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Social Security To Start Cashing Its IOUs

From an unfazed Associated Press:

Social Security to start cashing Uncle Sam’s IOUs

By Stephen Ohlemacher, Associated Press Writer Sun Mar 14

PARKERSBURG, W.Va. – The retirement nest egg of an entire generation is stashed away in this small town along the Ohio River: $2.5 trillion in IOUs from the federal government, payable to the Social Security Administration.

It’s time to start cashing them in.

For more than two decades, Social Security collected more money in payroll taxes than it paid out in benefits — billions more each year.

Not anymore. This year, for the first time since the 1980s, when Congress last overhauled Social Security, the retirement program is projected to pay out more in benefits than it collects in taxes — nearly $29 billion more.

Sounds like a good time to start tapping the nest egg. Too bad the federal government already spent that money over the years on other programs, preferring to borrow from Social Security rather than foreign creditors. In return, the Treasury Department issued a stack of IOUs — in the form of Treasury bonds — which are kept in a nondescript office building just down the street from Parkersburg’s municipal offices.

Now the government will have to borrow even more money, much of it abroad, to start paying back the IOUs, and the timing couldn’t be worse. The government is projected to post a record $1.5 trillion budget deficit this year, followed by trillion dollar deficits for years to come.

Apparently, the Associated Press is just noticing these minor details.

Social Security’s shortfall will not affect current benefits. As long as the IOUs last, benefits will keep flowing. But experts say it is a warning sign that the program’s finances are deteriorating. Social Security is projected to drain its trust funds by 2037 unless Congress acts, and there’s concern that the looming crisis will lead to reduced benefits

More than 52 million people receive old age or disability benefits from Social Security. The average benefit for retirees is a little under $1,200 a month. Disabled workers get an average of $1,100 a month

In the short term, the nonpartisan Congressional Budget Office projects that Social Security will continue to pay out more in benefits than it collects in taxes for the next three years. It is projected to post small surpluses of $6 billion each in 2014 and 2015, before returning to indefinite deficits in 2016

Social Security will also collect about $120 billion in interest on the trust funds, according to the CBO projections, meaning its overall balance sheet will continue to grow. The interest, however, is paid by the government, adding even more to the budget deficit…

The national debt — the amount of money the government owes its creditors — is about $12.5 trillion, or nearly $42,000 for every man, woman and child in the country. About $8 trillion has been borrowed in public debt markets, much of it from foreign creditors. The rest came from various government trust funds, including retirement funds for civil servants and the military. About $2.5 trillion is owed to Social Security

What a splendid time to introduce a new entitlement many times more massive and costly than Social Security.

What could possibly go wrong?

This article was posted by Steve on Sunday, March 14th, 2010. Comments are currently closed.

18 Responses to “Social Security To Start Cashing Its IOUs”

  1. Rusty Shackleford says:

    Can’t say we didn’t say “I told you so”.

    Knew it was coming. But, if you ignore it, it’s not there, right?

    Or was it, “It’ll be someone else’s problem” when the time comes?

    Or, “All that money not moving? We’ve got to DO something with it, just as long as it helps me get re-elected”

    Mark Twain said, “If the opposite of ‘pro’ is ‘con’ then clearly the opposite of ‘progress’ must be ‘congress’ “.

    Sooner or later, you run out of other people’s money–Margaret Thatcher.

    I’m 48….I pay huge sums from my paycheck into SS. I will never see a dime, or they’ll offer me some craptacular substitute. Shades of the disappeared GI Bill replaced by “VEAP” come to mind.

    Hurray for me. I will be long gone by then, moved to Australia, although more socialist than here, they will stay relatively sane about it. Plus, I can still hide in the Outback there.

    Watching this great nation being flushed down the loo with people like Biden and Pelosi’s hands on the handle is just so discouraging.

    Bloody shame.

    • JohnMG says:

      How do you think I feel, Rusty? I’ve been self-employed for about thirty of my forty-five year work career. Meaning I’ve paid both halves of my benefit contribution. Yet I don’t draw any more monthly than an employee will. And I have to pay taxes on it (taxes) again.

      Thanks, Uncle Sugar.

    • proreason says:

      This isn’t the one to worry about Rusty.

      Medicare will bust the country long before Social Security.

      And Obamy scare long before Medicare.

      But at 48, the age at which you can collect is likely to rise, if the country survives.

      The coutry is the thing to worry about.

    • Petronius says:

      Rusty: “I will be long gone by then, moved to Australia . . . .”

      Australia makes sense at your age. We have been looking at Northern Ireland.

      Our neighbors saw the handwriting on the wall and moved to New Zealand last summer.

    • Rusty Shackleford says:

      Seems awful to even contemplate it, doesn’t it? And what would I do with my beloved dog?

      JohnMG, I hear you and I understand. My mom worked until she was 70. A great many people are going to be left high and dry and that is unconscionable. I worry not just for myself but for all people of this nation. The entitlement mentality is catching up to us whether we subscribe to it or not as we all have been paying for it most of our lives.

      Social Security was the big boondoggle money-maker in the 30’s onward as most people didn’t live past 60 and you couldn’t collect til 65. Who would have realized that we’d outlive our pensions? Many were against it for that very reason back when the democrats did their first big grab.

      However, I am seriously considering what to do as I believe that this nation is going to be transformed into something really ugly and soon. Whether we get rid of the boy and the socialist congress is immaterial…the damage being done is a huge blow to our economy and it’s all intentional. Although the motivations are different. The congress is socialist and wants power and believes only they can make those heady decisions and what’s right for the people. The boy is just angry and what’s happening fits into his plan of bankrupting us and whether he’s dictator for life or gets run off to Zimbabwe, he’ll have plenty of cash to live on that he’s stolen or been given by suckers. His scorched earth policy is starting to really show and it appears that he will stop at nothing to gut any cash reserve (watch what happens to our 401Ks) and empty any vault, and destroy any form of income. All under the lie of “what’s best for the people” and the most horrible thing? There are many who buy into the lie.

      As was said in Star Wars, “This is how liberty dies; With thundering applause”. And it’s sickening.

      I read the lefty blogs on occasion and the brain-damage is spine-deep. They firmly believe that “universal healthcare” is THE answer. But, for me, I say, “Then what was the question?” So wrapped up in a pseudo-surreal Star Trek episode of their own imagination they cannot for one minute think about how this is going to be paid for, what it really does and who it really harms. No, to do that would indicate some measure of meanness. Cruelty…and inhumane nature.

      I’m hoping with everything I know how to make sure this steaming cesspool of a bill dies and every time it’s brought up it dies again and again and again.

      Hillarycare died…but here it is again. And this must die..but it won’t end. They will keep bringing it back again and again and again and we’ll all be living that movie “Groundhog Day”. Or, that less-than-B-flick from the 50’s, “The Thing That Wouldn’t Die”.

      The left is painting that they have the votes to pass it….the newspapers (even the loose-lefty ones) are painting that they don’t.

      Who to believe? It matters not since I have no say…but…will eventually intentionally break the law to get my insulin and testing supplies. As well as my thyroid medication (I get really angry when my thyroid is not under control…You wouldn’t like me when I’m angry)

      But Pro is right, it’s not so much SS that’s going (gone) broke that’s the main concern as the fact that these idiots have let the wind come in and blow all the money away to who knows where and it’s not coming back. Hyperinflation is about to hit and the news is ho-hum….life-as-usual here.

      I always knew that the give-away programs could not be sustained forever…but I never imagined that we’d be fast-tracked into insolvency in such short order.

  2. jobeth says:

    This is where one generation turns against the other. Neither are at fault (with the exception of the high power policy players in DC).

    Nearly everyone alive now has paid through the nose now.
    Both my generation, the pre baby boomers (I am one year prior), and the baby boomers like you Rusty… and you John who paid both ends of the bill.

    So through all the avoidance by our reps and now the “bring it home” moment by O’Balmy and his progressives…its going to be hard not to lose this country’s autonomy. With the likes of China and other players, we seemed doomed. It’s going to be an uphill battle for generations to come.

    It would have been bad enough if just this “chicken came home to roost” but O’Balmy’s drunken spending and credit borrowing has sealed the deal for them (the progressives).

    I can see really tough times ahead. Being American I know most of us are fighters but it is this horrible debt hole we are now in that is sinking our boat.

    We MUST keep working and fighting to right this ship but I have never been this afraid for our country.

    As a senior, I fully expect the younger generation to view me as expendable…no matter that I have worked long and hard all these years and paid my own way.

    However, in the kill or die world we are facing, it’s inevitably that the “me” generation will view us oldies and dispensable drags on their society.

    Sadly even you Rusty at a young 48 will be viewed the same by the youngsters.

    But what else would we expect. They’ve been told for years they are entitled and now O’balmy wants to give the oldies a pill to kill the pain as we all fade out of the way.

    Sorry to be so dismal but this is what I see today.

    We are on a cusp right now and I don’t have a clue whether we are smart enough and moral enough and tough enough to fix this whole deal.

    I just pray for us day by day.

  3. Petronius says:

    This AP reporter is on the right track but is somewhat optimistic.

    “Now the government will have to borrow even more money, much of it abroad, to start paying back the IOUs . . . .”

    Whether the US can continue to borrow money from foreign investors is highly problematic. The Chinese stopped buying US Treasuries five months ago. We owe China $780B, or over $10,000 for each American family.

    Due to the shortfall in foreign investment, the Fed had to create $270B in new money in 2009 to support unfunded government debt. (That is $270B in new money that we know about so far; the true figure could be higher.)

    “The government is projected to post a record $1.5 trillion budget deficit this year . . . .”

    The projected deficit for this year is closer to $1.6T. Last year Nerobama-Pelosi added $1.4T to the deficit, for a total of $3T in two years. The deficit for last month (February) alone was $221B. At that rate the deficit for 2010 would be $2.65T. Fortunately February was a short month.

    “More than 52 million people receive old age or disability benefits from Social Security.”

    This figure is going to balloon after amnesty.

    “The national debt — the amount of money the government owes its creditors — is about $12.5 trillion, or nearly $42,000 for every man, woman and child in the country.”

    The debt is fast approaching $13T and by the end of the decade will explode to over $22T. Obamacare would add another $2.3T to this number. This is $75,000 for every American man, woman, and child.

  4. Petronius says:

    SG: “What could possibly go wrong?”

    1. The US government is broken. The American political system is broken. All branches of the Federal government, with the exception of one-half of the Supreme Court, are in the hands of criminal robber gangs who are radical nihilists, revolutionaries, and totalitarians.

    2. Unemployment is officially at or near 10 percent, but the real level of unemployment is 20 percent.

    3. Massive government spending and excessive “stimulus” by Nerobama-Pelosi Democrats may have been boosting the economy, but ultimately there will be a high price to pay for all this spending, for the misallocation of precious, dwindling resources, and for the resulting debt. As Secretary of State Hillary Clinton testified to Congress on Feb 25th, the US will face “a moment of reckoning.”

    4. Current US debt is unprecedented.

    5. The debt is fast approaching $13T, or 91 percent of GDP. This is a red-flag level, because it means that the economy cannot grow fast enough to cover the amount of annual interest that the government’s debt will generate. This means a vicious downward spiral in the American standard of living. It means austerity as a way of life.

    6. Unless there is an economic boom of miraculous proportions, this level of debt is unsustainable. And the recent economy is nowhere near peak performance.

    7. Nerobama-Pelosi added $1.4T to the debt last year and will add $1.6T more this year. The deficit for last month (Feb) alone was $221B. By the end of the decade we will add another $9T at least, and the debt will be $22T. Obamacare would add about $2.3T more to this figure. The annual interest on the debt will be about $700B, or more than the current defense budget.

    8. This US debt level amounts to about $75,000 for each American man, woman, and child.

    9. The robber gangs in government have been relying chiefly on foreign money to finance their deficit spending and debt accumulation.

    10. China is the biggest lender, and we owe China about $780B. That means each American family owes China more than $10,000.

    11. But China has been selling US Treasuries for the past 5 months.

    12. Due to the shortfall in foreign investment, the Fed had to create $270B in new money in 2009 to support unfunded debt. That is how a Ponzi scheme works.

    13. Bond investors are now demanding a higher interest rate to keep lending the government money.

    14. An annual deficit equal to 5 percent of GDP is considered another red-flag level, indicating that government spending exceeds the nation’s optimum level of economic growth. This means that the economy at peak performance cannot grow fast enough to cover the interest on the accumulating debt, and consequently that hard times lie ahead.

    15. The annual Federal deficit now stands at 11 percent of GDP. This is a record held by only four countries, including Greece. Greece is bankrupt and there are riots in the streets.

    16. The Fed is holding down short-term interest rates, but it is without power to control long-term interest rates, which are poised to climb.

    17. In about 10 years, the interest on the national debt and on Social Security will take up 80 percent of all of the government’s income. The remaining 20 percent will have to cover everything else the government does, including spending for national defense.

    18. The Fed will try to keep interest rates low for as long as possible to avoid exploding interest payments on the government’s growing debt obligations.

    19. Inflation will eventually result. In fact, there are signs (as every shopper knows) that inflation has already started.

    20. Big changes in the economy take much longer to unfold than most people expect. But sooner or later, big debt is going to catch up with reality. And the consequences will be severe.

    21. A new mega trend in interest rates and bonds may now be unfolding, with the 30-year rate hovering around 4.65 percent. A sustained increase above 4.65 percent would signal the beginning of a new mega trend. As interest rates increase, bond values are going to get hammered.

    22. High interest rates and the drop in bond values will result in a credit crisis.

    23. The credit crisis will impair the ability of American businesses and State governments to function.

    24. Presently the US dollar is being replaced as the world’s reserve currency.

    25. Gold is in a secular bull market that began 9 years ago.

    26. In the 4th Quarter of 2009, the Soros Fund quietly doubled its position in the gold ETF (NYSE: GLD). This happened while George Soros was publicly proclaiming that gold was in a bubble.

    27. Gold is still in the early stages of a secular bull market. Other precious metals, oil, and strong foreign currencies (Canadian dollar, Australian dollar, Swiss franc) are in major uptrends.

    28. At present, the US tax base depends on a relatively small number of Americans in the upper classes.

    29. The wealth of the American upper classes is insufficient to support the massive Nerobama-Pelosi deficit spending, the national debt, and the interest owed on that debt –– debt that has already been incurred, even without added future debt for Obamacare and other Democrat spending programs.

    30. Future Democrat politicians will demonize the wealthy and big business (Big Oil, Big Banks, Big Pharma, Big Med Insurance, etc.) in ever stronger terms. We may also expect the Democrats to pit poor against rich, Main Street against Wall Street, moochers against producers, losers against achievers, nonwhite against white, immigrant against native, female against male, young against old. They have been working this formula successfully for decades, and there is certainly no reason to expect they will do any less in the years to come.

    31. If allowed to hold onto power, Democrat governments will attempt to confiscate the wealth of the upper classes, including capital invested in American businesses. That is like eating your seed corn.

    32. Wealthy American taxpayers may be driven to emigrate out of the country, or their wealth may be driven underground, or into foreign safe havens. Big businesses (and jobs) may be driven out of the US to friendlier, more stable countries.

    33. Hence one of the very first steps taken in the early days of the Nerobama Administration was an attack on Americans with foreign bank accounts.

    34. Inevitably the lower classes will also be called upon to make huge sacrifices. Their sacrifices will not be enough.

    35. Several States are already in serious financial trouble. In addition to California, these include New Jersey, New York, Kansas, Illinois, Michigan, and Florida. Other States are currently unable to pay tax refunds to their citizens. By the end of the decade, nearly all States will be facing bankruptcy.

    36. At some point, States and municipalities will default on their muni bonds.

    37. At some point, the Federal government will either default on its debt or resort to monetary inflation (or both).

    38. If the Federal government defaults, its Treasury bonds will become worthless. Pension funds and insurance companies (which are heavily invested in Treasuries) will fail. Retirements and savings will be wiped out. Wealth will be destroyed.

    39. Inflation will result in a monetary crisis.

    40. After the 1980s inflation in Argentina, 100B pesos were worth only 1 peso. To put this in perspective, Bill Gates’ fortune of $60B would be worth only 60 cents.

    41. As this process unfolds, the American economy and society will undergo tremendous strains. Things are going to get ugly.

    42. This process will unfold slowly, but the results will endure for decades.

    • proreason says:

      You missed a big one.

      Wild animals are attracted to the smell of blood

    • freelancer says:

      Petronius–I see that #37 on your list is that the Fed will either default on its debt and/or resort to monetary inflation. I have been convinced since the takeover of this Republic by the Obama progressives that the reason they are unconcerned about flinging around the wealth in our treasury is that they have no intention of paying one particle of a cent back. They will default either all at once or gradually . In the end the people of America will be in no better shape than those unfortunates of other countries who have been enslaved by other power hungry despots. The one bright spot in this scenerio is that the mighty will fall along with the not so mighty and they will be far less prepared and will still be thinking they will be spared. I want to see all of those involved in the process of destroying this republic, from uninformed or greedy voters to political opportunists, to foreign interlopers, living under bridges in crates and standing in lines for their scanty bowl of gruel. I know that American exceptionalism will restore our country because the American fighting spirit is on fire and will prevail. It will be a long slog but maybe the whole freedom fight is necessary to clean out the governmental and cultural rot that has built up here over many years. We have taken so much for granted, and rightly so, because free people cannot imagine living another way. We will now have to work hard, and probably fight hard as well, to hold on to our homeland, America. But we will do it. #41 ends with things about to get ugly and that is something the Health Care bill battle has assured. I think this administration has no clue as to just how ugly that will be.

    • Mithrandir says:

      This is yet another bubble that will burst under its own unsustainable weight.

      Yet, who racks up money without a clear budget? Who got us into our current monetary crisis? Who is responsible for mismanagement of our country?

      The same smooth talking lawyers we love to vote for year after year after year, that have no experience on how to do anything but talk their way out of their ignorance on every subject other than law. It’s just sugar on the ears to hear them redirect arguments, focus on their opponents foibles, blame other people, but they are experts in NOTHING.

  5. U NO HOO says:

    So, what’s new?

  6. U NO HOO says:

    Maybe I got this at S&L, but here it is again, maybe:


    The truth, the whole truth, and nothing but the truth.

    $29 billion deficit? Pay it out of TARP funds.

  7. BigOil says:

    The idea of our federal government issuing IOU’s is a joke. With the power to legislate and coerce, an IOU is meaningless.

    Expect shortly to get the double whammy of means testing and removal of the cap on the payroll tax. Consistent aspects of our federal government operating outside the bounds of the Constitution are the desire to punish the responsible and confiscate our liberty via taxation.

  8. mr_bill says:

    I will be more than happy to never take a dime out of Social Security and allow them to keep all the money they have taxed out of me in return for never having to contribute another dime. Of course if we all did that the Social Security system would collapse and we would have to…God forbid….be responsible for ourselves. We all know that liberals don’t want that to happen, then government couldn’t be our “savior.”

  9. Mithrandir says:

    Time to institute the new AMNESTY program! No, not that one, the amnesty for those people who refuse to purchase health care, and our new future ‘criminal class’ of broke taxpayers. I wonder if the police, federal marshals, and IRS agents are really going to throw people into debter’s prison for not purchasing health care, or are they going to side with the people?

    This is why I don’t see much difference between the parties, they have both played the game and bankrupted our country, while kicking the can down the road. The Democrats weren’t the only ones in power. Some Republicans take a stand on spending, then they buckle when the media starts hounding them, so, they are all to blame.

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