Letters Seldom Sent

Editor:

Do you ever wish to correct the misguided and mistaken who write you letters?  I do.  Every time from now on when I note you suffering more fools gently I'm going to rouugh them up. Not for their idiotic opinions, which they are welcome to, but for their ignorance of facts easily checked.  Here's the first one you won't get.

Editor:

A recent letter you published declared that Social Security was not an entitlement.  The writer's logic was ill and his facts were wrong, but he got to that conclusion anyhow.  His premise was that Social Security is insurance.  You and your employer pay for it and that is what you get back.

Not at all.  First, payments are a little more involved that that. Next, you must pay in for 40 quarters (ten years) to even be eligible for pay when you retire.  Your payments go into the Social Security trust fund, which has been there since 1935, and is managed by the Treasury Department.  Treasury pays interest, currently 4.5%, on the money it borrows from the Trust Fund.

Contrary to opinions often voiced by people who know better, the money Treasury borrows from the Trust Fund is not waisted.  Most of it goes to pay current retirees -- your parents for example.  The rest is temporarily used to reduce the national debt (not often) or to pay the nation's current bills (usually).  More about that later.

Social Security calculates what you are due on your earnings, not on what you paid in. The formula is complicated, so listen up.  The less well paid you were during your working life, the higher the percentage of your average wages you are paid.  But your actual retirement pay is always higher than the guy below you on the working life pay scale.

That result, plus an annual cost of living adjustment (usually up, occasionally zero, but never down), is what you will be paid every month for the rest of your life.  If your life is short, you will not get back what you and your employer paid in.  If it is long enough you will get back more than you paid in.  Contrary to current mythology, and because we are all living longer, the latter is the usual case. If that is not an entitlement, what is?

Now to why the Social Security Trust Fund has not been wasted, no matter what you have been told.  First,  understand than the total debt of the country has two parts.  One part is the public debt (about two thirds of the total) which the Treasury owes to individuals, corporations, pension funds, other governments.  The other part (about one third) is owed to other parts of the federal government, mostly Social Security and other federal pension funds.  The full faith and credit of the United States backs up both parts.

When the Social Security administration needs to draw from the Trust Fund, the Treasury sells new bonds to the public, ships the money to it, reducing the value of the Trust Fund by that amount. The total debt of the United States is unchanged.  The public is eager to buy, because The United States has never defaulted on any part of its debt in over 200 years.  Lately we nearly did and that was beyond dumb.

Sincerely,

Bruce G Johnson

20 October 2013