Thursday, October 14

Democrats Hate the Idea of Private Social Security Accounts - Because They Cannot Steal From Those Accounts...

One issue that keeps coming up in US politics is the Democrat's claim that Republicans will wreck Social Security if they ever get back into power.

One way that they mention the Republicans will do this is by changing Social Security to permit workers to put at least part of their Social Security payroll deductions into private accounts that they can then influence how they are invested. One benefit of this change put forward is that the money put into those accounts is dedicated for the person who earned the money and gives the possibility of a better return on the savings than the Government might be able to provide. The Democrats in turn has falsely labeled this plan as just another way to steal money from workers and give it to Wall Street.
Democrats are wrong to claim that personal accounts would hand Social Security over to Wall Street because - unlike having Washington centrally manage investments, as Bill Clinton favored - individuals would make their own decisions along with their choice of financial advisers.

The idea would be to take control of retirement away from politicians in Washington and from politically connected Wall Street insiders and put it in the hands of workers themselves. The upside is that the accounts would be able to provide much higher returns than the current Social Security system even promises, let alone what it can actually pay. They can therefore be sold to the public as what they are - benefit increases. - Washington Times
The one real problem to the Government (and to Democrat's demand to ever increase spending) with moving to private accounts is that the Government would no longer be able to take Social Security money and use it for other purposes. And how much of the Social Security surplus has the Government taken? How about all of it. Over $2 Trillion.
Social Security taxes are paid into the Social Security Trust Fund maintained by the U.S. Treasury (technically, the "Federal Old-Age and Survivors Insurance Trust Fund", as established by 42 U.S.C. § 401(a)). Current year expenses are paid from current Social Security tax revenues. When revenues exceed expenditures, as they have in most years, the excess is invested in special series, non-marketable U.S. Government bonds, thus the Social Security Trust Fund indirectly finances the federal government's general purpose deficit spending. In 2007, the cumulative excess of Social Security taxes and interest received over benefits paid out stood at $2.2 trillion. - Wikipedia
So on the one hand, Social Security has a surplus of over $2 Trillion to meet it's needs. On the other hand, all of that money was traded for Government bonds. The bonds are a promise from the Government to repay Social Security.

The Government took the money and spent it. The Government now either needs to pay that money back to Social Security, and with running a deficit, would need to borrow that money to repay the bonds. That could be a serious problem given that the Government already needs to borrow to cover the current year's spending deficits. And that is a problem with the idea of selling the bonds held by Social Security. Doing so increases the amount that needs to be sold into the market, and the Government is already having trouble selling the bonds it needs to need to cover current-year deficit spending.

Of course they could just print more money. I am not sure exactly how that would work out.

So remember, no matter how the politicians try to claim that Social Security has no problem, keep in mind that these same politicians turned the Social Security Trust Fund of $2 Trillion and turned it into added Government debt.
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