Actual List of Social Security Trust Fund Assets
by Bruce Webb
Well this is a response to a question in the Rivlin thread. There are widespread misunderstandings about what if anything makes up the “IOUs” in the Trust Funds, with many people thinking they just have artificially low rates (and so obviously underperforming theoretical private accounts) or just are open-ended loosey-goosy commitments to maybe pay the money back someday. Well that is not how it works at all on a monthly basis. So with no further ado here they are:
As always click to enlarge. Some notes under the fold.
First thing to notice is that these are the assets of the OASI or Old Age/Survivors Insurance Trust Fund, there is an entirely different set of assets in the DI or Disability Insurance One.
Second thing is that there are a range of yields from Certificates as low as 2.750% and Bonds as high as 7.250% with maturities ranging from 2008 to 2022.
Third is that this table gives you a snapshot of two moments in time, year-end 2007 and year-end 2008. A slot marked by “–” in the 2007 column indicates a bond that was issued in 2008 and so obviously did not exist in Dec 2007, similiarly a slot marked by “–” in the 2008 column indicates a bond category that was redeemed during the course of the year
Okay some observations. The instruments with the lowest rates were mostly issued in 2008, which is perfectly in line with the yields in Regular Treasuries in that time period. Contrawise the ones with the highest rates represent mostly 10 year bonds issue eight or nine years ago, once again in line with market conditions then. Note too that with one except every slot that shows zero in 2008 after showing a positive number in 2007 has a face maturity of 2008, these bonds matured and were honored by Treasury, no muss no fuss, just the same kind of routine re-financing you see in the Regular Treasuries.
But there was one interesting exception, the Treasury also redeemed the 3.500% 2009 a year ahead of time, which points out two facts, one that these securities are redeemable at any time, while as we see they are typically held to maturity, in a time of need the Treasury can and will tap them, and too that the Treasury at least in this case did so in the way that best preserved the fiscal health of the Trust Fund, presumedly they could have saved some interest by cashing in the remaining 7.000+% bonds instead.
The Social Security Trust Funds are not investment funds, that is not their purpose, but neither are they simple slush funds designed to separate out workers from their wages. I argue a times that there is something odd about certain details of the actual reporting, but as to daily operations and general management the Trustees have over the years lived up to their titles.
That clears up the misunderstandings that somehow got stuck in my brain about how the fund is run.
Agreed we don’t have a “Social Security Crisis”. The crisis is that some people want to steal it, or inaction on federal spending (the stuff other than distibution of payroll tax and letting us have some of our trust fund back) will sink the whole country.
But lets push for all going down at the same time!
“Steal” is not the right word. “Not have to repay” gets closer. But the deep reality is something else.
The cost of a worker financed fix is actually dirt-cheap, a 0.3% increase on current covered workers does the whole trick until 2026, and smooths out the repayment demands that under the current system will all be coming in a restricted period of time between then and 2037, but which under our plan will be smoothed out over the whole 75 year projection period.
The long-term SAVINGS to the General Fund via a tax INCREASE that would not even require a dime of EXTRA sacrifice on the part of the wealthy are huge, like trillions of dollars huge. Mostly because under the Northwest Plan most of the principal never has to be paid back at all. (Fifth column from right)
I have been arguing with ‘reformers’ for years and one thing is clear, they have no interest in fixing Social Security on its own terms, and in the end that has nothing to do with their future tax burden, or some fundamental desire to pursue ‘fiscal responsibility’ or ‘intergenerational equity’, because when you look at their proposals they mostly do neither. But what they do is break the compact between Workers and Government established during the New Deal.
Every single bit of this is about embracing Ayn Rand and pissing on FDR’s grave. I mean there are some people who have bought the propaganda, but the people fundamentally driving this effort, people from Cato and AEI and the various organizations directly associated with PGP hate the entire concept of a successful government run social program, it threatens their entire ideology.
Once you understand that the whole debate is being fundamentally driven by ideology and not finance as such much of the puzzle starts coming together.
glad you were here. hope this answers your questions. I need to hear three times that the Trust Fund will be paid “in a timely manner” so I can reassure myself that even stealing the Trust Fund is not what the current “crisis” is all about. It’s all about killing Social Security. A somewhat deeper concept.
They want to get rid of SS so that they won’t have to pay back the money they borrowed from it. We need to remember we paid into SS and we should get it when we are ready to retire. We should not let anybody bamboozle us and steal our money.
By steal I mean direct the current FICA stream elsewhere and convince us that the Trust Fund is worthless by any number of explanations. Or repeal FICA (Hooray!) and put in a 12.6% VAT or National Sales Tax (Boo!)
That sounds so draconian I almost get embarrased typing it. Hope 80 million AARP votes can scare the crap of the USG, but who knows, maybe we will see Libertarian Martial Law in our lifetimes?
Hardly seems worth all the trouble just to save a minimal hike in the rate, or cap, or just leave it alone and see if the Echo Boomers have jobs in 10 years.
Is killing FDR really that necessary? Shouldn’t we put that to a vote?
Once you understand that the whole debate is being fundamentally driven by ideology and not finance as such much of the puzzle starts coming together.
I’ve admitted to both. Simple finance theory suggests that the longer one’s time horizon, the riskier one’s portfolio should be. Empirically, in aggregate, during one’s working years, incomes rise with age to a point late in the career and then start to decline a few years prior to retirements. Taken together, these two end up having SS turn them upside down, sucking what would otherwise be discretionary income/retirement savings allocation from young workers and putting it into the “safest” asset class, thereby exacerbating wealth inequality, especially to the extent that larger allocation to equities has been a proximate cause of wealth inequality.
Somewhat related, when SS was first implemented, the average 20-year old was expected to live to about 67 vs. 79 now. I know the “contribution” has increased as well and I recall you and Coberly have rationalized the increased contribution with increased life expectancy – but we’re financing too much of retirement with not enough “savings”.
Cedric and other readers,
Bruce didn’t provide the Social Security Administration url links for the official explanations or the investment transactions record. The following comment posts will include the quoted information/data and links for any reader’s benefit.
The Social Security Administration (SSA) states:
“The trust funds hold special issues (SI) sold only to the trust funds. These SI securities are of two types: short-term certificates of indebtedness and long-term bonds. The certificates of indebtedness are issued on a daily basis for the investment of receipts not required to meet current expenditures, and they mature on the next June 30 following the date of issue. Special-issue bonds, on the other hand, are normally acquired only when special issues of either type mature on June 30.”
Longer SSA statement:
Trust funds and types of investments
The Old-Age and Survivors Insurance Trust Fund and the Disability Insurance Trust Fund comprise the Social Security trust funds. Both funds are managed by the Department of the Treasury. Since the beginning of the Social Security program, all securities held by the trust funds have been issued by the Federal Government. There are two general types of such securities:
•Special issues — available only to the trust funds
•Public issues — marketable Treasury bonds available to the public.
The trust funds now hold only special issues, but they have held public issues in the past.
Special issue types and properties
There are two types of special issues: short-term certificates of indebtedness and long-term bonds.
•The certificates of indebtedness are issued on a daily basis for the investment of receipts not required to meet current expenditures, and they mature on the next June 30 following the date of issue.
•Special-issue bonds are normally acquired only when special issues of either type mature on June 30. The bonds have maturities ranging from one to fifteen years.
The above properties of special issue securities are summarized in the following table.
Type of special issue / Investment frequency / Maturity
Certificates of indebtedness / Daily / Next June 30
Bonds / June 30 / 1 to 15 years
SSA Interest Rate Formula for Special Issues
“Special-issue securities bear a nominal rate of interest determined by a formula in the law. The current formula was established by the 1960 amendments to the Social Security Act. The formula sets the rate applicable in a given month to the average market yield on marketable interest-bearing securities of the Federal government which are not due or callable until after 4 years from the last business day of the prior month (the day when the rate is determined). The average yield must then be rounded to the nearest eighth of 1 percent. This formula became effective with the October 1960 rate.”
SSA Investment transactions of the OASI and DI Trust Funds, calendar year 2009
Transaction month / Type of security / Transaction Interest rate / Maturity year / Issue month / Amount
Jan SI certificates Acquire 2.125 2009 Jan 2009 $71,856,150
Jan SI certificates Redeem 2.125 2009 Jan 2009 32,722,395
Jan SI certificates Redeem 2.750 2009 Dec 2008 22,712,021
Feb SI certificates Acquire 2.750 2009 Feb 2009 54,418,877
Feb SI certificates Redeem 2.125 2009 Jan 2009 39,133,755
Feb SI certificates Redeem 2.750 2009 Dec 2008 14,987,593
Feb SI certificates Redeem 2.750 2009 Feb 2009 1,453,868
Mar SI certificates Acquire 2.875 2009 Mar 2009 58,698,377
Mar SI certificates Redeem 2.750 2009 Dec 2008 38,405,579
Mar SI certificates Redeem 2.750 2009 Feb 2009 13,925,049
Mar SI certificates Redeem 2.875 2009 Mar 2009 3,674,188
Apr SI certificates Acquire 2.500 2009 Apr 2009 77,094,030
Apr SI certificates Redeem 2.500 2009 Apr 2009 41,464,232
Apr SI certificates Redeem 2.750 2009 Feb 2009 10,741,038
Apr SI certificates Redeem 2.875 2009 Mar 2009 4,179,935
May SI bonds Redeem 7.000 2009 Jun 1996 837,698
May SI certificates Acquire 2.875 2009 May 2009 54,422,807
May SI certificates Redeem 2.500 2009 Apr 2009 35,629,798
May SI certificates Redeem 2.750 2009 Feb 2009 15,362,068
May SI certificates Redeem 2.875 2009 Mar 2009 683,118
May SI certificates Redeem 2.875 2009 May 2009 3,401,076
Jun SI bonds Acquire 3.250 2010 Jun 2009 11,505,830
Jun SI bonds Acquire 3.250 2011 Jun 2009 11,505,830
Jun SI bonds Acquire 3.250 2012 Jun 2009 11,505,830
Jun SI bonds Acquire 3.250 2013 Jun 2009 11,505,831
Jun SI bonds Acquire 3.250 2014 Jun 2009 11,505,831
Jun SI bonds Acquire 3.250 2015 Jun 2009 11,505,830
Jun SI bonds Acquire 3.250 2016 Jun 2009 11,505,829
Jun SI bonds Acquire 3.250 2017 Jun 2009 11,505,830
Jun SI bonds Acquire 3.250 2018 Jun 2009 11,505,830
Jun SI bonds Acquire 3.250 2019 Jun 2009 11,505,830
Jun SI bonds Acquire 3.250 2020 Jun 2009 11,505,830
Jun SI bonds Acquire 3.250 2021 Jun 2009 10,628,270
Jun SI bonds Acquire 3.250 2022 Jun 2009 10,628,270
Jun SI bonds Acquire 3.250 2023 Jun 2009 10,628,270
Jun SI bonds Acquire 3.250 2024 Jun 2009 153,311,163
Jun SI bonds Redeem 4.000 2009 Jun 2008 4,526,627
Jun SI bonds Redeem 4.125 2009 Jun 2005 10,516,946
Jun SI bonds Redeem 4.625 2009 Jun 2004 9,167,664
Jun SI bonds Redeem 5.000 2009 Jun 2007 12,454,234
Jun SI bonds Redeem 5.125 2009 Jun 2006 11,567,865
Jun SI bonds Redeem 5.250 2009 Jun 2002 9,235,912
Jun SI bonds Redeem 5.625 2009 Jun 2001 9,621,438
Jun SI bonds Redeem 5.875 2009 Jun 1998 6,169,273
Jun SI bonds Redeem 6.000 2009 Jun 1999 6,693,627
Jun SI bonds Redeem 6.500 2009 Jun 1995 2,431,254
Jun SI bonds Redeem 6.500 2009 Jun 2000 8,577,396
Jun SI bonds Redeem 6.875 2009 Jun 1997 3,975,271
Jun SI bonds Redeem 7.000 2009 Jun 1996 5,142,164
Jun SI bonds Redeem 7.250 2009 Jun 1994 27,311,591
Jun SI certificates Acquire 3.250 2009 Jun 2009 60,712,279
Jun SI certificates Redeem 2.750 2009 Feb 2009 12,936,854
Jun SI certificates Redeem 2.875 2009 Mar 2009 50,161,136
Jun SI certificates Redeem 2.875 2009 May 2009 51,021,731
Jun SI certificates Redeem 3.250 2009 Jun 2009 60,712,279
Jun SI certificates Redeem 3.750 2009 Nov 2008 7,420,648
Jun SI certificates Redeem 3.875 2009 Aug 2008 4,440,134
SSA Investment transactions of the OASI and DI Trust Funds, calendar year 2009
Transaction month / Type of security / Transaction Interest rate / Maturity year / Issue month / Amount
Jul SI bonds Redeem 3.250 2010 Jun 2009 11,505,830
Jul SI bonds Redeem 3.500 2010 Jun 2003 5,666,500
Jul SI bonds Redeem 4.000 2010 Jun 2008 622,572
Jul SI bonds Redeem 4.125 2010 Jun 2005 677,386
Jul SI bonds Redeem 4.625 2010 Jun 2004 855,497
Jul SI bonds Redeem 5.000 2010 Jun 2007 476,586
Jul SI bonds Redeem 5.125 2010 Jun 2006 349,995
Jul SI certificates Acquire 3.250 2010 Jul 2009 56,350,275
Jul SI certificates Redeem 3.250 2010 Jul 2009 36,731,520
Aug SI bonds Redeem 3.500 2010 Jun 2003 4,962,379
Aug SI bonds Redeem 4.000 2010 Jun 2008 802,709
Aug SI bonds Redeem 5.125 2010 Jun 2006 315,136
Aug SI bonds Redeem 5.250 2010 Jun 2002 1,363,407
Aug SI bonds Redeem 5.625 2010 Jun 2001 769,942
Aug SI certificates Acquire 3.250 2010 Aug 2009 50,664,009
Aug SI certificates Redeem 3.250 2010 Jul 2009 19,618,755
Aug SI certificates Redeem 3.250 2010 Aug 2009 28,697,138
Sep SI bonds Redeem 5.625 2010 Jun 2001 755,026
Sep SI bonds Redeem 5.875 2010 Jun 1998 916,286
Sep SI bonds Redeem 6.000 2010 Jun 1999 556,047
Sep SI certificates Acquire 3.125 2010 Sep 2009 58,507,264
Sep SI certificates Redeem 3.125 2010 Sep 2009 40,916,708
Sep SI certificates Redeem 3.250 2010 Aug 2009 19,492,795
Oct SI bonds Redeem 6.000 2010 Jun 1999 139,919
Oct SI bonds Redeem 6.500 2010 Jun 2000 1,317,108
Oct SI bonds Redeem 6.875 2010 Jun 1997 471,048
Oct SI certificates Acquire 3.000 2010 Oct 2009 52,679,948
Oct SI certificates Redeem 3.000 2010 Oct 2009 38,020,152
Oct SI certificates Redeem 3.125 2010 Sep 2009 16,901,059
Nov SI bonds Redeem 4.000 2010 Jun 2008 1,873,372
Nov SI bonds Redeem 6.875 2010 Jun 1997 3,333,397
Nov SI certificates Acquire 3.125 2010 Nov 2009 51,417,675
Nov SI certificates Redeem 3.000 2010 Oct 2009 14,659,796
Nov SI certificates Redeem 3.125 2010 Sep 2009 689,497
Nov SI certificates Redeem 3.125 2010 Nov 2009 34,077,369
Nov SI certificates Redeem 3.250 2010 Aug 2009 2,474,076
Dec SI bonds Redeem 3.250 2011 Jun 2009 877,560
Dec SI bonds Redeem 3.500 2011 Jun 2003 1,115,128
Dec SI bonds Redeem 4.000 2010 Jun 2008 9,399,111
Dec SI bonds Redeem 4.000 2011 Jun 2008 622,572
Dec SI bonds Redeem 4.125 2010 Jun 2005 1,093,747
Dec SI bonds Redeem 4.125 2011 Jun 2005 677,386
Dec SI bonds Redeem 4.625 2011 Jun 2004 240,146
Dec SI bonds Redeem 6.875 2010 Jun 1997 641,075
Dec SI certificates Acquire 2.875 2010 Dec 2009 90,662,374
Dec SI certificates Redeem 2.875 2010 Dec 2009 34,502,989
Dec SI certificates Redeem 3.125 2010 Nov 2009 17,340,306
SSA Investment transactions of the OASI and DI Trust Funds, calendar year 2010
Transaction month / Type of security / Transaction Interest rate / Maturity year / Issue month / Amount
Jan SI certificates Acquire 3.500 2010 Jan 2010 $70,908,440
Jan SI certificates Redeem 2.875 2010 Dec 2009 32,133,258
Jan SI certificates Redeem 3.500 2010 Jan 2010 2,324,369
Feb SI certificates Acquire 3.125 2010 Feb 2010 50,327,293
Feb SI certificates Redeem 2.875 2010 Dec 2009 24,026,127
Feb SI certificates Redeem 3.125 2010 Feb 2010 25,114,897
Feb SI certificates Redeem 3.500 2010 Jan 2010 8,644,044
Mar SI bonds Redeem 4.625 2011 Jun 2004 615,351
Mar SI bonds Redeem 5.000 2011 Jun 2007 41,214
Mar SI certificates Acquire 3.125 2010 Mar 2010 55,131,860
Mar SI certificates Redeem 3.125 2010 Feb 2010 25,212,396
Mar SI certificates Redeem 3.125 2010 Mar 2010 29,784,991
Mar SI certificates Redeem 3.500 2010 Jan 2010 7,217,231
SSA Investments held at the end of March 2010
by type of investment, interest rate, and trust fund
(Amounts in thousands)
Investment type / Interest rate (%) / Maturity years / Total OASDI / OASI / DI
Special issues(available only to the trust funds)
3.250 2011 $10,628,270 $10,628,270 $ —
3.250 2012-2020 103,552,471 95,654,433 7,898,038
3.250 2021-2024 185,195,973 185,195,973 —
3.500 2011 9,513,751 9,513,751 —
3.500 2012-2018 162,052,650 143,983,502 18,069,148
4.000 2011 12,075,192 12,075,192 —
4.000 2012-2023 297,033,849 275,510,006 21,523,843
4.125 2010-2011 19,940,145 19,940,145 —
4.125 2012-2020 209,051,633 190,721,268 18,330,365
4.625 2010-2011 18,335,328 18,335,328 —
4.625 2012-2019 178,464,666 160,242,302 18,222,364
5.000 2010 12,454,233 12,454,233 —
5.000 2011-2022 286,858,464 267,604,254 19,254,210
5.125 2010 11,567,866 11,567,866 —
5.125 2011-2021 254,059,722 233,832,032 20,227,690
5.250 2010 9,235,912 9,235,912 —
5.250 2011-2017 151,246,416 132,802,713 18,443,703
5.625 2010 9,621,438 9,621,438 —
5.625 2011-2016 132,783,203 116,258,517 16,524,686
5.875 2010 6,169,273 6,169,273 —
5.875 2011-2013 62,791,792 55,597,415 7,194,377
6.000 2010 6,693,627 6,693,627 —
6.000 2011-2014 78,179,051 70,033,380 8,145,671
6.500 2010 38,320,240 38,320,240 —
6.500 2011-2015 105,482,791 92,839,477 12,643,314
6.875 2010 3,975,272 3,975,272 —
6.875 2011-2012 49,955,908 41,064,868 8,891,040
7.000 2010-2011 36,485,804 36,485,804 —
Certificates of indebtedness
3.125 2010 25,346,869 23,316,709 2,030,160
3.500 2010 52,722,796 52,722,796 —
…………………………….Total OASDI / OASI / DI
Total amount invested 2,539,794,605 2,342,395,996 197,398,609
…………………………..Total OASDI / OASI / DI
Average interest rate 4.687% 4.670% 4.891%
you almost sound rational. but you are wrong. you have a simple minded understanding of investment and savings. your “plan” might work even for most people most of the time, but it can’t work for everyone all of the time, and it will never work for a very large percent of the people. that’s why it’s insurance and not an investment.
i think your demographics are a bit bogus, although it’s true a lot of those twenty year olds got killed in ww2 before they could collect social security, or pay much in taxes.
If memory serves, SS was implemented in 1935 and most accounts of WW2 have it ending sometime in mid-1945. Those 20-year olds who got killed were actually 4-10 year olds – but my demographics are bogus?
I’ll concede that women weren’t prominent in the workforce in 1935, and have grown life expectancy and labor force share at a faster rate than men since and had a lower life expectancy at age 20 than men in the 1930’s, but neither were they prominent in combat situations in WWII.
Check out page 30 of the following: http://www.cdc.gov/nchs/data/nvsr/nvsr56/nvsr56_09.pdf
Please enlighten us with your much more nuanced view of investment and savings with the consideration that, if memory serves, over rolling 20-year histories, equities outperform bonds in all but one period since (and including the crash of) 1929 and we’re talking about 40+ years, not 20 – and that I’m aware of no study of that suggests supply/demand imbalance is a relevant factor in long-run equity returns.
So what’s your point. It appears that total SSA investments of all three categories is $5.1 Trillion
earning about 4.65%. Previously on another thread you claimed that I had ove stated the SS Trust Funds balance by $454 billion, but used only OASDI assets for the basis of your complaint.
Now you show quite clearly that there is a much larger total of more than $5 Trillion in the SS Trust Funds. You’re cherry picking for the purpose of critisizing and you’re being totally inconsistent with your display of numbers. As the old saying goes, it’s not the numbers that are wrong. It’s the guy cherry picking the numbers in order to support his own confused agenda.
Again, so what’s your point? Do the Funds have too many Treasury notes? They are required to by law. Have previous administrations squandered those funds? Cerainly they have and sadly they continue to do so. Can the budget be brought under control? A President and Congress with an honest agenda could certainly do so by cutting back on wasteful millitary adventurism and restoring sanity to our tax system. When the wealthiest citizens recognize their patriotic duty to pay their fair share to suppport the government that supports their enormous wealth the country will gain a healthier economy.
MG that is low even by your standards. Anyone with even a passing acquaintance of the AB Social Security Series knows I regularly supply links suggesting otherwise makes YOU the liar here.
In the previous thread Coberly gave links to the Report and the heading of the graphic I supplied would give anyone a way to verify that and neither you or anyone has suggested the data is not fully correct.
Your comment can only be interpreted as character assassination.
This comment added no value. You are a hell of a lot better linker and cut and paster than you are analyst.
Care to explicate your point. Because as unusual it is more bluster and one up manship than anything.
Those numbers add nothing to the debate.
Did any of that blizzard of numbers have any relevance to the question posed by Cedric on the Rivlin thread? Other than feeding your odd King of the Mountain fixation vis a vis me?
You are this close to coming persona non grata on any of my posts. I don’t see that on balance you contribute value added to this topic. And you don’t have to like it.
I have no doubt the Peterson type reformers just want to kill the New Deal, for reasons of ideology and imaginary profit in handling all the investment funds that will be desperately seeking the big returns,
But given the buy-in from high end Democrats, I suspect something deeper may be at work. My guess is that having tried the New Deal and “high mass consumption” and looking at the future with large poplulations and diminished resources, the people who see the big picture may have just decided that serfs and company stores will be the way of the future.
Pure paranoid speculation on my part.
like I said: simple minded. I’ll leave it to you to work out your own investment strategy. But I’ll give some free advice to anyone else who might care:
If you NEED your Social Security deduction to make money on the market, you aren’t smart enough to make money on the market. Or at least you can’t afford to risk your retirement INSURANCE on a sure thing on Wall Street.
What Jed can’t seem to undrstand with his rolling histories is that a lot of people lose money on the market, and a lot of people never have enough they can afford to risk. Social Security is insurance, not an investment plan.
And just for the record. there is plenty of money sloshing around right now looking for a place to invest. All you can do with your “investment” dollar is join the casino gambling, drive up the price of stocks for now, and drive them down when you and a lot of other people start trying to sell them.
Unlike what I KNOW about Social SEcurity, the above is purely opinion.
And if you thnk jeds analysis of the demographics makes sense, you should stay away from any enterprise involving numbers.
MG given that the really shitty way you presented the data managed to convince an informed commenter that total Social Security TF assets were in the range of $5.2 trillion (see Jack below) and had no obvious clue that your $2.5 trillion number for OASDI was in fact a sum of your $2.3 trillion OASI plus $197 bn DI number just goes to show that the educational component of your contribution is in fact negative. Maybe you could have substituted an “=” for that first “/” ?
Do you think your last comment was explanative to anyone not thoroughly immersed in the relation between OAS and DI?
There is about 1.5 trillion in cash and cash equivalents sitting idle among private companies, not invested, waiting for the right moments.
Ok, thanks. So it looks like the fund is making about 4.7% average interest. I don’t see any 1981 vintage 30 year bonds at 12% on the list, so I think PIMCO would have beat the Treasury Dept long term performance. But the Treasury is so conflicted with this that I guess this is the best we can hope for, assuming it’s impossible to change it over to a real national pension fund like Canada and others have. I can’t think why it wouldn’t be possible, since we have already increased the debt cieling to cover it and I don’t don’t know why the Treasury couldn’t just swap out the special treasuries with newly printed real treasuries and it’s off to the races. But maybe there is some reason that alludes me.
M.Jed the difference between an investment model and an insurance model swamps out yield differences between equities and bonds. You are not even asking the right question.
As an economist you might want to explore the difference between”open group” and “closed group” obligations and get back to us.
Anyone remember the recent Italian experience with investing retirement funds in the public investments?
Yet another example of your clever language (though I miss your robust analogies) rather than refuting the facts regarding demographics. So here are some more facts. I assume you have somewhere in the back of your mind that life expectancy at age 65 hasn’t increased that much over the life of SS, and I’d agree with you. According to the SS website, it’s only increased about 2.5 years for men and 5 years for women.
The problem isn’t here – it’s prior to attainment of age 65. In 1940, slightly more than half of men who made it to age 21, also made it to age 65. Currently slightly less than 3/4 of men who make it to age 21 also make it to age 65. I assume (though probably shouldn’t) that you’d agree that if population were constant over these two periods that would be approximately 50% more men for whom we’re “providing” SS, right? For women, it’s about 60% and 85%, respectively, which is a 40% increase in the number of recipients.
I never NEEDED my SS contribution. I would have prefered the CHOICE of investing in assets that were more appropriate for my risk profile when I was younger – but we no how anti-choice, paternalistic, and omniscient you are.
Cedric – “I don’t don’t know why the Treasury couldn’t just swap out the special treasuries with newly printed real treasuries and it’s off to the races. But maybe there is some reason that alludes me.”
Throwing another $2.5 trillion in Federal securities offerings on the market would create a mess if not a crisis. That’s a large load to throw on the bond market above and beyond current borrowing by the U.S. Department of Treasury.
The problem wouldn’t be limited to the impact on the securities market. Separately, the Federal Budget would grow by $2.5 trillion and the debt ceiling would have be raised to accomodate that action. Then the projected interest costs would have to be added to the fiscal year and projected fiscal years’ budget. It’s likely that discretionary spending would be hammered.
The worst outcome could be a collapse in confidence by global interests to purchase U.S. Government debt instruments and a rapid decline in the value of the U.S. Dollar.
If interested, you may want to review info available at these U.S. Department of Treasury links:
Monthly Treasury Statement
of Receipts and Outlays
of the United States Government
For Fiscal Year 2010 Through February 28, 2010
Presentation to the
Treasury Borrowing Advisory Committee
November 3, 2009
Minutes of the Meeting of the Treasury Borrowing Advisory Committee
Of the Securities Industry and Financial Markets Association
February 2, 2010
Presentation to the
Treasury Borrowing Advisory Committee
February 2, 2010
MG – “Bruce didn’t provide the Social Security Administration url links for the official explanations or the investment transactions record. The following comment posts will include the quoted information/data and links for any reader’s benefit.”
Webb – “MG that is low even by your standards. Anyone with even a passing acquaintance of the AB Social Security Series knows I regularly supply links suggesting otherwise makes YOU the liar here.”
You didn’t provide any url links in the main post. None.
You didn’t identify the source of your 4.bp.blogspot jpg insert. New readers such as Cedric Regula probably have no idea where the information is located within the SSA archives.
I received three emails after the main post was put up at Angry Bear. All three wanted to know more information about the specifics of non-marketable securities at the SSA. My comment posts covered their questions from top to bottom. And, as one observed later, any new reader would appreciate the source links which aren’t so easy to locate at the SSA website.
Webb – “In the previous thread Coberly gave links to the Report and the heading of the graphic I supplied would give anyone a way to verify that and neither you or anyone has suggested the data is not fully correct.”
Identify the comment post(s) that you claim that Coberly posted which include “links to the Report”.
The previous comment thread that discusses any aspect of the SSA programs fall under this main post by Linda Beale:
Alice Rivlin on Financial Reform and Deficits
Posted by Rdan | 4/08/2010 04:29:00 AM
Coberly did not provide any links to an SSA report, annual or otherwise, as of this time in the comment thread under the previous main post which led to a discussion about the Social Security programs.
Some other readers of this blog do not agree with you.
If the information is so lousy, then perhaps the SSA should delete such from its website.
Unlike you, not everyone is entertained by a debate.
This information is valuable to those who want to develop an understanding of the recent transaction history at the SSA.
Your opinion does not rule Dan’s blog.
You’re not the focus here. This is factual information that serves to develop broader understanding of how non-marketable transactions are conducted at the SSA.
Don’t even entertain the idea of threating me. This is not your blog. I posted factual information related to the subject matter under discussion.
As usual, you’re in violation of Dan’s comment policy at Angry Bear.
Above and beyond that, the information that I presented is identical to the SSA presentation with the exception that I added the slash marks to make it clearer that columns of info were presented. I have had no complaints from individuals who contacted me by email. Quite the opposite, in fact.
I had already provided Jack with the SSA link that afforded him the opportunity to review the end of year and monthly asset positions of the SSA combined OASDI trust funds. All he had to do was make use of the link. That source link was made available on the previous comment thread.
As of this evening, I know of four individual who have used the link provided for determining the SSA Investments held at the end of March 2010. None had any problems whatsoever in locating and understanding the SSA data.
Your claim like so many others that you have made is baseless.
Save the “throw the kitchen sink” game for someone else, or hopefully, another blog. Some of you guys are putting on a clown show at this point, and it’s not helping the reputation of Dan’s Angry Bear blog.
Aside from that observation, you have made a few simple math errors which can be cleared up easily with minor effort on your part.
You can use the above link to review the original source data from SSA. I provided it. Similarly, I already provided you with the link that afforded you the opportunity to review the end of year and monthly asset position of the combined OASDI trust funds.
I provided the information and links so that readers don’t have to wait for or rely on the thinking and opinion of others. Look at the SSA source data and draw your conclusions.
This information simply showed the latest transaction history and asset holdings. No one else provided that info to the readers. The SSA source data can be accessed by using the links.
In my judgement, you wouldn’t be making mistakes if you took a few minutes to do some basic research or verification before you write some of your comment posts. I provided the right links with my comment posts. It’s just not hard to verify the info.
Hang in there.
A technical question for Mr. Webb.
You make the good point that all of the assets of the TF are “liquid” in that as needed on a month to month basis Treasury repo’s existing short or long term paper for the Fund. They have been doing this every month for a very long time. This cofirms Webb’s position that this IOU’s at the SSTF are in fact real and they are negotiable (exclusively through Treasury)
We know also know that Treasury pays on its bonds semi annually in June and December. The question to Mr. Webb: Given the foregoing how does the Fund generate the monthly interest income that it reports (other than Dec and June).
The answer is they sell old notes that have high coupons and generate a capital gain. Here is the monthly numbers for 2009: http://www.ssa.gov/cgi-bin/ops_series.cgi
Note that this page shows the interest income for the months. There is always positive interest, even when no interest has been paid.
How does this happen? One must look at the transaction report on a monthly basis. You will see that the Fund sells high coupon notes and bonds on a monthly basis and invests the proceeds in lower coupon paper. This captures a capital gain. The capital gain is reported as interest income.
Two things about this practice:
1) It proves Webb’s point perfectly. The holdings of the Fund are liquid. The Fund redeems old obligations constantly. This is not an issue that we should focus on. The Fund works, the Assets are real, the assets can and are are being sold, there is no reason to doubt that this will continue in the future.
2) The way that the TF manages this process generates current income that should not be treated as current income. They are just reducing the average yield on the entire portfolio by discounting old high yield paper. In the link I provide that “extra” interest income come to about $1b a year. Not a big deal, about 1% of total income. But this is the most obvious example of how the Fund is managing the numbers.
MG it takes quite of bit of hubris to insist that somehow I don’t have the right to decide what is the focus of a post put up by me. Yes the focus is on me, it is my post.
And threatening me against threatening you is pretty hubristic as well. If I decide your posts are not in fact, IN MY SOLE OPINION, related to the subject at hand I have full powers to either edit or moderate your comment out of existence.
Call up Dan and whine again, I don’t care. I no longer find your comments useful in advancing the topic at hand, and do not value your own self-evaluation of the value of your own submission.
If the government cannot make interest payments on its debt they wont be able to pay for SS.
Interest on debt is approximately 500 billion now and anticipated to almost double by 2020, that figure is liable to be off by a significant amount and by a significant time factor.
Government debt is moving by a large extent towards the short end of the yield curve, in other words we are being put on a short leash by our creditors.
These government projections assume an extremely low average interest rate and a spike higher in rates could prove to disasterous.
SS is just part of the overall budget so analyzing SS’s solvency while not taking into account the overall indebtedness is like projecting your ability to pay the water or cable bill while ignoring the fact that your interest on your credit card is slowly creeping to a level that will prevent you from paying ANY bills.
Assets in SS and interest on those assets are merely IOU’s from the government.
I see both arguments made here, “forget about those assets, SS is an insurance policy its pay as you go, those assets dont matter” and then ” dont worry about SS because we have these assets and surpluses”
Not to worry, Ive forgotten about them already, they are liable to prove nonexistant if our creditors lose their “faith” in the “full faith and credit of the USoA”
Which is an outcome that seems fast approaching.
Ok, thanks for the links. Haven’t read them yet, but I recognize some of the advisory reports. Relative to SS fund management, they do read like the fox is guarding the hen house.
I don’t want to make too big a deal about having a real national pension fund (or SWF) is a huge advantage at this point. Clearly many have had a rough ride in the markets starting in, say, 1999.
But I’m assuming they would be managed like a stodgy pension fund, and have rules like fixed income must be AAA rated, equity percentage of the fund is limited, etc…
The reason I think it could be done is the debt ceiling has been increased to include “public debt” plus “intragovernment debt”. I think it’s either the GAO or CBO that insists on that and it may be part of the debt ceiling rules. The debt ceiling was just raised from 12.5T to 14T.
As far as market impact, I’m assuming the Treasury would exchange tradable treasuries for special treasuries and shred the special ones. This would not be a market transaction, but they would need to match up coupons and remaining term somehow, but its just paper and ink so I think that could be done.
As a stodgy pension fund, I’m assuming the fund manager would not immediately dump all the treasuries and buy an oil ETF. But PIMCO is saying this is a rotten time to be a bond investor, which is why I’m not screaming for change right now.
As you point out, the real problem is probably that it’s a worse deal for Treasury, but we know how hard it can be to keep everyone happy with this arrangement. Ergo, I vote to leave it the same, and don’t screw us.
MG calling people liars is violation of the comments policy as well. Something you do to me on a regular basis. Including implicitly in your last sentence.
I have spent the morning discussing you with Dan. As of now you are not welcome to introduce extraneous material to my threads no matter how pertinent you think they are. Links to SSA and CBO documents yes, summaries yes, but extending the scope of the post just because you think it is relevant is no longer acceptable. Your data dump was totally out of scale for what is appropriate for comments, what might have been appropriate is for you to submit it as a guest post to Dan for separate publication.
I have the ability to edit comments for clarity, content, length, or ad homs and from this minute forward will exercise that ability at my own discretion.
This post was intended to answer a relatively simple question about the NATURE of the assets in the Trust Fund, it was not intended as a teaching tool to explain how to data mine the various resources available through the SSA Office of the Actuary. If you would like to establish the equivalent of a seminar series explaining how to access various sources of governmental data and how to extract the data from them, well that may be a valuable product. It just has no place in a series of posts that are using specific data points as illustrations for the purpose of policy development.
I decide what is relevant to my blog posts. Period. And from this point on will not attempt to lecture you on the difference. Instead you will just have to learn by seeing what gets edited out.
On a final note I am glad that four individuals were able to determine SSA Investments as of the end of March 2010. I don’t see that that information is actually useful to anyone, particularly since by the nature of the way that various income streams are allocated to Social Security month over month information will always be somewhat incomplete, for example things like tax on benefits are credited periodically and not steadily but whatever. But that was not the point of this blog post and it is not incumbent on you to decide you can hijack the thread for your own purposes.
Cedric there are several misconceptions in your comment.
One, the Trust Funds are not investment funds, they are reserve funds. Banks don’t keep their mandated reserves in highly volatile investments, instead they have them deposited at low interest rates with the Federal Reserve, as reserves they have to be totally liquid and totally safe.
Two, your point about 12% 1981 Treasuries is odd. Obviously within any asset class if you managed to pick the particular issue that was at the absolute bottom and devoted your entire portfolio to it then chances are you would out perform a more balanced portfolio. But the 12% yield on that 1981 issue was a sign of weakness not strength, betting that its return would be available in every future year that it might be needed would have been fairly foolish. Nobody would or could have put all eggs in that one basket.
Three, the main advantage of Special Treasuries over Regular Treasuries is precisely BECAUSE they are not marketable. A Special Treasury will always maintain the precise value of the bond and the stated yield, it is not exposed to the market in the same way a portfolio of Regular Treasuries would be. As such it is sheltered against times of economic trouble, which is to say the moment that they would be most needed. When do Social Security revenues tend to fall behind Social Security costs? In times of high inflation and/or high unemployment. What is the typical reaction of the bond market in the face of either? A demand for more yield and so a lower price. Is that when you suggest the Trustees should be liquidating a portfolio of Regular Treasuries, by being forced to sell into a bottom?
The functions of a Reserve Fund for a Pay-Go system are different than those of an Investment Fund for a Defined Benefit pension plan, and so vary the proper methods of funding them. Bank of America doesn’t hold its reserves in penny stocks (to take an extreme example).
There are ways that we could increase the yield of the Trust Fund while taking on minimal risk, but simply exchanging Special Treasuries for Regular ones don’t get you off to the races except in the sense it is sending you to make a bet at the pari-mutual window.
You continue to be blind to your own ideological indoctrination. As Bruce has already pointed out my arithmetic “error” is based on your misleading presentation of the data. I repeat, the size of the Funds are not the issue before us. The exact size of the SS Trust Funds is, for the sake of this discussion, irrelevant. The issue is, how does the government control a runaway budget deficiency that Social Security is not the cause of. The point concerning the seperation of budgets, the general from the Social Security program, is relevant. As you agreed, but seem to think that it is not important, the Social Security Funds and cash flows are legislatively OFF-BUDGET. They’re not supposed to be taken into account when the government is describing its general expenditures and receipts to cover those expenditures. Think of the Social Security program as a wholley owned subsidiary of the government, but one which has a distinct investor class. Stop trying to make it appear that it is OK to rob Peter in order to pay Paul.
In 2007 Hedge Fund billionaires paid no FICA withholding tax. When you look at total Federal taxes from all sources it all balances out.
Interesting how the same people who insist that Social Security should just be considered another part of the Federal Budget and claim it should share in any sacrifice are often the same people who never paid a penny in to it.
The rest of your post is just a bunch of Peter G Peterson talking points that have been refuted here many times. In point of fact raising taxes historically has produced more broad-based prosperity and so by most definitions a ‘healthier economy’. The Fifties had its problems but the middle class did pretty well with 90% top rates. On the other hand the Reagan, Bush I, and Bush II tax cuts were immediately followed in time with recessions and the productivity figures in most years since didn’t support the theory that those tax cuts would result in more investment. Instead they financed massive increases in luxury consumption by the wealthy while steadily increasing income inequality.
Some people can and do measure “healthier economy” simply by measures like GDP without considering issues of equity at all. President Bush called them “the haves, and the have mores, or more simply my base”. Har, har, har.
Intergenerational equity is a sham concept based on special pleading. The retirement age will not be raised for Boomers, nor will benefits be cut, instead the Peter G Peterson people suggest that future workers continue to pay the same amount of payroll tax while accepting smaller benefits going forward, there are no proposals on the table that would offset those smaller benefit cuts with less taxes. Nor if you examine it is there actually a savings for future workers, what benefits cuts do, absent an outright change in the law to confiscate FICA for the General Fund is to shift Public Debt FORWARD all to the benefit of capital in the medium term. Benefit cuts simply reduce outflows from the Trust Fund going forward (financed by income tax) meaning that the Trust Fund actually would GROW over baseline, and since Trust Fund Balances score as Public Debt actually INCREASE the debt of your children’s generation. You are being asked to cut your own throat and don’t even know it. A vote to cut benefits is a vote to impoverish Millennial workers in retirement. Heckuva job Gen-X Dad!
The Special Treasuries are no more and no less IOUs as Regular Treasuries. People who insist otherwise are using the kind of stretched legal explanations that would have decisions in Courts with gold fringe flags being invalid. Logic chopping by liars and thieves, unfortunately bought by too many younger workers who have not thought it through.
Otherwise you are just spouting a bunch of discredited supply side nonsense. We know what a tax-based fix to Social Security looks like. It is cheap and easy. Medicare not so much, but then the conflation of the two has always been a cheap linguistics trick.
Finally every post-War President not named Reagan or Bush drove down debt burdens as a share of GDP, and mostly didn’t do it by tax cuts, instead they did it by investments in infrastructure and people, i.e. social spending. The notion that the path to less debt is cutting spending is just not supported by the historical record, instead it matters a great deal on what that spending is focused on and how that effects productivity overall. I get the theory, free market believers think all private investments are inherently more efficient that governmental ones and that all gains from those investments are distributed in perfect equity by the Invisible Hand.
Once again something more suitable to Fairy Books than History Books. In the latter it is clearly shown that Capitalists given […]
The only thing I’d add is that I read in Wiki that the special treasuries are “callable”, unlike real treasuries. So they aren’t necessarily “sold” early with a capital gain (in a long term falling interest rate environment like we’ve had), but are called early at face value.
I don’t know how they are doing it for sure, but that’s what happens in market land with callable bonds.
Yes, well, this is the real problem. I call the Schrödinger’s Cat Economy. We can’t tell if it’s live or dead.
If we find out we do a Greek thing someday and get into an interest rate spiral, the US is Too-Big-To-Save.
The other problem is we can’t tell who gets there first, the US, Japan, or Europe.
Any one will make a splash heard ’round the world.
The cgi-bin links at SSA do not work as regular active links. They’re like the temp urls used for legislation at Thomas. They work fine when you advance to them from a regular link at SSA, but not as direct links for others to use.
You would need to cite one of the two following links for readers and then they will have to enter the time period to display the information:
one needs to look at current interest rates to see the “demand” for investment cash.
MG typically when you see a data table in an MSM publication like Time they simply source it something like (source: Social Security Administration) they don’t provide the link to the specific document. Over the last few years I have put up hundreds of links to the data tables of the Reports and probably dozens of jpg’s grabbed from them, and generally both. Anyone who has followed along, which includes you would immediately recognize that this is an extract from the SS Report. And whether or not Coberly supplied a link to it, all that would have done is pull up the Table, which I had supplied.
And BTW you didn’t supply a link to it either, instead you provide links to others.
And while it is nice that you answer your correspondence, given that none of those correspondents was asking that question of me, maybe because it didn’t actually relate to the post I put up, I am not sure why posting your responses to them here is so self-evidently justified. Why not just reply?
You didn’t bother to supply what I omitted, which would have been a service, but instead hog my thread. Now if you would have proceeded right to the data dump, maybe with an intro saying something like “three people e-mailed me and asked the following question, which I thought was relevant to this post and so I thought I would share my response”, then this conversation would have gotten off to a pleasanter start. Instead you start out with some sort of accusation that somehow I was at fault for not supplying links to something not even referenced in my own post. I didn’t supply a URL to the U.S. Constitution or my favorite pizza joint either.
You’re not my focus.
You don’t own this blog.
Your endless threats against comment posters is well known to others, including those who email and call me.
My comment posts are consistent with Dan’s comment policy. And you are in violation of that policy right now.
This blog’s purpose is spelled out in writing. It’s not about you.
you might also have noticed that in 1940 the SS tax was 1%. today it is 6%. and if people keep on living longer it might go to 8 or even 9 percent. all out of a lot more money that people have.
i have watched people who CHOSE those investments appropriate to their risk profile get very glad they have Social SEcurity when “risk” turned out to mean just that.
you should know that the odds are on your side. but that for about half the population Social Security turns out to be what saves them from poverty that no “potential gain” can ease the misery of.
me, i don’t need to be omniscient, there is history, and people i know personally who have lived through all the ups and downs. nor am i anti choics. i just point out that you have a LOT of money after paying your retirement INSURANCE to invest any way you choose.
If there was some way you could guarantee I wouldn’t have to support you in your old age, or kick your body off my doorstep I’d be glad to excuse you from buying SS.
But the whole problem of living in a country together has been addressed already, and about ten thousand years of history says that the “free to choose, free to be meee” doesn’t work. has never worked. will never work. and for those who can’t figure it out, no government in history has had the patience to listen to their fantasies.
Oddly none of those readers made those comments here. That a post here gets people to ask you questions off line (maybe because THEY don’t want to hijack the thread with off-topic questions) does not mean that the answers to those questions add value to the post.
That the universe of AB blog readers and the universe of your correspondents overlap doesn’t automatically give you unlimited rights of entry to post very long data dumps here in response to offline questions there. Why would you think it does?
thanks. I didn’t want to get between MG and Bruce because I don’t see it adding anything. From my perspective the whole “debate” is beside the point. The Trust Fund is not Social Security. I don’t believe that paying back the money will hurt the economy or the Bond Market specificaly, but if it would, there is always the possiblity of increasing taxes a small amount on the people who got the tax cuts that “created” the debt, or even increasing the payroll tax a small amount to ease Congress’ cash flow problem… and put off the need to repay the debt to another day.
What Social Security does not need is to be “fixed,” turned into welfare by means testing or taxing the rich to pay for it. Or have the retirement age raise, or cuts to benefits that would force a de facto raise in the retirement age.
As another reader pointed out, if we all start living longer healthier happier lives, the retirement age will take care of itself. But imposing an increase in the age across the board long in advance of any actual experience with those longer life expectancies is cynical or stupid and will cause enourmous pain.
Speaking of pain, it pains me considerably to see the conversation go off into entirely beside the point issues… that’s the game the privatizers want us to play. and then having it go all personal just depresses me… even when I am one of the guilty parties.
My opinion rules comment threads on my blog posts.
You want to comment on ‘Dan’s blog’ go to an Open Thread or ask for a Guest Post. And frankly you have zero understanding of how Dan chooses to operate his blog internally, though it is not much your business Dan has chosen to run it as a collaborative project with input from all main page posters and selected others. Think of Dan as Publisher and Editor-in-Chief and the Bears as members of the Editorial Board and you will get a better idea of how things operate behind the scenes.
But the deeper question remains. What real value is added by a simple breakdown of acquisitions/ redemptions? How does this information inform the policy debate? Say as opposed to just a year end summary, which would have been truly useful as an addition to the main post? It is just numbers for the sake of numbers. For example OASI and DI Trust Funds operate separately, your data aggregates the two and so really is not commensurate with the Table above.
MG you have an obligation to provide information in a way that informs. The excuse “well I just dumping a bunch of data and it is not my job to make it intelligible” really doesn’t fly. Jack’s comment to you showed that he had made a natural mistake by adding OASDI to OASI to DI to get $5.1 trillion, largely because your sloppy way of presenting the data made that mistake almost inevitable.
Now if you had inserted a colon after ‘OASDI’ and a plus sign between ‘OASI’ and ‘DI’ you would have made the only useful part of that whole comment actually legible, it then would have looked like this:
OASDI: $2.539tn: OASI $2.342tn + DI $197 bn even better would have been:
OASI $2.342 tn + DI $197bn = OASDI $2.539tn
If your intent was to inform and not just show off your data mining skills.
“In 2007 Hedge Fund billionaires paid no FICA withholding tax.”
“Interesting how the same people who insist that Social Security should just be considered another part of the Federal Budget and claim it should share in any sacrifice are often the same people who never paid a penny in to it. “
IT IS just another part of the Federal Budget, insists got nothing to do with it.
“The rest of your post is just a bunch of Peter G Peterson talking points that have been refuted here many times.”
Dont know who this guy is not that it matters because he is clearly made of straw.
“In point of fact raising taxes historically has produced more broad-based prosperity and so by most definitions a ‘healthier economy'”
Dont worry we will be seeing everything from vat taxes to capital controls to mandatory investments of IRA and 401k’s into government annuities (IOU’s again) so if you think moderate tax increases will solve these problems we should be in good shape with the massive tax increases that are sure to come soon. I suspect even these taxes will be too late.
“The Special Treasuries are no more and no less IOUs as Regular Treasuries.”
They are both in fact IOU’s backed by the increasingly shaky “faith” in the USG to issue more of same, so I guess you are correct
“Finally every post-War President not named Reagan or Bush drove down debt burdens as a share of GDP, and mostly didn’t do it by tax cuts, instead they did it by investments in infrastructure and people, i.e. social spending”
Dem vs Rep nonsense, both parties have pushed us into this debt based credit driven crack up boom, it began in 1971 so I guess you can blame Nixon, he was a Rep so its all good, just keep the blinders on whenever Obama decides to deliver yet another pallet of money to Lloyd Blankfein and the boys down on the Street and you will all right.
Economists with political leanings one way or the other are not to be trusted as far as I can tell and since we are talking about debt I cite Krugman and others insistence that 120+ debt to GDP ratios dont matter because we were able to lower them after WW2…..well duh..every other manufaturing center in the world was in ruins so naturally all that deficit spending didnt become malinvestment and in fact became an advantage…..I site this example because I suspect its an argument that goes over well here in regards to the debt and therefore SS……”no problem, pile it on and we will grow into it”….provided we win WW3 that is.
Who is the moderator? Identify yourself when you delete comments.
Krasting well other than replacing the word ‘sell’ with ‘redeem’ I don’t disagree with your first part.
But I think you are confusing two different operations. Or perhaps more. First there is a distinction between ‘accrual’ and ‘credit’. As I have suggested before perhaps a better tool to track actual Trust Fund operations is via the Treasury Department and not SSA, they are the ones actually handling the transactions. http://www.treasurydirect.gov/govt/reports/tfmp/tfmp.htm Trust Fund Monthly Reports. If you do you will see that Treasury Reports two balances for each fund each month with the difference mostly (but not entirely) do a lag between when interest accrues to the Fund and when it is actually credited in the form of a Special Treasury. When the Trust Fund is in overall surpluse neither the accrued interest or its ultimate Special Treasury is in a cash sense “generated” out of anything, instead they are simply created out of whole cloth at rates set by the market and then frozen in place. If Treasury rates are higher in 2006 than they were in 2007 then the whole family of notes and bonds that will be retired is replaced by a whole new family of newly created ones which across the family will have higher rates than the ones before. Because of the effect of rolling and that each year’s family will have a range of maturation dates the overall effect is smoothed out, but it cannot be that taken as a whole it is just a matter of replacing high coupon bonds with lower ones, over a period of years where rates on the 10 year are going up year over year the Trust Fund will end up with a higher range of yields from top to bottom. For example if I look at the 2004 Report and the same table cited in the main post I see bonds ranging from 3.5% to 9.25%, so so far your thesis holds, but ultimately real rates will move up and the range of bonds will move with it and you will get something like that of the 1996
http://www.ssa.gov/history/reports/trust/1996/tbiic2.html where the range is once again at 6.25% to 13.75%
http://www.ssa.gov/OACT/TR/TR04/VI_cyoper_history.html#wp125301 Let me post and go on, there is a lot in your comment.
Identify the comment post(s) that you claim that Coberly posted which include “links to the Report”.
If you can’t do that, withdraw your false claim.
It’s not your thread. The blog belongs to Dan. Dan provides comment threads for main post at HIS blog. Not your blog.
So I am not at all sure we are looking at capturing a capital gain, or whether that term is even appropriate.
Let me take a simplified example and try to think this through. Right now the DI system is flat out negative, it is not only using all interest to pay current benefits, it is also redeeming its principal to the point that its overall balance is falling year over year. What this should mean is that all notes and bonds that are coming due in 2010 are going to be redeemed and not replaced with anything either higher or lower coupon, instead it kind of notionally sits there as a credit which Treasury draws down by paying out benefits using dollars borrowed from the Public Markets. The rates on that money borrowed would seem to have no relation to the value of the bonds redeemed, if your current cost of borrowing is at 4% and you are redeeming a bond yielding 3.5% well that is just the way it goes.
But either way as long as their is a Trust Fund balance there will be SOME interest accruing, even if it is immediately flowing out the door as benefit payments financed by money borrowed at a higher rate. So for example the latest numbers on DI from Feb on the balance sheet on page 5
ftp://ftp.publicdebt.treas.gov/dfi/tfmb/dfifd0210.pdf shows $1.6 bn in interest accrued on $200.6 bn in assets for an interim balance of $202.2 even as the final balance shows the total assets unchanged at $200.6 bn still. Meaning there was no reinvestment at all for this month, there was no spread to capture in the form of capital gains/interest going from higher to lower, there not being any lower coupon bond at all.
When the DI Trust Fund goes to exhaustion, as it will if not fixed, the very last bond in the portfolio will still be earning its little bit of interest which will be a straight out obligation on the General Fund and so not ‘generated’ by anything
I am no more accountant than I am economist, but having played with these numbers for years, it just seems you are forcing investment derived concepts on something that is a much different beasties.
You don’t own this blog, Webb. You don’t control the readers who visit Dan’s Angry Bear blog. You don’t have that kind of imaginery power.
The number of participating commenters at Angry Bear is down. Many regular commenters have stopped participating on this blog for reasons that are well known to others. Dan, the blog owner, is aware of the situation.
Your personal attacks are in violation of Dan’s published comment policy. It’s not your personal blog. You are required to follow the same comment policy as Dan has applied to all blog participants.
This is not your blog. You are required to abide by the comment policy that Dan established for all blog participants. You are in violation of that policy, having made some false claims and initiated personal attacks on this comment thread.
Your personal attack launched on this comment thread is out of line. Your continued remarks could be forwarded in an email. But you apparently lack the foresight to see the advantage of level of communication. In my judgment, you’re busy embarrassing Dan, the blog owner.
The value of understanding the most current record of redemptions in relation to purchases of special securities is clear to many people. Krasting has pointed out some key features related to this issue. Others including the Administration and CBO have indicated that the current situation will involve more redemptions. The SSA record indicates that lower yield Federal special issue certificates and bonds are generally redeemed first. It’s clear what the SSA record shows.
I presented the data exactly in the same manner as does the Social Security Administration. I did not modify any data. None.
I provided the link to the SSA data source that any individual could use to verify the data. Anyone can verify the data and method of presentation employed by the Social Security Administration.
Your personal attack is in violation of Dan’s Angry Bear blog comment policy.
There was a time when the SSA purchased marketable Federal securities as well as special issue bonds and certificates. But flipping the entire porfolio holdings to marketable securities at one shot would be a headache for Treasury’s efforts to manage financing needs.
You’re correct about the debt ceiling. I do expect, though, that throwing that many Federal securities at the market in one slug was cause the yields to rise substantially. As such, the debt ceiling would have to be raised again. I should have expanded on that point.
You have no idea what my ideology is. None.
I am already on record at this blog stating that I support Coberly’s approach to any needed funding increases.
The data I presented from the SSA is identical to the presentation of such data at the SSA. Visit the website via the link that I provided and verify that fact.
On to your next point:
Whenever the U.S. Department of Treasury is requested to redeem special issue securities that involve the transfer credit of cash available for SSA usage. Should the SSA be projecting a net cash flow shortfall for any given fiscal year, the redemptions have an impact on Treasury’s potential need to borrow funding from the marketplace.
A review of Treasury’s actions to date for FY2010 funding needs of the U.S. Government indicates that deficit spending is well underway at this stage. Hence, Treasury is borrowing large sums of money in order to keep the U.S. Government and all its entities afloat. While the SSA programs are off-budget, any current net cash shortfalls require the Treasury to add to the level of borrowing from the marketplace.
If the Government decides to limit deficit spending, then redemption of SSA special securities will ultimately impact the level of funding for operation of discretionary programs or require additional revenues from whatever sources that the Government may chose to pursue.
The Government will continue to support all mandatory funding programs absent any changes in Federal law, but will have to increase deficit spending, reduce funding for discretionary programs, and/or increase its available revenues for overall operation of the Government.
Moreover, the rising level of Federal marketable debt increases the interest costs to the operation of the General Fund which also impacts the level of funding for operation of discretionary programs or forces an increase in deficit spending.
Just because the operation of the SSA programs are off-budget does not mean that the lack of SSA OASDI net cash surpluses will not affect the General Fund, discretionary programs, and Treasury operations on the market. The lack of SSA OASDI net cashflow has a direct impact on the General Fund, discretionary programs, deficit spending, and Treasury activities in the market.
The outlook beyond fiscal year 2020 is rather astonishing. The lawful need of funding the mandatory programs above projected net cashflow positions, whether by redemption of special issue securities or lack of funding by existing program assessments (taxes, fees, et al), is nothing to ignore. Absent substantial growth in deficit spending, the Congress is faced with a combination of choices – increase available revenue streams, reduce or eliminate discretionary spending programs, or a combination thereof. It’s not more complicated than that.
The Congress has to decide what to do and vote on it, regardless of whether we agree with such decisions or not.
I don’t think you have understood MY point about the Trust Fund… but don’t worry about it. It doesn’t matter.
can’t help myself. i don’t know much about cats, but it always seemed to me Shrodinger’s cat was misunderstood. We can’t tell if a quantum event occurs until “we” measure it (detect it,) The dead cat (or nuclear explosion, depending on the version of the story you heard) has surely detcted the “event.”
whether we have detected the dead cat or not. i would go so far as to suggest that a quantum “event” is self detecting. we don’t know when an electron is emitted. we do know when it hits the detector. that’s the event.
greed is good for them… in the short run.
with enough greed they put us back in the middle ages. maybe still good for them since it turns out even a rich man can’t eat all that much, and what they really like is power.
thanks for endorsing my approach. it was not at all clear that’s what you were saying.
there is no doubt that SS cash flow has a direct impact on the General Fund. the question has always been how should that effect be handled.
failing to repay the Trust Fund is not a moral answer, i suspect it is not even a legal answer. But Bernanke has told the Congress, in this context, “I’ts only the law until Congress changes the law.”
That suggests to me an intent to steal the money from the people who were told they were paying for their own retirements.
And given the whole context of the Social Security “debat” it seems clear to me that their goal is not even so much to steal the money as it is to use the deficit as a smokescreen to cripple Social Security. This has been their goal for a long time and they have used every “emerging situation” as a basis for rationalizing a need to “fix” (destroy) Social Security.
It is a sad comment on democracy that “the Congress has to decide…regardless of whether we agree…or not.” But the fact that so much money has been spent on lying to the public makes me think that whether we agree or not must have some relevance to what Congress decides.
Here are your “combinatioin of choices”:
increase revenue streams. yes. raise the marginal tax above 100k to start to pay down the deficit. and/or increase the payroll tax to borrow more money from the workers and begin the tax increase that will ultimately be necessary to pay for their own retirements.
reduce…programs. yes. but not Social Security which pays for itself.
I have no disagreement with your approach. I endorsed when it wasn’t popular.
The Congress must honor its mandatory program obligations. How many changes occur with regard to the specifics of those mandatory program obligations remains to be seen.
What the Congress will do on all other matters regarding sustaining the Federal budget and existing discretionary programs remains to be seen.
We should know more in a year or so. And it’s likely that Congress will go through the process again later this decade. The projected outyear deficits beyond FY2020 are something to behold. The discretionary programs are in serious trouble unless major changes occur.
“…failing to repay the Trust Fund is not a moral answer, i suspect it is not even a legal answer. But Bernanke has told the Congress, in this context, “I’ts only the law until Congress changes the law.”
Let’s not forget the real implication of any change to the status of the Trust Fund that would revise the original intent of its assets. If the Trust Fund assets are in any way modified, redirected or in any way not utilized for the purpose of supplementing Social Security program obligations it means in effeect that that portion of all prior FICA contributions that created and added to the Trust Fund balances were little more than an income tax supplement paid by the middle class. A sham. A scam. It’s not just about the sanctity of the Social Security funding streams. It’s about being hood winked into contributing a disproportionate share of income taxes over a 30 year period. In fact it’s about having been taxed twice on that share of FICA that was excess for the purpose of Trust Fund development. Once as income tax and a second time as FICA for the purpose of funding the general budget rather than Social Security.
And it is about time you made some clear statement as to your opinions and conclusions regarding the necessity of Social Security program sanctity. Though now it is not entirely clear how one reconciles your conclusions with all of the lists of numbers you thought necessary to post on these various threads.
I think Shrodinger was mixed up, and I certainly wouldn’t use any animate being as the target in my thought experiment.
But it’s a “tree falling in the woods” question. I don’t think they gave the answer to that one in my symbolic logic course I took back in college. They just ask the question.