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April 24, 2013

The Social Security Administration's Dirty Little Secret About Your Payroll Tax Proceeds...

You might want to sit down when you read this...

Many Americans believe that the Social Security tax is collected, held, and invested towards their own retirement.  Unfortunately, that is not completely the case.  SSA cannot hold the money as cash, because there is no return and the investment must grow in order to provide a fixed income for the population.  To limit options further, the government cannot privately invest in stocks, corporate bonds, etc, likely because of the PR ramifications of the government making private investments (didn't stop us from TARP).

Therefore, the government doesn't have a "choice" but to buy Treasury bonds, or lend the money to itself.  The government thus takes the excess cash in the Social Security Trust, turns it into internal bonds, and spends the cash.

The 'savings' of hundreds of millions of Americans is hundreds of billions of dollars of debt instruments.  And this is the same group that criticized corporations for trading mortgage backed securities!

Next week, we'll take a closer look at the income and expenses of the Social Security program!

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