Topic: "Treasury Securities" vs. US National Debt (Read 3384 times)

Yes and there is a commercial deficit in addition of the budget deficit

Some positive will unset the negative : big innovative companies and hard workers are in the US, a lot of capital (Gold, Bitcoin foreign stocks ect.) are in the hands of americans, Oil ect.

I agree. Social security should not be used as a vehicle of growing your money, but instead is designed to be a system to guarantee you a minimum amount of income in your retirement years. Workers should still put additional money into savings/investments to fund the majority of their retirement costs.

The way the law is setup today is that the average person will receive more in benefits then they pay in FICA taxes over the course of their lifetime. This means that under current law workers will collectively collect more in benefits then they pay in taxes. This is why it is so important to reform entitlement programs in the US.

Your statement that it is impossible to collect more in benefits then taxes are paid in (collectively) is correct for every other insurance contract, but is not true for Social Security. This is because of the massive amount of taxing and borrowing power of the US government and the money taxed and borrowed can be used to fund Social Security. Now the reason why this is not a good idea is that allocating these resources towards entitlement programs will crowd other things that need to have money spent on like national security and infrastructure.

It is impossible for the workers collectively to get more from SS than they collectively pay into it.   SS is more like an insurance program than a retirement plan.  On average the premiums paid for life insurance will always be more than the net present value of the policy, if it wasn't the insurance companies would go bankrupt.   Most people still buy life insurance (and car insurance, and homeowners insurance) knowing that in pure dollars and sense they are "net negative".   The purpose of insurance isn't to provide a gain but to manage risk.   In the case of homeowners insurance the couple thousand dollar premium is a cost that can be paid but for most people the loss of a couple hundred thousand dollar house is one that can't.   You can't hedge a risk and profit at the same time.  It would mean the counterparty is taking risk and a guaranteed loss as well.  Nobody would do that.

The problem with SS is that their "accounting" would be simply illegal for any other entity and for good reason.  If a life insurance company had similar ratio to projected future revenue and obligations it would have been seized by the authorities, wound down, and the operators put in jail for insurance fraud decades ago.   The future projected revenue collected does not cover the future benefits promised. On average the benefits have to go down or the revenue has to go up or the whole thing collapses eventually.   The more time that goes by with an imbalance the worse the required changes will need to be.

The point of having SS is in the name, it is "social security"; meaning it gives you the security of having somewhat of a standard of living for when you retire. You may or may not end up with less then you paid in FICA taxes, but the average person should end up with less; if you live longer then the average person then you would end up receiving more. SS is also a forced savings in a way which is another point of SS as most people do not have the maturity to save enough and constantly in order to be able to retire at some point in their lives and the people that do will often take money from their savings to pay for things they do not need.

Programs like SS and Medicare are very important so that everyone has at least some minimum of retirement benefits and medical coverage.  You don't want 80-year-olds to have to work because they have nothing.  However, you are certainly correct that politicians (not just liberals) don't use tax money the way they should when they get more of it.

This is exactly true. Programs like social security and medicare force people to become dependent on the government while far from enough taxes are collected to pay for these programs. Liberals then will want to increase taxes on the rich aka successful in order to pay for these social programs. But instead of using the money to cover the costs of social programs, the liberals will use most/more then all of the new tax revenue to pay for even more social programs and the cycle will just continue.

I'm talking about from the worker's perspective.  If I can end up with more money by just saving what I would have contributed, then what's the point in having SS? 

Yes, you bring up a good point about the long-term issues with population growth having to level off at some point.  But things could still be balanced if they're set up right.  Means testing could also help.

One of the biggest problem of most western countries is demographic : aging population with  too generous systems, less saving, big government, big taxes

I would disagree that it should work this way. The social security administration obviously has administrative costs that would need to come out of total benefits paid. Social security has been setup very much like a pyramid scheme but this is a very bad way of doing it (only a liberal would think this is a good idea). The thing is that the population boom that we saw after WW2 when soldiers started to come home and a lot of people started to start families at roughly the same time was not sustainable and was not sustained. As a result we will (and are) having a concentrated number of people stopping paying FICA taxes and start taking social security benefits at the same time. A very major problem with having SS be a massive pyramid scheme is that the earth has limited resources and can only handle a limited number of people living on it at one time (based on things like ability to house people, ability to grow enough food, ability to produce energy, total water supply) so population growth cannot last forever. Social security should be setup so that the average person draw slightly less then total taxes paid over their career plus inflation in total benefits. Some people would obviously draw more because they last longer, and some people would draw less because they die at a young(ish) age.

I would hope that if you pay in X over your career that you'd get more than X+inflation out (interest might be pushing it).  Otherwise there's little point.  But as long as the numbers are calculated correctly, that doesn't *have* to be a problem.  The population *should* be growing such that there will always be more workers paying in than those receiving benefits.  But with people having fewer kids now, that really messes things up.  Like I said, it's supposed to be a pyramid system.  And it works fine as long as the base is much wider than the top.

Here's a good article about SS fund.  http://www.ssa.gov/policy/docs/ssb/v70n3/v70n3p111.html

3.3 workers today pay for 1 retiree.   The issue has to do w birth rate decline and boomerrs retirements.   Proposal is increase on SS  taxes so that 2 workers pay for 1 retiree

You pay in "x" over your career in taxes, however under today's system you will end up receiving more then "x" in benefits over your retirement even after accounting for inflation and interest. In other words you end up taking more then you pay in taxes over your retirement. This is obviously not sustainable and changes need to be made.

Yes, you pay into the Social Security system: you pay X today so that (hopefully) you will get Y tomorrow.  I said nothing about having a Social Security account.  There is (or at least used to be) a trust fund that held all the saved money from the system.  I believe, however, that it's been mostly drained due to improper management of the system.

Social Security is intentionally designed to be a pyramid scheme.  If all the numbers were actuarially adjusted to properly balance the inputs and outputs, it would work well.  But with longer life spans and an aging population, benefits have effectively become too generous.  But that still doesn't mean that the benefits each person has earned to date should be diminished.

You do not pay into any system. Social security is setup so that the taxes you pay today pay for today's beneficiaries of the entitlement. You do not have any kind of "social security account" that increases in value as you pay more in taxes, although this would be a much better system then what we have today.

When social security was first implemented, the average person would live to be around the age that they would be able to retire with "standard" benefits (not early retirement, not full retirement) so they would receive benefits for a very short amount of time, however today, people will most often live for decades after they can receive even full retirement benefits. As a result people are able to draw much more benefits then what they "put into" (aka paid taxes for) the system. This is obviously not sustainable.

I'm sorry to jump all over this, but the words "entitlement reforms" make me mad.  First, I very much dislike how people use "reform" to try to make screwing over people's lives (seriously in some cases) sound like an improvement.  And second, "entitlement" is a poor way of describing things like Social Security and Medicare because of all the connotations the word has.  I think they are better described as paid-for benefits.  You pay into the system to earn a benefit in the future.

That said, I don't fault you personally for using those terms as, unfortunately, they've caught on.

This still does not account for the unfunded liabilities. Our country needs serious entitlement reforms in order for us to be able to continue paying our bills.

Actually, the money spent by the Fed on assets was essentially "printed" though technically "created" by Bernanke pressing a button.  This is why so many people thought there would be a lot of inflation right now in the USA.  However, the velocity of money dropped and so inflation has yet to show up.  This has enabled left of center economists like Paul Krugman to claim that more of the same is needed to create full employment.

Unfunded liability such as social security and pension are not counted toward the National debt figure.

The money need to be printed in the coming years will be staggering as baby boomer starting to retire.

actually they are, now that we know what they represent.
http://www.treasurydirect.gov/NP/debt/current
http://www.fms.treas.gov/finrep13/note_finstmts/fr_notes_fin_stmts_note12.html
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http://www.fms.treas.gov/finrep13/note_finstmts/fr_notes_fin_stmts_note11.html
http://www.fms.treas.gov/finrep13/note_finstmts/fr_notes_fin_stmts_note15.html
http://www.fms.treas.gov/finrep13/note_finstmts/fr_notes_fin_stmts_note17.html

Wow.  Just wow.  I couldn't believe this so I had to look it up.  They actually get a few million dollars a year in gift money.  Who actually believes this does any good?

These numbers are all totally unverifiable. 

Just so you know: I also take gifts and I do acvept Bitcoin

But the programs can be changed via changing the law so that the beneficiaries of the programs would receive less benefits, and/or need to wait longer to be able to receive the benefits. The amount they are to receive is not set in stone, as most social programs have changed many times.

The government will still need to eventually pay this debt to the beneficiaries of the various social programs. I would argue that this is still debt owed to the american people, not the individual programs.

The amounts held on the balance sheet of the fed is essentially the government loaning money to itself so, in theory this is not really money owed. The process for paying this money back is more or less the "left hand" giving money to the "right hand"

The difference is mainly from deficits in entitlement programs. This will likely be reversed when reforms are brought to social security, disability, medicare and medicaid programs.

This explains it.

Remember a lot of US Government "debt" is held in trust funds such as the Social Security Trust Fund or (now) on the balance sheet of the Fed.

Well as I pointed out it is $914B not $914T or $194T. It aligns pretty closely with the amount of net increase in treasuries in 2014 per the report at the end of Q2.

http://www.treasurydirect.gov/govt/reports/pd/pd_debtposactrpt.htm

2014 YTD Issues:$51,715 Billion
2014 YTD Redemptions: $50,821 Billion
2014 YTD Net Change: $894 Billion

Yes, this is the same response I'm having.

Can anyone explain the $194 number or can I write it off as random BS?

I dont know where they got $194T but treasurydirect.gov says $17.6T outstanding treasuries as of 6/30/2014

That website doesn't work on my tablet.   Couldn't find the $194T anywhere else

http://www.treasurydirect.gov/govt/reports/pd/pd_debtposactrpt.htm

No idea where they got that number from but it is $914B not $914T.  Maybe it is the total treasury securities issued this year?  Remember debt is continually coming due and is paid by issuing "new debt.

http://www.federalreserve.gov/releases/z1/current/accessible/l209.htm

None of what I saw there answered my question at all...

Wouldn't they just be swapping it for treasury's already on the balance sheet of the Fed though? Or can the Fed randomly just create treasuries too (I thought they could only do that for federal reserve notes).

Not even tax deductible.   Just a gift.   LOL

From the Treasury website


 

http://www.investopedia.com/articles/04/011404.asp

http://www.treasurydirect.gov/govt/resources/faq/faq_publicdebt.htm

The national debt is the sum of the budget deficits through the years. The government funds the deficit by selling treasuries and then using the cash to pay for government spending.

US Treasuries can also be issued to help banks and other institutions with market liquidity. For example suppose Goldman Sachs might have a "billion dollars" worth of shitty derivatives on its balance sheet which nobody wants (this means their true value is significantly less than a billion dollars). GS can swap their toxic shite for US Treasuries which were issued for sole purpose of facilitating this trade. The shitty derivatives stay on the balance sheet of the Fed and are never sold or spent so they don't add to the national debt.

Here: http://www.usdebtclock.org/

National Debt:                $17T
Treasury Securities:     $914T

AFAIK "Treasury Securities" are a synonym for "national debt." Then why are Treasury Securities like 50x the National Debt? Am I missing something?