#1 - SSTF assets are invested in Treasury securities, not the other way around. The SSTF can't, by law, resell the bonds it invests in and it can only invest in Treasury securities. The general revenues of the United States pays interest on the bonds held by the SSTF.
#2 - The securities held in the SSTF are regularly cashed in as they reach maturity, then new ones are purchased. There have been a handful of years where payroll taxes could not cover paid out benefits and bond redemption revenues were part of paid out benefits. I believe 2010 is the first calendar year in somewhere around thirty that this situation happened. It remains to be seen, when the books close, whether or not 2011 will be such a year.
Arguments that refer to "debt" miss the point, in my opinion, on addressing what issues exist with the solvency of the SSTF. (And those issue are relatively modest compared to, oh, the current unemployment rate, for example. If employment were back at proper levels, payroll taxes would be back to a point where no one could rationally worry about the solvency of the SSTF.)
Another conservative solution is to raise the cap on FICA taxes. Numbers I've seen suggest that the cap needs to be raised as little as $10,000. (That's little 'c' conservative, not what people who call themselves "conservative" would advocate. Those people measure solutions in megatons.)
The real danger is that continued payroll tax cuts mean that more other federal revenues are necessary to repay interest on securities held by the SSTF and that would lead (is leading) to changing the perception that SSDI benefits are actually an entitlement. (In the correct sense of the term: an earned benefit.)
I understand and agree with all that -- I think that's the same thing I just said (including raising the cap), except for one thing:
"The SSTF can't, by law, resell the bonds it invests in."
Technically, you're correct, but I believe that technicality is equivalent to selling. If a bond matures, and the treasury issues a new bond to the public to get back the money to pay the mature bond, at the end of the process, we have less debt held by the SSTF and more debt held by the public, but the same gross debt modulo interest, which would have had to have been paid anyway, surplus or deficit. The only difference lies in maturity date and interest rate, and that isn't relevant for the discussion on hand. [There's a bit I deleted about the SSTF getting better interest rates than the public, but it's not relevant.]
Yes, I'm a physicist, and you caught me saying "Look at this spherical cow." Still, I think it's conceptually equivalent.
PS The arguments about the debt aren't about the solvency of the SSTF -- they're about the debt held by the public growing. They say that SS is taking in less money than it is spending, which causes debt held by the public to grow. This is all technically accurate.
#2 - The securities held in the SSTF are regularly cashed in as they reach maturity, then new ones are purchased. There have been a handful of years where payroll taxes could not cover paid out benefits and bond redemption revenues were part of paid out benefits. I believe 2010 is the first calendar year in somewhere around thirty that this situation happened. It remains to be seen, when the books close, whether or not 2011 will be such a year.
Arguments that refer to "debt" miss the point, in my opinion, on addressing what issues exist with the solvency of the SSTF. (And those issue are relatively modest compared to, oh, the current unemployment rate, for example. If employment were back at proper levels, payroll taxes would be back to a point where no one could rationally worry about the solvency of the SSTF.)
Another conservative solution is to raise the cap on FICA taxes. Numbers I've seen suggest that the cap needs to be raised as little as $10,000. (That's little 'c' conservative, not what people who call themselves "conservative" would advocate. Those people measure solutions in megatons.)
The real danger is that continued payroll tax cuts mean that more other federal revenues are necessary to repay interest on securities held by the SSTF and that would lead (is leading) to changing the perception that SSDI benefits are actually an entitlement. (In the correct sense of the term: an earned benefit.)
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"The SSTF can't, by law, resell the bonds it invests in."
Technically, you're correct, but I believe that technicality is equivalent to selling. If a bond matures, and the treasury issues a new bond to the public to get back the money to pay the mature bond, at the end of the process, we have less debt held by the SSTF and more debt held by the public, but the same gross debt modulo interest, which would have had to have been paid anyway, surplus or deficit. The only difference lies in maturity date and interest rate, and that isn't relevant for the discussion on hand. [There's a bit I deleted about the SSTF getting better interest rates than the public, but it's not relevant.]
Yes, I'm a physicist, and you caught me saying "Look at this spherical cow." Still, I think it's conceptually equivalent.
PS The arguments about the debt aren't about the solvency of the SSTF -- they're about the debt held by the public growing. They say that SS is taking in less money than it is spending, which causes debt held by the public to grow. This is all technically accurate.
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