balance sheet when these bonds run out. They are an accounting device between various parts of the government, they don't represent a box of gold that exists independent of the federal balance sheet.

But, I am very far from an expert.

I agree with all of that. There is no economic difference between keeping SS taxes and benefits in a separate fund or just including them in general revenue.

The whole political issue is in the bold. Under current law, the Secretary cannot legally pay benefits unless the worksheet says the "trust fund" has a positive balance.

So Congress has to pass a new law to either increase taxes, decrease benefits, or get rid of the whole separate account concet. When they do that, they have to decide whose ox gets gored. Goring oxen is never popular with the gorees.

 

[Independent]

Still confusing. I would assume savings bond interest is part of the debt. But would unpaid federal retirement benefits be included? They are a future obligation, but not a debt?

I can say something about Social Security.

With SS, the Trust Fund is the excess of past earmarked revenue (mostly payroll taxes) over past benefits, accumulated with interest.

However, the excess of future benefits over future revenue is not in the Trust Fund. For example, the OASI Trust Fund has a balance of about $2.8 trillion. The annual benefits are about $800 billion. It seems plain that the Trust Fund wouldn't begin to pay the benefits for the people already retired. Then, add in the benefits already accrued for people who haven't retired (for example, if someone who is 60 stopped working today, that person would still qualify for SS based on his/her work record through today). That is many trillions more.

So, only a portion of the liability for future SS benefits is included in the debt.

I don't know about Civil Service retirement. Here is a report for 2017. https://www.opm.gov/about-us/budget-performance/other-reports/fy-2017-csrdf-annual-report.pdf

It seems to show a Trust Fund balance of $888 billion, but Present Value of Accumulated Benefits of $1.5 trillion. This https://www.everycrsreport.com/reports/R41328.html#_Toc381621845 lists a Trust Fund balance at the end of 2012 of $826 billion.

I'm guessing that this is similar to SS, only a portion of the benefit shows up in the debt as a trust fund balance, but I'm only guessing.

 

[samclem]

I agree with all of that. There is no economic difference between keeping SS taxes and benefits in a separate fund or just including them in general revenue.

The whole political issue is in the bold. Under current law, the Secretary cannot legally pay benefits unless the worksheet says the "trust fund" has a positive balance.

So Congress has to pass a new law to either increase taxes, decrease benefits, or get rid of the whole separate account conceit. When they do that, they have to decide whose ox gets gored. Goring oxen is never popular with the gorees.

So, from a politician's perspective, the "lowest pain" way to go (and, thus, the one that will have a strong allure) may be to just pass appropriations that keep making the same transfers into SS as the government was already making. The SS bonds did not, in any way, reduce the amount of annual borrowing or taxes. Just explain that to the electorate.

Cities do this all the time with bond measures: "Levy 6 will fund needed school maintenance and will not increase property taxes" because it replaces an expiring levy of the same amount. Everybody likes getting something for nothing.

I'm not saying this is the most fiscally responsible thing to do, just that it may be the path of least resistance.

 

[braumeister]

I'm not saying this is the most fiscally responsible thing to do, just that it may be the path of least resistance.

And when has a politician ever gone down that road?

 

[Independent]

So, from a politician's perspective, the "lowest pain" way to go (and, thus, the one that will have a strong allure) may be to just pass appropriations that keep making the same transfers into SS as the government was already making. The SS bonds did not, in any way, reduce the amount of annual borrowing or taxes. Just explain that to the electorate.

Cities do this all the time with bond measures: "Levy 6 will fund needed school maintenance and will not increase property taxes" because it replaces an expiring levy of the same amount. Everybody likes getting something for nothing.

I'm not saying this is the most fiscally responsible thing to do, just that it may be the path of least resistance.

Given recent experience, I think you are right.

The CBO projects that "debt held by the public" will hit 100% of GDP in 2028. If the politicians take the path of least resistance and don't let certain tax cuts and spending programs expire, the number will be 105% of GDP. A big chunk of the increase is tax cuts combined with spending increases passed just months apart. "Borrowing is not a problem" seems to be the rule of the day.

It wasn't always this way. In 1983, when SS was facing a shortfall, a bipartisan majority in congress passed tax increases and spending cuts so that SS would continue to be self funding.

Those days seem to be gone.