Texas Proud said:
You either pay now or pay later... since we are not paying enough NOW for the ordinary govmt, we will have a hard time paying for it in a few years..
This is good point. The federal budget needs to be brought in line with the revenues from taxes intended for the federal budget minus the trust fund borrowing. This will reduce the obligations for redeeming securities from other sources in a given year and will restore the confidence in the purchase of securities in the future.
The trust funds may have more legal basis than the SS program itself (full faith and trust guarantee on the bonds, promise on the pay-go), I just don't know how much more.
Bruce Webb, a poster at AngryBear claims that the fund growth has been higher than the government estimates for the low-cost projection (never runs out of money) for each year since the focus turned on SS in the late 90's. If boomers work longer than the projections assume, the economy trucks along as it has in the past, OR any other of the adjustable parameters comes in better than the intermediate estimate with all else being the same, the trust fund may not need to be tapped at all. Who knows? The assumptions used in the models are extremely conservative. If the estimates short range or so bad, are the long range ones better? It's all a crapshoot and I find it unconscionable that people would just decide to reduce benefits based on this long-range model that was moving out in time each year. The fund has been getting so flush so fast that they had to go to a more pessimistic future economy in order to keep it in crisis. Perhaps this estimate of the future is a better one; perhaps not. Besides, if benefits are reduced now, the trust fund just gets larger without bound. Remember that as long as it is not used, the interest is reinvested and earns interest, which is reinvested and earns interests, etc. That is what should scare people if the fund keeps over- performing. (Note, I have not independently confirmed all of what I have just written; I have just seen it referenced in many economic conversations. I think, though, the fact that the date of trust fund exhaustion which has moved from 2029 to 2042 and then back to 2041 last year seems to support these observations.)
The politicians are addicted to claiming improved deficit numbers that can be explained, at least in part, by increases in the amount borrowed each year from the excess SS contributions. At some point they may use the excess flow to claim they have no deficit (ala Clinton). If one looks at the right place, all of this borrowing to cover over $500 billion or so per year of deficit, when added to the debt where it collects interest, is a problem that makes me want to pay my income taxes now instead of freezing to death in an unheated apartment in the future. There is a letter from the actuaries somewhere on that site that warned the President about using the “infinite projection” as they were willing to compute it, as requested, but felt it had too much error to be valid. That is the number that many in the “crisis” crowd like to quote, and quote often.
I have no trouble with the government investing some of these excess funds in state and municipal bonds, conservative market investments, etc. simply because I see no difference in “personal accounts” run by the government, the TSP, and trust fund investments. There is no doubt that the funds need to be put in a place where the word “trust” may have a chance to gain meaning and people won’t feel betrayed or jerked around. Right now the trust fund is used as a cash fund to buy re-election through lower taxes. It’s like some old poor bloke who works his butt off is unknowingly contributing to the campaign coffer of a politician without knowing or approving it. But that is another rant for another day, the laundering of tax dollars.