Social security value

[Alternatepriorities]

I propose the reason SS is functioning like a pyramid scheme is simply that it's been politically expedient to kick the can down the road for as long as it we've know our demographics were not following the assumptions the actuaries made. It's the same reason state pension plans are underfunded. Politicians are generally rewarded for doing bad math that gives easy answers.

No, it's always been like that. The first SS recipient was Ida May Fuller who paid in $24.75 to get $22,888.92 in Social Security benefits.
https://www.ssa.gov/history/idapayroll.html

The program was designed to be pyramid scheme-esque with current workers paying for current retirees.

That's actually better than I would have assumed. I figured the first people to collect paid in zero.

My point is that if the math were done correctly there would be some free loaders at the beginning and then over time it would become self sustaining. If it were a true pyramid scheme the fund would not have run up a massive surplus that it is now spending down as the boomers retire. I'm both optimistic enough to believe the system could be set up with honest intentions and cynical enough to believe politicians are kicking the problem down the road because they know they will be gone when it all falls apart.

[Tempname23]

Has there been any software developed to put your yearly SS payments in from your beginning, then grow each years contribution by some percentage or by the S&P or whatever index, to find a value today that we could then apply the 4% guide to?  Complicated by one side or both sides of SS, or self employed some of that some.
  I'm well aware that the cost of disability and family protection would not be subtracted from that, but I would still like to see that number.

[Must_ache]

My social security earnings were $32,695 in 1997, grew to 102,000 in 2008, and were 119,307 in 2021.
Total earnings adjusting for SS inflation index: $2.815M
6.2% of that would be my paycheck deductions in today's dollars: $175K.
Amount if I were to invest all those contributions in the S&P: (assume my money in 1997 doesn't start growing until 1998): $550K.

If you applied the 4% rule to that you could have $22,000/yr.  SS thinks my age-62 benefit would be $26,208/yr

[wageslave23]

My social security earnings were $32,695 in 1997, grew to 102,000 in 2008, and were 119,307 in 2021.
Total earnings adjusting for SS inflation index: $2.815M
6.2% of that would be my paycheck deductions in today's dollars: $175K.
Amount if I were to invest all those contributions in the S&P: (assume my money in 1997 doesn't start growing until 1998): $550K.

If you applied the 4% rule to that you could have $22,000/yr.  SS thinks my age-62 benefit would be $26,208/yr

Ok so that sounds about right.

[JupiterGreen]

My mother died at age 50, and never collected.  My father got the paltry "death benefit" - not sure what it was in 1980.  $250?  My sister was 17.  She couldn't collect the month my mother died, since Mom was alive for five days that month.  She received payments the next two months, and turned 18 on the 26th of the fourth month, so she received nothing that month either.  That's all my family received for all of the years my Mom paid into SS.  There are surely a lot of stories like this one.  Also, my first husband, from whom I was divorced, died suddenly at age 64, never having collected.  His and his employer's contributions remained in the 'trust fund.'  I wonder how the contributions of folks who never collected, or whose families received very little, impact the overall value of the 'trust fund.'

Same about having a parent die the very year they retired. All that work and saving only to never experience the good parts of one's labor. It's a good reminder that time is worth more than money and nothing is promised.

Question about the SS 35 years max benefits. I have 35 years of work, but some of those were very low paying because I started working at 14.5 y/o and I was in school for some of those years. Is there a way to tell which years count for the 35 year max on the SS site (or elsewhere?). If I understand it correctly, each year has a minimum SS contribution to count towards that 35 year formula. So how do they factor in the low earning years, are they combined together and so for instance 3 low years might equal 1 towards the 35 overall years one must work to receive max benefits? I hope my question makes sense and also that someone understands the SS formula. Thanks.

[mistymoney]

My mother died at age 50, and never collected.  My father got the paltry "death benefit" - not sure what it was in 1980.  $250?  My sister was 17.  She couldn't collect the month my mother died, since Mom was alive for five days that month.  She received payments the next two months, and turned 18 on the 26th of the fourth month, so she received nothing that month either.  That's all my family received for all of the years my Mom paid into SS.  There are surely a lot of stories like this one.  Also, my first husband, from whom I was divorced, died suddenly at age 64, never having collected.  His and his employer's contributions remained in the 'trust fund.'  I wonder how the contributions of folks who never collected, or whose families received very little, impact the overall value of the 'trust fund.'

Same about having a parent die the very year they retired. All that work and saving only to never experience the good parts of one's labor. It's a good reminder that time is worth more than money and nothing is promised.

Question about the SS 35 years max benefits. I have 35 years of work, but some of those were very low paying because I started working at 14.5 y/o and I was in school for some of those years. Is there a way to tell which years count for the 35 year max on the SS site (or elsewhere?). If I understand it correctly, each year has a minimum SS contribution to count towards that 35 year formula. So how do they factor in the low earning years, are they combined together and so for instance 3 low years might equal 1 towards the 35 overall years one must work to receive max benefits? I hope my question makes sense and also that someone understands the SS formula. Thanks.

they take the highest inflation-adjusted years to calculate your benefit.

[JupiterGreen]

My mother died at age 50, and never collected.  My father got the paltry "death benefit" - not sure what it was in 1980.  $250?  My sister was 17.  She couldn't collect the month my mother died, since Mom was alive for five days that month.  She received payments the next two months, and turned 18 on the 26th of the fourth month, so she received nothing that month either.  That's all my family received for all of the years my Mom paid into SS.  There are surely a lot of stories like this one.  Also, my first husband, from whom I was divorced, died suddenly at age 64, never having collected.  His and his employer's contributions remained in the 'trust fund.'  I wonder how the contributions of folks who never collected, or whose families received very little, impact the overall value of the 'trust fund.'

Same about having a parent die the very year they retired. All that work and saving only to never experience the good parts of one's labor. It's a good reminder that time is worth more than money and nothing is promised.

Question about the SS 35 years max benefits. I have 35 years of work, but some of those were very low paying because I started working at 14.5 y/o and I was in school for some of those years. Is there a way to tell which years count for the 35 year max on the SS site (or elsewhere?). If I understand it correctly, each year has a minimum SS contribution to count towards that 35 year formula. So how do they factor in the low earning years, are they combined together and so for instance 3 low years might equal 1 towards the 35 overall years one must work to receive max benefits? I hope my question makes sense and also that someone understands the SS formula. Thanks.

they take the highest inflation-adjusted years to calculate your benefit.

Thank you, apologies if this was a basic question. I've been told my whole life that SS was going away so I never counted/looked at it. But I am getting to be the age where (I believe, even with GOP trying to kill it) I would receive some of my earned benefits since I (and partner) have had all my quarters for a bit now. Between me and my partner, this is no small number, even starting at 62. I'm glad we automatically pay into SS since this is one of the only safety nets in the US and I imagine some people will be very reliant upon it (even if we aren't). 

I did a little more reading on this and realized my confusion. So in case anyone else has this questions here is how I understand it: for any years under 35 years when you didn't earn income they make it zero. So they take the average of 35 years regardless of how many working years you actually have. Because of this, the closer you get to 35 years working the better the average since your additional working years replace the zeros (or the lower paying years). There is a max you can receive and with the newest change to SS it is (from SS.gov) if you retire at full retirement age in 2023, your maximum benefit would be $3,627 (43,524/yr). However, if you retire at age 62 in 2023, your maximum benefit would be $2,572 (30,864/yr).

SS + stache = a sizable amount. Let's just hope GOP backs off SS.

[PDXTabs]

I've been told my whole life that SS was going away so I never counted/looked at it.

I don't believe that there has ever been any real evidence to support this narrative. The absolute worst case would appear to be paying out 76¢ on the dollar because the trust fund runs out.

[Arbitrage]

I've been told my whole life that SS was going away so I never counted/looked at it.

I don't believe that there has ever been any real evidence to support this narrative. The absolute worst case would appear to be paying out 76¢ on the dollar because the trust fund runs out.

I had pretty similar disdain when growing up and early in my career, and did my planning assuming that it would just be a bonus if it still existed.  I now fully expect it to be around in some form, but plan to the reduced benefit number.  Still, my crystal ball for 20-30 years from now is very hazy, and I mostly treat SS as longevity insurance and something to throw into whatever increased medical costs we will be incurring once we reach traditional retirement age. 

[wageslave23]

My mother died at age 50, and never collected.  My father got the paltry "death benefit" - not sure what it was in 1980.  $250?  My sister was 17.  She couldn't collect the month my mother died, since Mom was alive for five days that month.  She received payments the next two months, and turned 18 on the 26th of the fourth month, so she received nothing that month either.  That's all my family received for all of the years my Mom paid into SS.  There are surely a lot of stories like this one.  Also, my first husband, from whom I was divorced, died suddenly at age 64, never having collected.  His and his employer's contributions remained in the 'trust fund.'  I wonder how the contributions of folks who never collected, or whose families received very little, impact the overall value of the 'trust fund.'

Same about having a parent die the very year they retired. All that work and saving only to never experience the good parts of one's labor. It's a good reminder that time is worth more than money and nothing is promised.

Question about the SS 35 years max benefits. I have 35 years of work, but some of those were very low paying because I started working at 14.5 y/o and I was in school for some of those years. Is there a way to tell which years count for the 35 year max on the SS site (or elsewhere?). If I understand it correctly, each year has a minimum SS contribution to count towards that 35 year formula. So how do they factor in the low earning years, are they combined together and so for instance 3 low years might equal 1 towards the 35 overall years one must work to receive max benefits? I hope my question makes sense and also that someone understands the SS formula. Thanks.

they take the highest inflation-adjusted years to calculate your benefit.

Thank you, apologies if this was a basic question. I've been told my whole life that SS was going away so I never counted/looked at it. But I am getting to be the age where (I believe, even with GOP trying to kill it) I would receive some of my earned benefits since I (and partner) have had all my quarters for a bit now. Between me and my partner, this is no small number, even starting at 62. I'm glad we automatically pay into SS since this is one of the only safety nets in the US and I imagine some people will be very reliant upon it (even if we aren't). 

I did a little more reading on this and realized my confusion. So in case anyone else has this questions here is how I understand it: for any years under 35 years when you didn't earn income they make it zero. So they take the average of 35 years regardless of how many working years you actually have. Because of this, the closer you get to 35 years working the better the average since your additional working years replace the zeros (or the lower paying years). There is a max you can receive and with the newest change to SS it is (from SS.gov) if you retire at full retirement age in 2023, your maximum benefit would be $3,627 (43,524/yr). However, if you retire at age 62 in 2023, your maximum benefit would be $2,572 (30,864/yr).

SS + stache = a sizable amount. Let's just hope GOP backs off SS.

Nobody is taking away your social security.  Maybe raising retirement age to 70 or reducing benefits by 25% in order to keep it solvent. Please keep politics and fear mongering out of this discussion.

[mistymoney]

I've been told my whole life that SS was going away so I never counted/looked at it.

I don't believe that there has ever been any real evidence to support this narrative. The absolute worst case would appear to be paying out 76¢ on the dollar because the trust fund runs out.

I had pretty similar disdain when growing up and early in my career, and did my planning assuming that it would just be a bonus if it still existed.  I now fully expect it to be around in some form, but plan to the reduced benefit number.  Still, my crystal ball for 20-30 years from now is very hazy, and I mostly treat SS as longevity insurance and something to throw into whatever increased medical costs we will be incurring once we reach traditional retirement age.

Similar, and this is back in the 80's thinking - SS won't be around by the time I retire! spoiler.....it looks like it will be!

One thing I'm curious as to other's thoughts here on the longevity insurance issue. Most people seem to agree that the best outcome for that is to wait if you can to 70 for maximum monthly benefit in case you end up into the 90's.

Of course, the benefit decrease due to insufficient funds to fully pay everyone out is something that still may be on the horizon.

Does anyone think that there would ever be a situation where someone takes it at 62 - and is in a sense locked into the program, whereby reducing benefits for current recipients seems to be a much harder bar to legislate - but that someone born the same year delays until 70 but has their benefits reduced more easily as they are not a current recipient at say 66? Or would the tendancy be to just enact changes based on year of birth cohorts as they usually do?

[wenchsenior]

I'm always curious, who is this mysterious 'they' who keep telling people that SS is not going to be around when they retire? B/c that isn't true now, nor has it ever in the history of the program been even close to true.

[Turtle]

I'm always curious, who is this mysterious 'they' who keep telling people that SS is not going to be around when they retire? B/c that isn't true now, nor has it ever in the history of the program been even close to true.

There was a lot of gloom and doom talk in the early 80's about it, especially prior to the retirement age being increased.  Even in the 90's when I first worked at a job that had financial planning talks as part of HR, the presenter said something about the farther away you are from SS retirement, the more you should prepare for the possibility that they raise that age again.  He specifically said for younger folks it was in their best interest to make retirement plans as if SS wasn't there. 

Predictions about how long Social Security would stay solvent have varied widely over the years.  When I was in High School and this topic came up in Civics class, there definitely were some models showing it going broke before we students would have been able to start collecting.  Thankfully it hasn't ended up that way.

[Alternatepriorities]

I'm always curious, who is this mysterious 'they' who keep telling people that SS is not going to be around when they retire? B/c that isn't true now, nor has it ever in the history of the program been even close to true.

There was a lot of gloom and doom talk in the early 80's about it, especially prior to the retirement age being increased.  Even in the 90's when I first worked at a job that had financial planning talks as part of HR, the presenter said something about the farther away you are from SS retirement, the more you should prepare for the possibility that they raise that age again.  He specifically said for younger folks it was in their best interest to make retirement plans as if SS wasn't there. 

Predictions about how long Social Security would stay solvent have varied widely over the years.  When I was in High School and this topic came up in Civics class, there definitely were some models showing it going broke before we students would have been able to start collecting.  Thankfully it hasn't ended up that way.

Yeah, I don't think I ever had a blue collar coworker in the 90's and early 2000's that thought SS would be there when they retired. The funny thing is none of them ever did anything practical about it like save some of their earnings... I suspect it's just an easy thing to complain about at coffee breaks and the rumor spreads. Same as misinformation about taxes. I knew a successful engineering manager who argued with a straight face that bonus at Christmas weren't all that great because they are always taxed at 25% (at the time)... That didn't seem right to me at the time since obviously 75% of a bonus is better than no bonus. I didn't know enough yet to explain that their only withheld a %25 and then taxed at whatever tax bracket the income falls in when you file your taxes... I doubt he ever figured that out, decent engineer, bad with money ¯\_(ツ)_/¯

[JupiterGreen]

I'm always curious, who is this mysterious 'they' who keep telling people that SS is not going to be around when they retire? B/c that isn't true now, nor has it ever in the history of the program been even close to true.

There was a lot of gloom and doom talk in the early 80's about it, especially prior to the retirement age being increased.  Even in the 90's when I first worked at a job that had financial planning talks as part of HR, the presenter said something about the farther away you are from SS retirement, the more you should prepare for the possibility that they raise that age again.  He specifically said for younger folks it was in their best interest to make retirement plans as if SS wasn't there. 

Predictions about how long Social Security would stay solvent have varied widely over the years.  When I was in High School and this topic came up in Civics class, there definitely were some models showing it going broke before we students would have been able to start collecting.  Thankfully it hasn't ended up that way.

Interesting, I am not sure exactly where or who told us that but it is definitely still something I carry with me. I was aware of this in the 80s and 90s and I think you're right, school, work, in the news, I feel like it was everywhere. It seemed to be the prevailing assumption about retirement for X and Y generations and that we better not count on it. I'm still not convinced it will be 100% there once I reach my 60s.

[PDXTabs]

I'm always curious, who is this mysterious 'they' who keep telling people that SS is not going to be around when they retire? B/c that isn't true now, nor has it ever in the history of the program been even close to true.

There was a lot of gloom and doom talk in the early 80's about it, especially prior to the retirement age being increased.  Even in the 90's when I first worked at a job that had financial planning talks as part of HR, the presenter said something about the farther away you are from SS retirement, the more you should prepare for the possibility that they raise that age again.  He specifically said for younger folks it was in their best interest to make retirement plans as if SS wasn't there. 

Predictions about how long Social Security would stay solvent have varied widely over the years.  When I was in High School and this topic came up in Civics class, there definitely were some models showing it going broke before we students would have been able to start collecting.  Thankfully it hasn't ended up that way.

Interesting, I am not sure exactly where or who told us that but it is definitely still something I carry with me. I was aware of this in the 80s and 90s and I think you're right, school, work, in the news, I feel like it was everywhere. It seemed to be the prevailing assumption about retirement for X and Y generations and that we better not count on it. I'm still not convinced it will be 100% there once I reach my 60s.

I think that some people conflate the SS trust fund (or the HI - Medicare - trust fund) running out of money with SS not existing. Along those lines I think that there is a very real risk that Medicare ceases to exists in about six years: https://www.cms.gov/files/document/2022-medicare-trustees-report.pdf

[rantk81]

Hot-off-the-presses today ---
https://www.ssa.gov/OACT/solvency/GMoore_20230131.pdf

[simonsez]

Hot-off-the-presses today ---
https://www.ssa.gov/OACT/solvency/GMoore_20230131.pdf

Two sections stood out to me:

Section 5 and Section 6. Eliminate the taxable maximum, and provide benefit credit for
additional earnings taxed, fully effective in 2033. Phase in the elimination over 10 years by
taxing all earnings above the current-law taxable maximum at a rate of 1.24 percent in 2024,
2.48 percent in 2025, …, and 12.40 percent in 2033 and later. Additional earnings taxed are
creditable for benefit purposes. The PIA formula is changed by: (1) adding a new bend point
at the current-law taxable maximum (without regard to this provision) for the second year
prior to initial eligibility, divided by 12, and (2) applying a 3-percent PIA factor to average
indexed monthly earnings (AIME) above the new bend point.

Section 7. Increase the combined OASDI payroll tax rate to 13.0 percent, fully effective for
2029 and later. The combined rate is increased by 0.1 percentage point each year starting in
2024, reaching the ultimate 13.0 percent rate for 2029 and later

For those that aren't self-employed, this means it will go from 6.2% to 6.5%.  I wonder what the effect of the temporary change to 4.2% during 2011 and 2012 did to the solvency.

[PDXTabs]

I wonder what the effect of the temporary change to 4.2% during 2011 and 2012 did to the solvency.

AFAIK they issued new bonds on the treasury side and transferred them into the trust fund and it had zero impact on trust fund solvency.

[Alternatepriorities]

I wonder what the effect of the temporary change to 4.2% during 2011 and 2012 did to the solvency.

AFAIK they issued new bonds on the treasury side and transferred them into the trust fund and it had zero impact on trust fund solvency.

As I understand it, that is what they do with all the money SS collects and doesn't pay out anyway. Invest it in T-bills. If the Federal Government ever became insolvent SS beneficiaries will have bigger problems than a smaller check...

[Arbitrage]

Hot-off-the-presses today ---
https://www.ssa.gov/OACT/solvency/GMoore_20230131.pdf

Two sections stood out to me:

Section 5 and Section 6. Eliminate the taxable maximum, and provide benefit credit for
additional earnings taxed, fully effective in 2033. Phase in the elimination over 10 years by
taxing all earnings above the current-law taxable maximum at a rate of 1.24 percent in 2024,
2.48 percent in 2025, …, and 12.40 percent in 2033 and later. Additional earnings taxed are
creditable for benefit purposes. The PIA formula is changed by: (1) adding a new bend point
at the current-law taxable maximum (without regard to this provision) for the second year
prior to initial eligibility, divided by 12, and (2) applying a 3-percent PIA factor to average
indexed monthly earnings (AIME) above the new bend point.

Section 7. Increase the combined OASDI payroll tax rate to 13.0 percent, fully effective for
2029 and later. The combined rate is increased by 0.1 percentage point each year starting in
2024, reaching the ultimate 13.0 percent rate for 2029 and later

For those that aren't self-employed, this means it will go from 6.2% to 6.5%.  I wonder what the effect of the temporary change to 4.2% during 2011 and 2012 did to the solvency.

Rich people be breaking out their lobbying checkbooks to kill this thing.

[PDXTabs]

Hot-off-the-presses today ---
https://www.ssa.gov/OACT/solvency/GMoore_20230131.pdf

Two sections stood out to me:

Section 5 and Section 6. Eliminate the taxable maximum, and provide benefit credit for
additional earnings taxed, fully effective in 2033. Phase in the elimination over 10 years by
taxing all earnings above the current-law taxable maximum at a rate of 1.24 percent in 2024,
2.48 percent in 2025, …, and 12.40 percent in 2033 and later. Additional earnings taxed are
creditable for benefit purposes. The PIA formula is changed by: (1) adding a new bend point
at the current-law taxable maximum (without regard to this provision) for the second year
prior to initial eligibility, divided by 12, and (2) applying a 3-percent PIA factor to average
indexed monthly earnings (AIME) above the new bend point.

Section 7. Increase the combined OASDI payroll tax rate to 13.0 percent, fully effective for
2029 and later. The combined rate is increased by 0.1 percentage point each year starting in
2024, reaching the ultimate 13.0 percent rate for 2029 and later

For those that aren't self-employed, this means it will go from 6.2% to 6.5%.  I wonder what the effect of the temporary change to 4.2% during 2011 and 2012 did to the solvency.

Rich people be breaking out their lobbying checkbooks to kill this thing.

This checks out.

[Ron Scott]

I never understand the concept of “solvency” or of SS “running out of money”. Makes no sense to me for a country like the US which creates its own money.

Here is Alan Greenspan explaining it to Paul Ryan years ago, where he says paying the benefits is not the issue…it’s ensuring the economy continues to produce the goods and services needed so those with the money can buy them. THAT makes sense.

https://www.c-span.org/video/?c4923562/user-clip-alan-greenspan-answers-paul-ryan

[clarkfan1979]

This biggerpockets money podcast was super helpful in understanding Social Security. It's about 3 months old.

https://www.youtube.com/watch?v=l910jtrWN-k

[Alternatepriorities]

I never understand the concept of “solvency” or of SS “running out of money”. Makes no sense to me for a country like the US which creates its own money.

Here is Alan Greenspan explaining it to Paul Ryan years ago, where he says paying the benefits is not the issue…it’s ensuring the economy continues to produce the goods and services needed so those with the money can buy them. THAT makes sense.

https://www.c-span.org/video/?c4923562/user-clip-alan-greenspan-answers-paul-ryan

Shame no one remembered that the last three years.

[Ron Scott]

I never understand the concept of “solvency” or of SS “running out of money”. Makes no sense to me for a country like the US which creates its own money.

Here is Alan Greenspan explaining it to Paul Ryan years ago, where he says paying the benefits is not the issue…it’s ensuring the economy continues to produce the goods and services needed so those with the money can buy them. THAT makes sense.

https://www.c-span.org/video/?c4923562/user-clip-alan-greenspan-answers-paul-ryan

Shame no one remembered that the last three years.

We’ve had a drunken sailor spending spree by the government FOR DECADES. Trump’s unfunded tax reductions and Trump/Biden unfunded COVID cash giveaways are examples. Go back a little further, W cut taxes big time and started a 20-year war in the Middle East—both unfunded…and Obama made W’s tax cuts permanent. Both Ds and Rs are equally responsible for the debt.

But debt is OK—so long as it doesn’t create a money supply so large that it outpaces the economy’s ability to produce goods and services. When that happens, too many dollars bid for too few goods and you get inflation. Inflation devalues money.

The Rs current play—to screw bond holders out of their interest unless the Ds cut “something” that congress already passed and funded—is total horse shit. Makes no sense and would accomplish nothing.

[PDXTabs]

But debt is OK—so long as it doesn’t create a money supply so large that it outpaces the economy’s ability to produce goods and services. When that happens, too many dollars bid for too few goods and you get inflation. Inflation devalues money.

This is debatable. Are you conflating the money supply with government debt? When the government borrows more money they borrow that money from somewhere, it isn't created out of thin air. Some would argue that too much government debt starves the private debt and equities markets because if you are lending your money to the government you can't lend it to private industry.

[Ron Scott]

But debt is OK—so long as it doesn’t create a money supply so large that it outpaces the economy’s ability to produce goods and services. When that happens, too many dollars bid for too few goods and you get inflation. Inflation devalues money.

This is debatable. Are you conflating the money supply with government debt? When the government borrows more money they borrow that money from somewhere, it isn't created out of thin air. Some would argue that too much government debt starves the private debt and equities markets because if you are lending your money to the government you can't lend it to private industry.

I understand the competitive aspect you refer to but the word “starves” seems a bit strong. For example, while the US federal government was accumulating most of its recent debt load the private market had little trouble issuing its own bonds at historically low rates and the equity markets enjoyed an historically long bull run. Also, keep in mind that almost 2/3 of all US government debt is held by the government itself (through its trusts, like Social Security) and foreign governments.

It is also interesting to note that a significant percentage of US corporations successfully issued bonds at low rates in order to fund optional increases in dividend payments and optional share buyback’s that boost their stock value. It certainly doesn’t seem like historic debt accumulated under Bush, Obama, Trump, and Biden starved the private markets.

I’ve heard the argument you mention but I am unconvinced.

What do you think?

[zolotiyeruki]

When the government borrows more money they borrow that money from somewhere, it isn't created out of thin air. Some would argue that too much government debt starves the private debt and equities markets because if you are lending your money to the government you can't lend it to private industry.

Um, creating it out of thin air is exactly what the Federal Reserve does.

And that money isn't just lent to the government.  It's loaned out to banks as well, who turn around and lend that money in turn to individuals and businesses.  Ron Scott is right that low interest rates have been a major factor in the recent bull run.

That said, eventually, the piper must be paid.  Either inflation rears its ugly head (done), or the market gets overbought and P/E ratios get way out of whack (which they have), or some market segment (for example, real estate) gets inflated out of balance and eventually that bubble has to pop.

Flooding the market with money is fine, as long as economic production and consumer spending can keep pace.  Pull back on production (thanks, supply chain disruptions and government-mandated shutdowns!) or spending (thanks everyone for the recession panic!), and the velocity of money drops and inflation happens.

[PDXTabs]

When the government borrows more money they borrow that money from somewhere, it isn't created out of thin air. Some would argue that too much government debt starves the private debt and equities markets because if you are lending your money to the government you can't lend it to private industry.

Um, creating it out of thin air is exactly what the Federal Reserve does.

I agree. But I thought that we were talking about the Treasury issuing bonds. Which was my point, they are two different things. You can have an increasing money supply while shrinking debt or you could have increasing debt while shrinking the money supply.

[PDXTabs]

But debt is OK—so long as it doesn’t create a money supply so large that it outpaces the economy’s ability to produce goods and services. When that happens, too many dollars bid for too few goods and you get inflation. Inflation devalues money.

This is debatable. Are you conflating the money supply with government debt? When the government borrows more money they borrow that money from somewhere, it isn't created out of thin air. Some would argue that too much government debt starves the private debt and equities markets because if you are lending your money to the government you can't lend it to private industry.

I understand the competitive aspect you refer to but the word “starves” seems a bit strong. For example, while the US federal government was accumulating most of its recent debt load the private market had little trouble issuing its own bonds at historically low rates and the equity markets enjoyed an historically long bull run. Also, keep in mind that almost 2/3 of all US government debt is held by the government itself (through its trusts, like Social Security) and foreign governments.

It is also interesting to note that a significant percentage of US corporations successfully issued bonds at low rates in order to fund optional increases in dividend payments and optional share buyback’s that boost their stock value. It certainly doesn’t seem like historic debt accumulated under Bush, Obama, Trump, and Biden starved the private markets.

I’ve heard the argument you mention but I am unconvinced.

What do you think?

I think that there is a limit to how much debt the US can issue and keep interest rates low. The UK just ran into this. Most of the recent debt was also issued along with a rapidly expanding money supply. It isn't clear to me that we could have issued all that debt without the expanding money supply in relation to the starvation issue. Of course rapidly expanding money supplies do lead to "too many dollars bid[ing] for too few goods."

[Tempname23]

One other thing to consider with social security is the value associated with the survivor and disability benefits. In my case, I'd probably be paying an extra $400-600/yr for life insurance if social security wasn't around. I haven't run the numbers on disability insurance, but I'm sure there's a savings there as well.

 This is where I was headed, SS is much more than a Retirement fund, as you said survivors (wife and kids) and a disability policy. I think I will get way more than my fair share, starting with my father, he had a major heart attack at 43 and was on disability which allowed me to save rather than support him and my mom. I had large periods of Self employment so paid both sides for many years, over a 48 years I paid in $116,535 and my employers paid in $14,898 for a Total of $131,437. I'm waiting a couple more years and expect a little over $36,000 a year in SS benefits. I think I am a big winner in the SS recipient pool. Especially with the benefit my dad and mother got and then what I'm looking forward to. There was a time when I thought I would have done much better investing that money myself and might have, but adding all the other SS benefits, plus the fact that without SS we would be supporting old folks that cannot support themselves, I have changed my thinking on SS and am now a big supporter of SS.

[Car Jack]

So I'm about to retire and did Mike Pieper's opensocialsecurity calculator.  It showed that my wife should take SS at 62, coincidentally the same month I'm going to retire and I should take it at 70.  So the cool thing is that my well calculated retirement spending budget is $67k.  At 70, when we are both getting SS, assuming zero increases between now and then, we'll be bringing in about $72k from SS. 

So what about the 2034 drop to someplace from 70% to 80% of benefits?  Ok, for me, it's a big "who cares" because I'm already overfunded for savings.  But nobody looks beyond this, where the population of young people is small and old people is big.  Well, us baby boomers are going to die.  And younger kids numbers are bigger.  So there will be a point where there's going to be more coming in than going out.

So some history.  When SS was invented, you could retire at 65.  Not 62 with lower payout.  Not 70 with bigger payout.  Almost all recipients were men.  What was the average life expectancy of a man back in 1935?  65.  Ok, so retire, put in for social security and on the way out of the SS office, die of a heart attack. 

We'll see what happens going forward.  Congress has done nothing since what?  1982 (from memory)?  Today, they can't get a majority vote that the White House is white.  I doubt they'll do a thing.

[JupiterGreen]

So I'm about to retire and did Mike Pieper's opensocialsecurity calculator.  It showed that my wife should take SS at 62, coincidentally the same month I'm going to retire and I should take it at 70.  So the cool thing is that my well calculated retirement spending budget is $67k.  At 70, when we are both getting SS, assuming zero increases between now and then, we'll be bringing in about $72k from SS. 

So what about the 2034 drop to someplace from 70% to 80% of benefits?  Ok, for me, it's a big "who cares" because I'm already overfunded for savings.  But nobody looks beyond this, where the population of young people is small and old people is big.  Well, us baby boomers are going to die.  And younger kids numbers are bigger.  So there will be a point where there's going to be more coming in than going out.

So some history.  When SS was invented, you could retire at 65.  Not 62 with lower payout.  Not 70 with bigger payout.  Almost all recipients were men.  What was the average life expectancy of a man back in 1935?  65.  Ok, so retire, put in for social security and on the way out of the SS office, die of a heart attack. 

We'll see what happens going forward.  Congress has done nothing since what?  1982 (from memory)?  Today, they can't get a majority vote that the White House is white.  I doubt they'll do a thing.

I'm not sure I understand what you are getting at. But just wanted to add that life expectancy is misleading. Sure it was worse during the Roosevelt administration, but remember LE is counted at birth. We do much better now with infant mortality. We don't have as much infant mortality now and we also have more people paying into SS who are included in that number. The Roosevelt administration (Committee on Economic Security) designed SS to deal with rising life expectancy (this was not a surprise) they anticipated a 140% increase in life expectancy. Lastly, rich people benefit the most from SS since they live longer on average. Provided we support it (and I do), there are probably several things we could do to maintain SS to help benefit all and keep SS going for younger generations.