STOCK MARKET WATCH - Thursday, 5 January 2012

[Demeter]

5. The Washington Post Doesn't Understand Social Security

http://www.alternet.org/newsandviews/article/756169/the_washington_post_doesn%27t_understand_social_security/#paragraph6

See if you can spot the big mistake (giving them the benefit of the doubt) in this Washington Post story: Payroll tax cut raises worries about Social Security’s future funding :
http://www.washingtonpost.com/business/economy/payroll-tax-cut-raises-worries-about-social-securitys-future-funding/2011/12/28/gIQAVKZOPP_story_1.html

This year, the Social Security system projects that it will pay out $46 billion more in benefits than it will collect in cash. It made up for the shortfall by redeeming Treasury bonds bought in years when there were cash surpluses.

Here is the mistake, thanks to Dean Baker: Social Security Is NOT Selling Government Bonds,
http://www.cepr.net/index.php/blogs/beat-the-press/social-security-is-not-selling-government-bonds

This is not true. The Social Security trust fund is projected to earn $114.9 billion in interest on the bonds it holds. It will use a portion of these earnings to pay current benefits. It will not be redeeming its bonds.

Social Security has a huge trust fund -- if you think $2.6 trillion is huge. That trust fund is invested in US Treasury Bonds, and earns interest. When you hear that Social Security is "in trouble' or "going broke" you are hearing from people who ignore this huge, huge trust fund and the interest it earns. This trust fund, along with the money people pay in, means that Social Security has enough to pay full benefits until 2037. Even then it will still be able to pay everyone more than they receive today. (Yes, more, because of cost-of-living adjustments.)

One of the problems with Social Security is that the "cap" -- the top income that is taxed to pay into the fund -- was calculated in the 80's, and they didn't foresee that all income gains after the 80s would only go to those at the top, where the income isn't taxed to pay into the fund. So, since the 80s, as more and more of the income gains went to the top few, the Social Security fund started to not have quite enough to go on forever. So now it it projected to only last until 2037. This is, of course, easily fixed -- as are so many of our country's problems -- by asking those at the top to pay in a little more.

So ... will I be attacked with pepper spray and batons for suggesting that the rich should pay back a bit more?

By Dave Johnson | Sourced from Campaign For America's Future