Quote:
Originally Posted by Cletus Miller
I was under the (possibly? certainly? mistaken) impression that SS wouldn't be selling the bonds, but having them repaid. If they are actually going to be selling them on the open market, (1) they will recover less than face and (2) that will likely have some unexpected/unintended consequences.
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When a given bond matures the SSTF can do one of two things. Take the cash or reinvest the cash in more bonds. Obviously the SSTF is doing this on a large scale with many bonds maturing at any given moment. So long as the SSTF has net income it will continue to invest in more tbills. Once it has net payments to make some bonds when they come due will go to SS payments.
But none of this is really relevant to anything--when the SSTF stops running a surplus, the deficit will grow even more rapidly and the government will need to finance that deficit spending by selling bonds in the market, which presumably will have whatever effects running a higher deficit will have.
In terms of government accounting, all this means is that the deficit will go up. I also imagine that we'll switch accounting so that there's a separate deficit that does not include the social security deficit and that will be the one cited by politicians.
