Social Security funds

Michael Hansen’s (10/14, Letters) says that the “government spends 100 percent of the Social Security funds it receives and promises to pay all future Social Security payments out of future tax collections.” Not exactly.

FICA taxes go into trust funds, out of which come benefit payments and administrative expenses. The excess is invested in government bonds. These bonds pay interest regularly back into the trust funds.

To say that these bonds are worthless is the same as saying that the treasury bonds that private investors hold are worthless or even that every $20 you have is worthless, because “nothing backs them up.”

Well, the full faith and credit of the United States back them all up. The system works without gold bars or overflowing vaults because America works. You can be assured that if America doesn’t work, the stock markets won’t work, either.

Anyone who considers the full faith and credit of the United States to be worthless has far more to worry about than Social Security.

Max J. Skidmore
Overland Park

Comments

[pmcw]

Yes, Mr. Skidmore is right; the bonds in the Social Security Trust Fund are in fact backed by the full faith and credit of the U.S. government. What he's totally missing, however, is what "backed by the full faith and credit of the U.S." really means. Possibly a course in economics or even mathematics would help him better understand this situation.

Both writers agree that surplus Social Security funds are spent by congress. During the last couple of decades, congress has spent roughly $2.4 TRILLION of these excess funds.

Both writers are correct in stating this surplus money taken from the Social Security Trust fund is replaced by Treasury Bonds. As this pertains to Social Security, the correct term, according to the U.S. Treasury Monthly Treasury Statement, is "Special Treasury Bonds;" Special because they are not able to be traded on the open market (they are non-negotiable).

The one point of disagreement, which is the worth of these bonds, is rather interesting - neither party has it right. When it is stated that something is backed by the Full Faith and Trust of the U.S. government it means it is backed by U.S. taxpayers. This means these bonds that replaced the surplus money we sent the government to support our retirement was taken from us and replaced by a bond (an IOU) written by congress that we will have to repay in the future. In other words, the bonds (IOU's) in the account are debts issued by us to us.

I would love to debate this so-called expert on the realities of Social Security, but I doubt he would except such an invitation. So in the mean time, if you want to know the truth about how Social Security is managed, please see the following link:

https://www.nextinning.com/socialsecurity2.php

[Marctnts]

Actually, I took a course on social security from Mr. Skidmore at UMKC. He was EXTREMELY knowledgeable on the subject, and had even published a book on it.

I may not have agreed with all he said during the class, but trust me, he did "have a clue" on the subject.

[kcstar_is_one_sided]

Max -

You don't have a clue.