further devaluing SS trust funds
Topics: Welfare
01 Dec 2006
From: Ervan Darnell
The existance of the SS trust fund doesn't rescue the program or answer
the objections to it, but when we last discussed this there was some
question of whether or not the trust funds meant anything at all.
There is blog entry in Catallarchy today [1] pointing out that the SS
trust fund bonds are substantially different than market bonds in 3
ways: 1) not market priced, tradeable, or convertable, 2) never really
mature, and 3) are redeemed based on SS shortfall only (the blog
explains why this makes them weaker). The government seems to agree
these are accurate [2]. This adds weight to the idea that the SS trust
fund doesn't really exist at all, but is just an accounting gimmick to
make the SS deficit seem less than it really is (as part of it is now
reported as general debt instead). At the end of the day, it's an
indirect route to increasing the payroll tax and simultaneously make it
more progressive, while doing nothing to stabilize the system. Indeed,
it may actually destabilize the system further as it causes the true
deficit to be understated and lower the urgency of addressing it.
I wouldn't say completely because in theory the SS trust fund is going
to pay for Medicare (the government's second biggest expense), which
reduces borrowing now, and thus future income taxes can pay SS benefits
via retiring SS trust fund bonds instead of being spent directly on
Medicare.
[1]
http://catallarchy.net/blog/archives/2006/12/01/why-trust-fund-bonds-are-indeed-different
[2] http://www.ssa.gov/OACT/ProgData/fundFAQ.html
_______________________________________________
Ragnar mailing list
Ragnar@ragnar.kelvinist.com
http://ragnar.kelvinist.com/mailman/listinfo/ragnar
Home