How much money is in your 401 (k) or similar DC plan?

[DGuller]

Now at 60

[KRonn]

Now at 60

Kids these days....   

[Admiral Yi]

Bubba should have put that lockbox money into a sovereign wealth fund.

[MadImmortalMan]

Bubba should have put that lockbox money into a sovereign wealth fund.

LBJ should have done that. Or FDR, really.

[Admiral Yi]

LBJ should have done that. Or FDR, really.

Don't think we were running a surplus under those guys.

[Sheilbh]

There's no such thing as a deficit or surplus in social security, it's going to come from general taxation like everywhere else in the world and it's time people stop lying/deluding themselves about it.

[Admiral Yi]

There's no such thing as a deficit or surplus in social security, it's going to come from general taxation like everywhere else in the world and it's time people stop lying/deluding themselves about it.

So before the inevitable dipping into general revenue, how would you prefer to describe the current state of affairs?  The artist formerly known as the Social Security surplus?

[Sheilbh]

So before the inevitable dipping into general revenue, how would you prefer to describe the current state of affairs?  The artist formerly known as the Social Security surplus?

A nonsense distinction, it's a pay as you go system. But none of the 'lockbox' or 'trust fund' phrases work. It just means you're not using general taxation yet. As it is a surplus, can be used to help government finance in general (I believe it can be borrowed against by the Federal government) and a deficit will be met by general revenue. How that can meaningfully be a 'surplus', 'deficit' or 'trust fund' is beyond me.

If you put it into a separate national pension fund that was like a giant pension fund, investing and accruing gains as well as receiving employee and employer contributions then the language of surplus or deficit would matter.

[Admiral Yi]

It's precisely because it's a pay as you go system that it's not nonsense.  Right now we're paying more than we're going.

[Sheilbh]

It's precisely because it's a pay as you go system that it's not nonsense.  Right now we're paying more than we're going.

Not really. You pay more into it and that excess then goes into funding government in general. It doesn't build up any savings. It doesn't pay down debt. How is it meaningfully a surplus?

Edit: Also as it's pay as you go, what's the actual difference, apart from semantics, of funding it from general revenue?

[OttoVonBismarck]

A nonsense distinction, it's a pay as you go system. But none of the 'lockbox' or 'trust fund' phrases work. It just means you're not using general taxation yet. As it is a surplus, can be used to help government finance in general (I believe it can be borrowed against by the Federal government) and a deficit will be met by general revenue. How that can meaningfully be a 'surplus', 'deficit' or 'trust fund' is beyond me.

If you put it into a separate national pension fund that was like a giant pension fund, investing and accruing gains as well as receiving employee and employer contributions then the language of surplus or deficit would matter.

You're correct that since it's not invested in a sovereign wealth fund similar to what traditional pensions in America are invested in, it is mostly an account matter and not an immediately important one. I think what Yi is saying though is we should have some words to describe a situation in which the 12.4% tax on gross earnings paid into social security for each person, in total, exceeds the total of benefits paid out during a given calendar year. I'd argue surplus is the only really obvious word for that.

As for 'can be used to help government finance' it's actually "must be." By law, any excess social security tax collected over and above the amount needed to cover benefit checks must immediately be used to purchase treasury bonds. So basically as long as we collect more than we use we actually continually go further into debt. This is actually why intragovernmental debt (and total debt) increased during the Clinton Presidency. Operating budget wise, we did good and paid down some debt held by the public. But because the economy was doing well and a lot of people were employed we were running big surpluses in social security taxes--and thus running up huge debt purchases throughout the 90s. So this means a surplus is essentially just general revenue cash that results in a notation indicating the SSTF has bought more treasury bonds or whatever.

Some people equate this to the trust fund being "stolen" or "used up." In some ways it's just government accounting tricks, but where it's sadly unfortunate is it means we really see virtually no return on the nominal amount in the trust fund because historically treasury bonds barely beat inflation. If we could take that money and instead create a SWF we could actually have grown it over time and who knows where it'd put us now. If a country like Norway can amass a SWF of $700bn I like to think ours would be immense. The nominal amount in the SSTF is like $2.8 trillion, and if it had been properly invested since the 30s it would have been immensely larger.

[OttoVonBismarck]

It's precisely because it's a pay as you go system that it's not nonsense.  Right now we're paying more than we're going.

Not really. You pay more into it and that excess then goes into funding government in general. It doesn't build up any savings. It doesn't pay down debt. How is it meaningfully a surplus?

Edit: Also as it's pay as you go, what's the actual difference, apart from semantics, of funding it from general revenue?

Not sure if you're aware but technically:

Income Taxes + Certain Federal Excise Taxes + Federal Estate Taxes --> General Revenue for Budgeting

Social Security Taxes (12.4% of gross earnings) --> SSTF, first used to satisfy current benefit claims and excess is used to purchase Treasury Bonds. The cash used to purchase the bonds ends up in the Treasury account and is of course --> General Revenue

So the only material difference is it goes through an intermediary theoretical step before becoming part of general revenue for budgeting.

[Admiral Yi]

Edit: Also as it's pay as you go, what's the actual difference, apart from semantics, of funding it from general revenue?

The incidence of the tax, i.e. who pays it.  If it got thrown onto general revenue it would be Mitt's 53 per centers.

[Sheilbh]

The incidence of the tax, i.e. who pays it.  If it got thrown onto general revenue it would be Mitt's 53 per centers.

Okay. But that's the nature of payroll tax everywhere in the world. In this country it's called 'national insurance' and part of the reason for that is because they're normally tied to DC schemes.

I had to do the report on US social security in my old job and I just found the rhetoric of 'trust fund' and all the rest a bit of a nonsense.

So the only material difference is it goes through an intermediary theoretical step before becoming part of general revenue for budgeting.

Exactly. I think the problem is there's really very few actual differences. But all of this language of 'surplus' and 'trust fund' make it far more difficult to actually reform pensions in the US, which is a shame because it would be helpful.

But then I believe in the public sector being in a permanent state of reform

[Admiral Yi]

Okay. But that's the nature of payroll tax everywhere in the world. In this country it's called 'national insurance' and part of the reason for that is because they're normally tied to DC schemes.

What's in the nature of payroll taxes everywhere?

I had to do the report on US social security in my old job and I just found the rhetoric of 'trust fund' and all the rest a bit of a nonsense.

I thought the logic of collecting more in payroll taxes in the fat years to prepare for the lean Baby Boom years was impeccable.

Biscuit: you missed one crucial part.  When the federal government borrows to finance future SS obligations, that's not general revenue, that's deficit spending.

Would anyone happen to know if the headline deficit number that's reported these days is gross, or net of the trust fund?  For a while there they used to report two numbers, that seems to have gone by the wayside.  My Islamophobe Kenyan conspiracy theory is that the unattractive, bigger number stopped being reported right around the time the stimulus bill was saving us from extinction as a species, but I'm not at all certain.