Now that we Amis have a nice tax cut, how to reduce spending to cover it?

[JohnT]

Not exactly a rigorously thought-out rebuttal, Kid.

[Imran Siddiqui]

Yeah, that settled it Kidicious

MtG is totally correct on that score. Check out the long term success for the markets.

[Kidlicious]

Return is related to risk. You can say that something is lower risk, but that's just your own perception.

[MichaeltheGreat]

Originally posted by Kidicious
Oerdin,

Check this out.

SSA FAQs

That's great.

Is there really a Social Security trust fund?


Yes. Presently, Social Security collects more in taxes than it pays in benefits. The excess is borrowed by the U.S. Treasury, which in turn issues special-issue Treasury bonds to Social Security. These bonds totaled $1.4 trillion at the beginning of 2003, and Social Security receives more than $80 billion annually in interest from them. However, Social Security is still basically a "pay-as-you-go" system as the $1.4 trillion is a small percent of benefit obligations.

The "trust administrator" (SSA) loans your money to an affiliated entity (the Treasury) in a non-arms length transactions, at a below market interest rate (less than the rates paid for that week's issue of 30 year T-bonds, less than the 13 week T-bill rate, and every one in between) and does so while the trust is technically insolvent ("as the $1.4 trillion is a small percent of benefit obligations.")

If you used the common legal definition of trust fund, the Federal government could be sued by a class consisting of all payees and beneficiaries for causes of action including fraud, conversion, and breach of fiduciary duties, and should be criminally prosecuted.

If a private trust administrator did that, he'd be facing prison time and any lawyer would be looking to make a plea bargain rather than taking all the heat at trial, with no chance of acquittal.

[MichaeltheGreat]

Originally posted by Kidicious
Return is related to risk. You can say that something is lower risk, but that's just your own perception.

Let's say it's my "perception" that the risk the US government will legislatively dance around what would otherwise be a default on SS obligations by altering the time and manner in which benefits are payable is a helluva lot higher than the risk of the US triggering a global financial collapse by defaulting on Treasury bonds.

Besides, leaving the State of California aside as a big default risk, there's a ton of high-rated tax exempt munis and special purpose district bonds that could be mixed in an aggregated tax free bond fund that would significantly exceed the yield you'd get from a mixed spread of US treasuries.

edit - you can objectively verify it. Past bond rates for US treasuries can be researched, and you can take the SS formulas, plug in contributions at any level, and compare the returns. The whole reason the government is so attached to SS and propagandizes it so much is that they tax your money to create below market transfers for their benefit, then give you back some of your money years later, like they're doing you a favor. They do this so well, they get people to ardently buy into it and get all adament that "no way we're going to let you get away with not screwing us silly."

[Kidlicious]

It's not the same thing as a private trust. They aren't doing it for profit, or did you think they were?

[MichaeltheGreat]

Originally posted by JohnT


Hey! I'd like a piece of that action! Where can I sign up?

Hey, it can be structured to have a nice return with the vast majority of risks fully hedged out. Coffee is certainly volatile enough. The only drawback is that Starbucks stock only weakly responds to coffee price movements, since it's still growth and consumer spending driven. Once store growth slows down a lot, unless they expand their non-coffee product lines, their stock will be a lot more responsive to coffee commodity movements.

[Kidlicious]

Originally posted by MichaeltheGreat
edit - you can objectively verify it. Past bond rates for US treasuries can be researched, and you can take the SS formulas, plug in contributions at any level, and compare the returns. The whole reason the government is so attached to SS and propagandizes it so much is that they tax your money to create below market transfers for their benefit, then give you back some of your money years later, like they're doing you a favor. They do this so well, they get people to ardently buy into it and get all adament that "no way we're going to let you get away with not screwing us silly."

Fundamental diference between conservatives and the rest of us is that conservatives believe that govt is some monster which must be destroyed to save us. I'm not making that assumption, but you might impress some others with that . These transfers are no threat to us. It's all done for our benefit. The govt isn't stealing from us. They are providing a valuable service and doing it better than the private sector can.

[MichaeltheGreat]

Originally posted by Kidicious
It's not the same thing as a private trust. They aren't doing it for profit, or did you think they were?

That doesn't matter. States and special purpose public agencies have non-profit trust funds for a number of purposes, which all have arm's length and fiduciary standards. SS is the only claimed "trust" which is exempt from those standards, so to call it a trust totally stretches the legal definition to create a one-off example of a totally unique trust which has no features in common with any other type of trust, which all share that common set of features.

It's analogous to a Papul Bull (appropriately named in this case) in the Spanish colonial days in Latinamerica, which proclaimed that a capybara was a type of fish, so it could be eaten on Fridays and during lent, because fish was a lot harder to come by.

Despite spin from official authorities, a capybara is no more a fish than the SS "trust fund" is a trust.

[MichaeltheGreat]

Originally posted by Kidicious


Fundamental diference between conservatives and the rest of us is that conservatives believe that govt is some monster which must be destroyed to save us. I'm not making that assumption, but you might impress some others with that . These transfers are no threat to us. It's all done for our benefit. The govt isn't stealing from us. They are providing a valuable service and doing it better than the private sector can.

They're taking your money, loaning it to themselves at half the minimum market rates to fund their own pork projects and lack of fiscal discipline, then threatening tax increases and benefit deferrals because otherwise they won't have enough money to give you back what you put in?

Why don't they just give you the option of putting that money into US Savings Bonds or T-Bonds, at prevailing market rates? Because that would be borrowing your money and paying market rates for it, not taking it in the guise of giving you a "benefit" some decades down the road, by giving you back some of your own money.

And I'm only "conservative" to you lefties. Most of the conservatives consistently dismiss me as a lefty, and I'm a lifelong third generation plus Democrat. (Descended from a New Dealer political dynasty, no less ) I just recognize fiscal bull**** for what it is.

[Kidlicious]

Originally posted by MichaeltheGreat
That doesn't matter. States and special purpose public agencies have non-profit trust funds for a number of purposes, which all have arm's length and fiduciary standards.

The difference is that your going to get your social security at the cheapest cost possible. There is no risk to you and no one is ripping you off .

[MichaeltheGreat]

If I was allowed market rate returns on those Treasury loans, I'd be subject to no more risk and get my "benefits" for half what I have to pay.

Since I'm paying at least double the market value of what I (may) eventually receive, I'm being ripped off by definition. (semantic argument killer: I will receive something, assuming I don't croak beforehand {another SS scam}, the operative question is how much will I receive and when will I first receive it?)

Yes, young Skywalker, I know it's hard to realize what you've believed in is really the dark side of the force, but it's not too late - join the rebellion.

[Kidlicious]

Originally posted by MichaeltheGreat
loaning it to themselves

They do this in our benefit. Otherwise our taxes would be higher. If the money is there we should use it. You want to pay higher taxes and use the trust fund to make risky investments? What happens if the trust fund loses money. Then you will have to pay more taxes. It's working well the way it is. There is no scam.

[Kidlicious]

Originally posted by MichaeltheGreat
Since I'm paying at least double the market value of what I (may) eventually receive, I'm being ripped off by definition. (semantic argument killer: I will receive something, assuming I don't croak beforehand {another SS scam}, the operative question is how much will I receive and when will I first receive it?)

True, but you have to look at it how it is designed, as social insurance. It's not really an investment. It's insurance. Some people don't recieve benefits.

[MichaeltheGreat]

Originally posted by Kidicious
They do this in our benefit. Otherwise our taxes would be higher.

Or they'd have to evaluate the true cost of money, take current "transfers" out of calculating deficits and surpluses, and the increased awareness of real costs would alter spending priorities, force increased fiscal discipline, decrease tolerance for bloat and waste, etc. with a gradual lowering of the net cost of government services.

If the money is there we should use it.

I think that's pretty much the view Jimmy Hoffa, Allen Dorfman and Joe Lombardo had about the Teamster's Pension Fund too.

You want to pay higher taxes and use the trust fund to make risky investments?

Now you're spinning my statements into strawmen. Higher taxes is a function of a lot of things, including the state of the economy, fiscal discipline and spending priorities. Being able to "borrow" captive money at below market rates in a disguised tax isn't one of them.

What happens if the trust fund loses money. Then you will have to pay more taxes.

The so-called "trust fund" will make more money if it's removed from the Treasury's ability to tap it for below market interest internal loans-on-demand. If that income is in turn taxed in the same manner as present SS benefits, under the same criteria, then there will be more tax revenues collected due to the higher gains, not less. Do the math.

It's working well the way it is. There is no scam.

Since you trust the government so much (everything they're doing is for our benefit, right? They wouldn't lie. ), then I guess you have to take the SSA at it's word when they say the system will have to increase taxes and/or cut benefits and/or defer the earliest date at which you can receive benefits.

If the government you trust so much says benefits will go down and taxes will go up, that's no worse a result than you claim will occur with privatization.