Re: Bush busts Social Security with massive deficits

From: Dave Thompson (davethompson_at_cmeforit.us)
Date: 09/26/04 

Date: Sun, 26 Sep 2004 11:53:19 -0700

In news:PuD5d.14760$Gk4.4066@fe1.texas.rr.com,
Igor <jjweatherby@houston.rr.com> pecked:
>
> Here is how it works. First look at your paycheck. You will see three
> taxes.
>
> 1. FICA This is the tax that is used for the general budget. This is
> the budget that is in deficit.
>
> 2. Social Security This is a completely seperate budget. All social
> security taxes go to the social security budget. This is the budget
> that is in surplus.
>
> 3. Medicare is combined with Social Security.
>
> Now the confusion. Deficit number are calculated as the sum of all
> budgets. This is incorrect. Currently the Republicans want this
> because it makes the deficit look smaller. Democrats go along with
> because they can spook people about Social Security. Here is how the
> budgets are handled. When the general fund deficit is FICA -
> expenditures. When expenditures are greater than taxes a deficit
> results. This is much larger than reported. Why? Simply because
> Social Security is a seperate budget. The Social Security surplus is
> locked away and never used to finance a deficit.

(SNIP)

All very nice and all very wrong.

Social Security does not have money in its trust fund. It has special
government bonds that must be redeemed by the Treasury in the future. By law
all monies collected by Social Security are IMMEDIATELY deposited in the
Treasury for current government operations and Social Security receives
non-negotiable bonds.

A better analogy:

Your employer takes your 401k funds and gives you an IOU to be paid in the
future. In the present your employer uses those funds for current
operations. The IOU's are a liability against the employer's balance ***.
If your employer goes bankrupt there will be no money to fund the IOU's.

So goes Social Security. There are NO, repeat NO tangible assets in the
Trust Fund. There are only IOU's in the form of non-negotiable government
bonds. 

--
Dave Thompson
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