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Archive for Tuesday, January 15, 2013

40 years ago: Social Security to open Lawrence office

January 15, 2013

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From the Lawrence Daily Journal-World for Jan. 15, 1973:

  • A branch office of the Social Security Administration was to open in Lawrence no later than Jan. 1, 1974, according to Elmer Iske, district manager in Topeka. The official announcement had been made today by Congressman Larry Winn, R-Overland Park, Sen. James B. Pearson, R-Prairie Village, and Sen. Bob Dole, R-Russell. The formal opening date was to depend on the completion of staff and space arrangements. Iske said today that the staff of eight to 10 persons would come primarily from employees currently working in Topeka.
  • City commissioners this week were to consider the expenditure of $2,500 to install "a ceramic granular material resembling grass" in the medians at the intersections of 15th and Iowa and 19th and Iowa. Total cost of the reflective greenery was expected to be $5,000, but half of the cost was to be federally funded.

Comments

avarom 1 year, 11 months ago

Ever since the SS law was enacted in 1932, SS FICA funds have been invest in US Government Bonds.

Only the interest earned, on those SS US Bonds, is carried as a Debt on the Annual Budget Balance Sheet.

The Principle, on the SS US Bonds, is carried as an Asset on the Annual Budget Balance sheet, to be spent as the Congress sees fit.

Interestingly the US Bond was YOUR Bond, that is why only SS held Bonds can be cashed before maturity, because YOUR Bond was to be turned over to you at retirement, or AT THE TIME OF YOU DEATH, if that occurred BEFORE you turned 65.

A short time after, when the politicians saw all that money sitting in the Treasury, the Democrats decided to crate a POOL of those funds, funds they could use to BUY YOUR VOTE.

In 2011, for the first time in history, the SS Administration cashed MORE matured US Bonds than it purchased as had been the case since 1936 when SS payments started

The reason is Obama's so called "payroll tax (FICA) cut of 2%, took $350,000,000,000 OUT OF THE SS FUND, resulting in more being payed Out than came In.

Remember....that in November because Obama wants to take another $350,000,000,000 OUT OF THE SS FUND in 2012 by extending the "payroll tax (FICA) cut of 2%,for ANOTHER year.

This is how the Social Security Trust fund loaned the US Government money....now SS is hurting badly and the Government wants to make even more changes and amendments....Just Sucks....8-(

avarom 1 year, 11 months ago

The following two scenarios help illustrate the concept. Depending on which scenario is right, Social Security is either an accounting fiction or represents real economic savings. Scenario 1 (Trust Fund is an accounting fiction): 1984: $1 payroll tax collected in 1984 1984: $1 lent by Social Security to the federal government 1984: Federal government increases spending on government programs by $1 2020: Federal government raises taxes by $1 plus interest to repay the loan to Social Security 2020: $1 plus interest transferred from Federal Government to Social Security.

Scenario 2 (Trust Fund represents real economic savings): 1984: $1 payroll tax collected in 1984 1984: $1 lent by Social Security to the federal government 1984: Federal government borrows $1 less from other sources and increases spending on government programs by $0 2020: Federal government raises taxes by $0, but may borrow from other sources, to repay the loan to Social Security. Any tax increases that occur in 2020 would have happened anyway without Social Security. 2020: $1 plus interest transferred from Federal Government to Social Security.

It is instructive to note that the $2.5 trillion Social Security Trust Fund has value, not as a tangible economic asset, but because it is a claim on behalf of beneficiaries on the goods and services produced by the working population. This claim will be enforced by the United States Government although the precise monetary mechanism of enforcement is yet to be determined. In order to repay the Trust Fund, the United States government has three options, which may all be pursued to varying degrees.

avarom 1 year, 11 months ago

(1) The government may issue debt by selling treasuries. Thus, $1 in debt to the Social Security Trust fund is replaced with $1 in debt to a different lender. This scenario would increase the tax burden on future generations if the interest rate is higher on the new debt. If the new debt is more expensive and government revenues do not increase sufficiently either through taxes of economic growth, the government would be forced to cut spending on other programs (such as Defense, Education, Research) or else default on all or part of the debt.

(2) The government may raise taxes. If taxes are raised across the board, ironically, by reducing take home pay for workers, the government could make it harder for the younger, working generations to invest and save for retirement. However, if taxes are raised only on those whose earlier tax cuts were partially offset by these excess FICA contributions, namely those taxpayers whose marginal rates were reduced from 74% to as little as 28% during the Reagan Administration, the younger, working generations will not lose any ability to save or invest.

(3) The government may monetize trust fund obligations by transferring the treasuries held by the Trust Fund onto the Federal Reserve balance sheet. In such a transaction, the bonds would become "assets" on the Fed's balance sheet, and the Fed would create money "out of thin air" to purchase the bonds from the government. Under such a scenario, the bonds are converted into cash, which would then be used by the government to cover social security payments. This scenario would likely lead to increased inflation, as it would inflate the money supply without directly increasing the amount of goods and services produced by the economy as a whole.

avarom 1 year, 11 months ago

While there are many options for financing social security in the short- and long-term, there is no existing government program which can instantly change the demographic aspects that affect the sustainability of social security. The program's sustainability depends upon the payout rates and Social Security tax rates, the number of workers supporting each retiree, the rate of productivity growth among the remaining workers and the mechanics of how the excess contributions to the Trust Fund are handled (e.g. a "lock box" and for what sort of asset). In order to support the same living standard as before, as the ratio of retirees to workers temporarily increases due to the retirement of the Baby Boomers, the productivity among the working population must increase and/or Social Security Trust fund savings must be used. Productivity has consistently increased, but it is unclear if the rate of increase will be adequate going forward. This productivity growth, and/or consumption of savings, is required because there are fewer workers available to produce the same amount of goods and services. If productivity does not rise fast enough to offset the loss of productive workers, and if accumulated savings in the trust fund are not adequate to fill this gap, then per-capita benefits would decline.

The most difficult hurdle for claiming that the Trust Fund is not a fiction is the fact that redeeming Trust Fund bonds will be indistinguishable from how the federal government finds any other new revenues: raises taxes, borrows more, or uses surpluses from other programs.

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