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on social insecurity [Feb. 3rd, 2005|04:02 pm]
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I took a browse on the data available at the SSA to see if i could so my own figuring out.

From the graph of the data I retrieved, one can see a couple of relative percentages which were computed. Here are my explanations of the trends we see.

From before 1957 to sometime around 1975, OASDI ( old-age, survivors, and disability insurance), the core of social security, took in about as much as it needed to run the program. Sometimes in the black, sometimes in the red.

From about 1975 to 1990, centered around 1983, something happened and the program became significantly more expensive to administer, and began an extended period of being in the red (more expenses than income).

After 1990, the program stabilized, and in fact began to run an excess of about one-fifth of receipts over this period.


SSI payments, which amount to 12.4 percent of income (6.2% from employees, 6.2% from employers), were used to purchase goverment debt, which has returned an average 5% dividend over the course of the nineties based upon the graph.

if one-fifth of this is "excess" put into savings, earning 5%, is not used to pay current participants, that means that 2.5% of your payroll tax for the last decade and a half has been "spent" on other government programs, besides social security, and an IOU is printed for that balance. That 2.5% amounts to roughly one-eighth of a trillion dollars, every year, for which we "owe ourselves" 5% interest.

The IOU, an account which should be used to ensure the solvency of the program, was about 20 billion dollars in the fifties and sixties. It exceeded one trillion dollars in 2000 and continues to rise. It is "invested" in government- the ability of the government to tax its citizens.


The democratic half-truth is that the program, based on the last 15 years, has performed pretty well, so don't mess with it.
The republican half-truth is that if the program is one fifth more expensive to taxpayers than it needs to be, that fifth should be "given back", here in the form of "personal accounts".

Both views are right, and both views are wrong, based upon the same fulcrum: the future will change soon, with more people retiring and living longer than ever. Therefore, the performance won't continue along the same lines, so we can neither afford to keep things the way they are nor "give back the excess" today.

Therefore, IMO, current plans and political stances from both sides of the aisle are inadequate.


What I want to know: what happened in 1975, and what happened in 1990, or thereabouts, that caused these dramatic inflections? If I had to guess what program reversed the trend of 1975-1983 and brought things under control by 1990, it would not be unreasonable to suggest "looks like reaganomics". I think if the democratic party wants to win the argument that reaganomics is the ill and not the salvation, they have a pretty wide swath of history that must be rewritten.

(Deleted comment)
[User Picture]From: hbergeronx
2005-02-03 09:58 pm (UTC)

the dipping is not so much the problem

It is entirely sensible that a surplus, if one needs to exist, be invested in government debt, because this is a very minimum risk investment. It's more a problem if/when the debt can't be repaid, or if there isn't a good alternative investment. If you need the surplus, to save for the rainy day, it has to be invested somewhere, either in government debt or personal debt. If the money can't be repaid, it doesn't matter what you've invested it in: the money just never will materialize when the rainy day comes.

If th4e money isn't turned into governemnt debt (bonds), where do you invest it? If you don't invest it, why maintain a surplus?
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(Deleted comment)
[User Picture]From: hbergeronx
2005-02-03 10:30 pm (UTC)

Re: the dipping is not so much the problem

You can't "save" without "investing". Even if you put money in the bank in a savings account, it's then invested in things like mortgages and govenment bonds.
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[User Picture]From: hbergeronx
2005-02-03 10:40 pm (UTC)

expanding on that point

We're talking about a trillion plus dollars. When you put aside that money for later, you don't just put it into gold bars under a rock: it's a piece of paper that says "this much money is owed to social seurity", which is then used to buy some tangible investment such as (not gold, but ) government bonds, mortgage notes, stocks, foreign currencies, whatever. When you push a trillion dollars into something, it stimulates whatever you push it into. If you push it into government bods, it makes it easier for the overnment to spend money. If you push it into mortgages, it makes it easer for people to get lower interest loans on their house. That's *stimulus*.

The problem is not so much that the average joe is going to waste it needlessly- the problem is more that the government will use it as a low interest loan to buy stupid things like tanks and foreign elections: i.e., the government (when you buy savings bonds) can waste it just as easily as your average joe.
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