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Social Security Trust Fund

What is the nature of the Social Security “Trust Fund”, into which surplus S.S. moneys flow? If it’s nothing but I.O.U.‘s I find that scary.

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Why?

Posted by: Mr_Blue on 2010 02 13

Yes, “trust fund” has been used to make the budget deficit not look so big. As a result Treasury Dept. has exchanged the surplus in the trust fund for special treasury bonds - “non-marketable”. But its still a bond - a legal contract.

Now, if you BELIEVE that U.S. gov’t can become insolvent and default on its obligations then you will be scared. But U.S. gov’t CANNOT go insolvent and it will not default on its bonds. Why? Because of something called a fiat currency system. There a lot of people, particularly economists, who don’t understand this.

For more information on Social Security - from someone who hates the idea of privatization:

http://bruceweb.blogspot.com/2008/08/angry-bear-social-security-series.html

Thank you for the link.

Posted by: Escortrider on 2010 02 13

I spent two hours reading there about Social Security and I’m not finished yet. While the actual mechanics of the Trust Fund may not be terribly complicated, the questions about the effects, the what if’s, the how likely is…, what are the implications of… are complex and nuanced. And some very bright and knowledgeable people do not entirely agree. While I now take back my word “scary”, let me say I find it “worrisome” to think about the possible strain on the Federal General Fund when the Trust Fund finally begins to be redeemed after the Social Security cash flow turns negative in a few more years. I agree the Trust Fund is a legitimate debt of the U.S. and will be repaid just like any other debt. So when people (either out of ignorance or to advance their own agenda) talk about S.S. going “broke” or “bankrupt” I agree those are scare tactics. Thanks for your patience in helping to educate us. I wish all your sister websites had half as much.

Uncertainty

Posted by: Mr_Blue on 2010 02 13

The future is not very clear so I understand the anxiety. We have to understand the motivations for those who say Soc. Sec. is bankrupt. Some have are sincere in their concern but MANY want to privatize Soc. Sec.

Here is the other thing - good/solid economic growth tends to soothe anxiety. Our focus should be sustainable real economic growth. It will require changes to policies but we are capable of sustainable real economic growth - at least that is what history tell us.

Social Security Trust Fund

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