Social Security's Surplus Disappearing Fast in Downturn

#23 04-15-2009, 01:55 PM

The US Treasury site confirms this observation.
The Debt is broken in Public and Government holdings.
SS and medicare surpluses are supposed to be
invested in treaturies. For the last several years
they increase about 20 billion a month. But its
been going down since Nov 2008.

http://www.treasurydirect.gov/NP/NPGateway

#22 04-14-2009, 11:18 PM

On Apr 14, 9:20*am, Bill Woessner <woess...[at]gmail.com> wrote:
- quote -

> On Apr 13, 4:52*pm, Ron Peterson <r...[at]shell.core.com> wrote:

> > They are both an asset and a liability for accounting purposes. They
> > cancel themselves out for the whole organization. But if a corporation
> > owns bonds in a subsidiary, the subsidiary counts the bonds as a
> > liability and the owning corporation counts the bonds as an asset.

> OK. *But that's the converse of the situation with the federal
> government and Social Security. *Social Security is the "subsidiary"
> and the federal government is the "corporation" (I think). *So in this
> case, the subsidiary holds bonds in the corporation. *How does that
> work?

Again, the SS Trust Fund bonds are an asset for SS and guaranteed by
the US government for whom they are a liability.

--
Ron

#21 04-14-2009, 02:20 PM

On Apr 13, 4:52*pm, Ron Peterson <r...[at]shell.core.com> wrote:
- quote -

> They are both an asset and a liability for accounting purposes. They
> cancel themselves out for the whole organization. But if a corporation
> owns bonds in a subsidiary, the subsidiary counts the bonds as a
> liability and the owning corporation counts the bonds as an asset.

OK. But that's the converse of the situation with the federal
government and Social Security. Social Security is the "subsidiary"
and the federal government is the "corporation" (I think). So in this
case, the subsidiary holds bonds in the corporation. How does that
work?

--Bill

#20 04-13-2009, 08:52 PM

On Apr 11, 11:34*am, Bill Woessner <woess...[at]gmail.com> wrote:
- quote -

> On Apr 11, 9:40*am, Ron Peterson <r...[at]shell.core.com> wrote:
> > It's not meaningless if a corporation owns Treasury bonds. Those bonds
> > are considered long term investments which are distinct from tangible
> > and intangible assets.

> Correct. *If a corporation owns Treasury bonds, they are an asset. *If
> a corporation owns corporate bonds from another corporation, they are
> an asset.

> *But if a corporation owns its OWN bonds... are they an
> asset? *

They are both an asset and a liability for accounting purposes. They
cancel themselves out for the whole organization. But if a corporation
owns bonds in a subsidiary, the subsidiary counts the bonds as a
liability and the owning corporation counts the bonds as an asset. The
subsidiary is then treated as having a lower book value than if it
hadn't issued bonds.

- quote -

> That's exactly the situation with the Social Security Trust
> Fund. *The federal government has issued itself its own bonds and is
> calling them an asset. *

The SS Trust Fund bonds are an asset for SS, but a liability against
the government. The government guarantees those bonds through general
taxation, something SS can't do without Congressional approval.

Many of us don't like that situation because it may mean rising taxes
when SS starts to redeem the bonds in the Trust Fund.

--
Ron

#19 04-13-2009, 03:52 PM

On Apr 11, 5:46*pm, Thumper <jaylsm...[at]comcast.net> wrote:
- quote -

> Y can't compare it to private accounting.

Why not?

--Bill

#18 04-13-2009, 03:36 PM

On Apr 12, 12:07*pm, honda.lion...[at]gmail.com wrote:
- quote -

> Anyone posting happy Easter greetings in a forum open to all cultures
> and religions is fair game for being reminded that more than
> Christians read here.

Fair game? What's this, open season on Christians? Just let
Christians be Christians and celebrate our holidays without policing
and let those who mind having their holidays remembered manifest
themselves. I for one won't reply that they should mind the
Christians. It's their feast.

#17 04-12-2009, 05:07 PM

Augustine <evan...[at]mailinator.com> wrote:
- quote -

> The Passover is not today

Passover is a multi-day event, and we are in fact in the midst of it.
Anyone posting happy Easter greetings in a forum open to all cultures
and religions is fair game for being reminded that more than
Christians read here.

#16 04-12-2009, 04:08 PM

On Apr 11, 12:44*pm, honda.lion...[at]gmail.com wrote:
- quote -

> > Happy Easter!
> You forgot: Happy Passover and spring solstice.

No, I didn't. The Passover is not today and the spring solstice
happened a few weeks ago.

I wonder if you're going to remind your Jewish and Pagan acquaintances
about a Christian holiday too...

#15 04-11-2009, 10:24 PM

- quote -

> I am going back to USA bonds after
> all. Of course, there are Pakistani, Iranian, and, Somali bonds. They
> could be good solid investments too. I'll think it over.
I hear that since piracy is becoming quite stable and lucrative in

Somali, their bonds should do very well.

Chip

#14 04-11-2009, 09:46 PM

On Sat, 11 Apr 2009 11:34:58 -0500, Bill Woessner <woessner[at]gmail.comwrote:

- quote -

> On Apr 11, 9:40*am, Ron Peterson <r...[at]shell.core.com> wrote:
> > It's not meaningless if a corporation owns Treasury bonds. Those bonds
> > are considered long term investments which are distinct from tangible
> > and intangible assets.
> Correct. If a corporation owns Treasury bonds, they are an asset. If
> a corporation owns corporate bonds from another corporation, they are
> an asset. But if a corporation owns its OWN bonds... are they an
> asset? That's exactly the situation with the Social Security Trust
> Fund. The federal government has issued itself its own bonds and is
> calling them an asset. I'm not an economist or an accountant or
> anything of the sort, but that sounds like Enron-style accounting to
> me.
> --Bill
Y can't compare it to private accounting.

Thumper

#13 04-11-2009, 08:15 PM

On 2009-04-11 01:59:35 -0700, "catalpa" <catalpa[at]entertab.org> said:

- quote -

> Only if you are interested in purchasing a lifetime supply of hákarl.

I'll skip the hakarl. I've been told it smells like the cleaning fluid
used to get dirt out of bathtubs. I am going back to USA bonds after
all. Of course, there are Pakistani, Iranian, and, Somali bonds. They
could be good solid investments too. I'll think it over.

#12 04-11-2009, 05:44 PM

Augustine <evan...[at]mailinator.com> wrote:
- quote -

> it's a Ponzi scheme because it squandered its funds and now
> depends on those getting in the mandatory scheme to keep its
> liabilities funded.

Overextending in the short term on the bet that this will prove a good
investment in the long term is typical of many businesses.

- quote -

> Happy Easter!

You forgot: Happy Passover and spring solstice.

#11 04-11-2009, 05:04 PM

On Apr 10, 4:05*pm, honda.lion...[at]gmail.com wrote:
- quote -

> Calling SS a Ponzi scheme is like calling an insurance company a Ponzi
> scheme just because it hit a rough patch of multiple hurricanes.

No, it's a Ponzi scheme because it squandered its funds and now
depends on those getting in the mandatory scheme to keep its
liabilities funded. Of course, in a demographic winter when couples
traded having children to hoard retirement funds, the scheme is bound
to fail. Ironically, those retirement funds are failing too...

Happy Easter!

#10 04-11-2009, 04:34 PM

On Apr 11, 9:40*am, Ron Peterson <r...[at]shell.core.com> wrote:
- quote -

> It's not meaningless if a corporation owns Treasury bonds. Those bonds
> are considered long term investments which are distinct from tangible
> and intangible assets.

Correct. If a corporation owns Treasury bonds, they are an asset. If
a corporation owns corporate bonds from another corporation, they are
an asset. But if a corporation owns its OWN bonds... are they an
asset? That's exactly the situation with the Social Security Trust
Fund. The federal government has issued itself its own bonds and is
calling them an asset. I'm not an economist or an accountant or
anything of the sort, but that sounds like Enron-style accounting to
me.

--Bill

#9 04-11-2009, 02:44 PM

A Ponzi scheme is when you lie about how money is to be
invested and paid out. SS has been up front about how it
operates (except before WWII when it used insurance terms
like premiums and annuities to describe its methods.)

#8 04-11-2009, 02:17 PM

This wasnt supposed to happen until 2018 according to the
trustees report. But we may see for a few years.
The Trustees report is very modest about future
economic growth and doesnt model sudden lurches
like bubbles and great recessions.
We could return to the main demographic trend when
the recession ends.

#7 04-11-2009, 01:40 PM

On Apr 10, 9:18*pm, Beliavsky <beliav...[at]aol.com> wrote:

- quote -

> The existence of a Social Security trust fund that owns Treasury bonds
> is meaningless.

It's not meaningless if a corporation owns Treasury bonds. Those bonds
are considered long term investments which are distinct from tangible
and intangible assets.

- quote -

> ... There are no
> tangible assets in the trust fund, just taxpayer obligations.

The alternative would be for the trust fund to hold stock and
corporate bonds. I have advocated that, but the market collapse makes
it a difficult point to argue.

People need to make provisions for the future and just not rely on SS,
but isn't that well known?

--
Ron

#6 04-11-2009, 08:59 AM

"Don" <dwzimm[at]telus.net> wrote in message
news:2009041019280243042-dwzimm[at]telusnet...
- quote -

> On 2009-04-10 17:23:03 -0700, Douglas Johnson <post[at]classtech.com> said:
> > Those surpluseshave been invested the safest securities in the world --
> > US Treasury Bonds.
> I always thought Iceland Treasury Bonds were the safest.

Only if you are interested in purchasing a lifetime supply of hákarl.

#5 04-11-2009, 02:27 AM

On 2009-04-10 17:23:03 -0700, Douglas Johnson <post[at]classtech.com> said:

- quote -

> Those surpluseshave been invested the safest securities in the world --
> US Treasury Bonds.

I always thought Iceland Treasury Bonds were the safest.

#4 04-11-2009, 02:18 AM

On Apr 10, 8:23*pm, Douglas Johnson <p...[at]classtech.com> wrote:
- quote -

> "Gil Faver" <rowdy'sb...[at]xxyz.com> wrote:
> > if an insurance company set up a program like Social Security, they would be
> > locked up and the key thrown away.
> Yeah, and if the corner candy store did their accounting the same way as the
> Federal Government, Mom and Pop would be in jail, too.
> But we have been running surpluses on Social Security for decades. *This was in
> preparation for the deficits that demographics made inevitable. *Those surpluses
> have been invested the safest securities in the world -- US Treasury Bonds. *So
> far, no problem. *Insurance companies do exactly *the same thing.
> The problem comes in the scale. *When an insurance company redeems some Treasury
> bonds, even a lot of Treasury bonds, *the Treasury hardly notices. *When Social
> Security starts redeeming its bonds, the Treasury is either going to have to
> find a way to raise a lot of money --- *tax, borrow elsewhere, or cut spending
> elsewhere. *Financing that and current deficits is going to be interesting.
> -- Doug

The existence of a Social Security trust fund that owns Treasury bonds
is meaningless. Suppose there were no trust fund. When Social Security
benefits exceed payroll taxes, and the government runs a deficit, the
benefits are effectively being paid by issuing bonds. If there is a
trust fund owning government bonds, selling those bonds to pay for the
benefits is economically the same as issuing new bonds. There are no
tangible assets in the trust fund, just taxpayer obligations.

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