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guy44 · 02-07-2005, 11:03 PM

flstf -

The real value of that 80% in 50 years or so is greater than the real value of 100% of benefits today. This is assuming that the way benefits are adjusted over the years is through wage-indexing - as they are done now - rather than fixing them to inflation, as Bush wants to do. Obviously, if you tie benefits to inflation, everything else being equal, the real value everyone recieves in benefits will never change. To be honest, I'm not 100% sure how wage-indexing does what it does - but what it does is slowly increase the real value of benefits so that 50 years from now, even if you receive only 80% of total benefits, you are still getting more than someone gets today with 100% of benefits received.

As far as I know, and as best as I can explain it, the Trust Fund works like this:

In the 1980s, everyone knew that as Baby Boomers became Social Security eligible, there wouldn't be enough people paying into the system to pay for the huge amounts of people getting money from the system. So in 1983, Reagan and Congress rose taxes a bit so that every year more money than needed would be raised for Social Security so that there would be extra to go around by the time the Boomers were retiring. A lot of Trust Fund money has been lent to the federal government in exchange for Treasury bills which Social Security can redeem with interest when it needs to. Sometime in the next 20 years or so, it will need to.

To use your example, I save $100 extra dollars a month for 10 years in anticipation of purchasing an especially nice car. However, in that time I don't really need that extra $100 a month, which I'll call my Car Fund. So over those ten years, I'll lend my money in exchange for the promise to get it back with interest. This is more or less what a bank does - you lend them money, which they use for capital investments, their own loans, etc. - so lets say I put that $1200 a year for ten years in the bank. At the end of the ten years, I want to buy that great car. So I withdraw my Car Fund money from the bank, with interest.

This is more or less what Social Security did, except instead of a bank they lent the money to the federal government and the federal government promptly spent that money on programs. So the question is: when the time comes, how will the government be able to pay back the Trust Fund money that they have already spent - with interest, no less?

Bush's plan appears to be to default on that debt - essentially, to simply not pay it back. The plan of action I proposed would be to repeal Bush's tax cuts, which would provide the federal government enough money to pay back Social Security the money it needs. And if Social Security gets that money back, then there won't be any crisis.

I hope I've explained that correctly and satisfactorily...

02-07-2005, 11:03 PM	#6 (permalink)
guy44 Somnabulist Location: corner of No and Where	flstf - The real value of that 80% in 50 years or so is greater than the real value of 100% of benefits today. This is assuming that the way benefits are adjusted over the years is through wage-indexing - as they are done now - rather than fixing them to inflation, as Bush wants to do. Obviously, if you tie benefits to inflation, everything else being equal, the real value everyone recieves in benefits will never change. To be honest, I'm not 100% sure how wage-indexing does what it does - but what it does is slowly increase the real value of benefits so that 50 years from now, even if you receive only 80% of total benefits, you are still getting more than someone gets today with 100% of benefits received. As far as I know, and as best as I can explain it, the Trust Fund works like this: In the 1980s, everyone knew that as Baby Boomers became Social Security eligible, there wouldn't be enough people paying into the system to pay for the huge amounts of people getting money from the system. So in 1983, Reagan and Congress rose taxes a bit so that every year more money than needed would be raised for Social Security so that there would be extra to go around by the time the Boomers were retiring. A lot of Trust Fund money has been lent to the federal government in exchange for Treasury bills which Social Security can redeem with interest when it needs to. Sometime in the next 20 years or so, it will need to. To use your example, I save $100 extra dollars a month for 10 years in anticipation of purchasing an especially nice car. However, in that time I don't really need that extra $100 a month, which I'll call my Car Fund. So over those ten years, I'll lend my money in exchange for the promise to get it back with interest. This is more or less what a bank does - you lend them money, which they use for capital investments, their own loans, etc. - so lets say I put that $1200 a year for ten years in the bank. At the end of the ten years, I want to buy that great car. So I withdraw my Car Fund money from the bank, with interest. This is more or less what Social Security did, except instead of a bank they lent the money to the federal government and the federal government promptly spent that money on programs. So the question is: when the time comes, how will the government be able to pay back the Trust Fund money that they have already spent - with interest, no less? Bush's plan appears to be to default on that debt - essentially, to simply not pay it back. The plan of action I proposed would be to repeal Bush's tax cuts, which would provide the federal government enough money to pay back Social Security the money it needs. And if Social Security gets that money back, then there won't be any crisis. I hope I've explained that correctly and satisfactorily... __________________ "You have reached Ritual Sacrifice. For goats press one, or say 'goats.'"