Social media is full of the myth that Congress and various presidents stole money from the Social Security Trust. The Trust is in the same position as all of the entities listed below. They buy Treasury bills and bonds. Note that includes state and local government pension funds as well as private pension funds.
While not technically debt held by the public, Social Security (Social Security Trust Fund and Federal Disability Insurance Trust Fund) owns $2.786 trillion of federal debt. The special issue bonds held by Social Security can be redeemed at any time at face value, they are not subject to the ups and downs of the market.
The rate of interest on special issues is determined by a formula enacted in 1960. The rate is determined at the end of each month and applies to new investments in the following month.
The numeric average of the 12 monthly interest rates for 2015 was 2.021 percent. The annual effective interest rate (the average rate of return on all investments over a one-year period) for the OASI and DI Trust Funds, combined, was 3.37 percent in 2015. This higher effective rate resulted because the funds hold special-issue bonds acquired in past years when interest rates were higher. Source: SSA website
Debt Held by the Public – Foreign governments and investors hold nearly half of the nation’s public debt. One-fourth is held by other governmental entities, like the Federal Reserve, and state and local governments. Fifteen percent is held by mutual funds, private pension funds, savings bonds or individual Treasury notes. The rest is owned by businesses, like banks and insurance companies, and an assortment of trusts, companies, and investors.
Here’s the breakout:
Foreign – $6.175 trillion
Federal Reserve – $2.461 trillion
Mutual Funds – $1.056 trillion
State and Local Government, including their pension funds – $803 billion
Private Pension Funds – $403 billion
Banks – $515 billion
Insurance Companies – $293 billion
U.S. Savings Bonds – $174 billion
May 16, 2016
I have a question for those Americans who can’t let go of the myth that Congress stole money from Social Security, where should the $2.8 trillion be invested to generate equivalent interest while the principal is guaranteed?