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Comment by lotsofpulp | Hacker News Reader

How have lawmakers been looting social security? As far as I know, taxes collected for social security are either paid out as benefits or invested by purchasing US debt. But I don't see any other option of what to do with them (keeping them as cash seems imprudent as they would just lose value due to inflation).

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It's "looting" in that from the outside looking in, when social security has a surplus, the federal government takes that money and spends it on non-related things. Internally, one part of the government is writing an IOU to another part to make it seem like the money is "invested". So from some super technical and pedantic sense, the surplus is invested, but it is only ever invested in internal IOUs from the same entity to which it belongs, it's not like social security is buying up equity or real estate for the long term.

Are you suggesting that the US government use social security taxes to purchase equities and real estate?

The purpose of the current system is to make the benefits one receives sort of proportional to the income they earn. Of course it's the government taking in money and spending it, and it's all one government if you zoom out, but it's still useful to categorize certain funds.

Well, I could live with either taking the surplus from that specific program and investing it in the best possible way to cover for well-known coming shortfalls, or saying that it is a generic tax like any other tax. Then at least people would know where it stands.

Instead we have a weird situation where the tax specifically calls out social security, but in reality gets spent on a bunch of unrelated things, with a thin veneer of technicality to make it all hold together.

It's a tax, so they can take part of the money and do other things with it. And they have from time to time. They are not remitting the full tax receipts to the Social Security Administration for disbursement. Which instead of having them buy US debt, actually creates the need to create more US debt because they have obligations to meet and the SSA is locked into certain debt instruments that can't be exited on large scale easily.

EDIT: This is not correct. It appears they have borrowed against the SS fund using treasuries, which will have to be back. Or phrased another way - the SS system chose to invest in US debt.

Any sources? These reports don't support your statements:

https://www.ssa.gov/policy/docs/chartbooks/fast_facts/2019/f...

https://www.ssa.gov/agency/performance/

And I don't know of a debt instrument that can be exited more easily than US Treasuries:

https://www.ssa.gov/news/press/factsheets/WhatAreTheTrust.ht...

This interview with a prominent actuary who worked in the Social Security admin is also very helpful to clarify the workings of SS:

https://us14.campaign-archive.com/?u=bd0d1b66f832083794c33c9...

Thank you for this. It appears I was lied to. The person that told me this is not someone who usually neglects to do their research and verify things, so by extension I did not. I have edited my response above accordingly. Much appreciated.

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