Saving Social Security as easy as one, two, three
The news is about how to cut Social Security Benefits. This backward way to solve a problem created by those who are responsible for the problem.
Step one; Remove Social Security from the control of Congress and the Executive Branch.
Step Two; Create a Nation Retirement Trust and organize it as a member of the Federal Reserve system.
Step Three; Use one-half of the 2.6 Trillion Dollars in Special Revenue Bonds as Collateral for borrowing from the Federal Reserve at the .0025% Discount Rate.
The earnings on the investments of the borrowed funds will make enough money to keep Social Security solvent indefinitely.
Social Security is a self-funded employer and employee system. There are no Federal Taxes involved in the Retirement System.
The issue is the Federal government borrowed (illegally) the Trust Fund money to support the general fund. The Government does not and will not have the money to pay back the trust, calling for benefit cuts to hide this fact from the American People. Deficit spending has been funded on the back of the seniors by Politicians of both parties who now want to reduce benefits.
Removing Social Security to a formal Trust sets up a firewall. This is the same philosophy used in Company pension plans to protect the assets.
Having the Trust as a Bank is a “having your cake and eating it too” solution. It would be funded by the 2.8 Trillion Dollars in US Treasury Bonds, the most secure investment in the world. Whatever interest the government now pays it would pay to the trust.
Understanding how the Federal Reserve works in general; the Federal Reserve loans money to Member Banks at the Fed Funds rate, which is now .25% or one-quarter of one percent. They then in turn loan it to business and individuals at a higher rate, about a 5.5% spread, to stimulate the economy. But some of the Wall Street Banks are using the money to buy Stocks and Bonds. They do this when they do not find borrowers who are qualified for their loans.
The spread for the banks is; Fed Fund rate subtracted from the rate charged the borrower. The banks are acting as a middleman. The cost of operations is roughly 3% on each loan, so the banks receive a 50 percent profit on each loan using Fed Funds. If they invest the money, they see a 100% profit since there is no meaningful amount of administrative costs related to the investment.
Let us bring all this into focus. If the Trust borrows only half of the value of the 2.8 Trillion Treasury Bonds at the Fed Funds rate of .25%. Then investing it at the rate of return equal to what the Public Employee Retirement Systems historical rate of 8%. The Trust would create 100 Billion Dollars a year.
The Economy and society went from the financial boom of post-World War I of the 1920’s to the devastating depression of the 1930’s. Preventing that drastic of a social swing from happening again, President Franklin Roosevelt championed Social Security.
Employees and employer contributed equal amounts to establish a Social Assurance system to provide for their families’ future.
President Roosevelt did not want any money from the public treasury involved in the Social Security system. In the long history of Social Security, no funds other than those provided by the employee and the employers have been used for benefits. FDR wanted it that way so the politicians would keep their hands-off.