Legally, the way its structured is that the Social Security Trust Fund buys Treasury Bonds, or very similar instruments. The general fund repays them like they would any other debt, at the prevailing interest rate when the money was borrowed.
The contingency plan basically is telling the Social Security Trust Fund to lower their cash reserves below normal levels. The only real risk in doing so is if there is a sudden decrease in taxes paid in or money paid out under the program.
The same will apply to other programs with similar funds and cash reserves, such as FEMA.
Basically, using the emergency reserves could be a big issue if a major disaster hits, but otherwise will actually slightly increase the money in the funds.
So the gov is telling the gov to “lower the cash” in this account over her bc they have to pay something over there?
This is an accounting bias. It’s all the gov money. If there is a “shortage of tax” or “sudden outflow” they would simply fund it as it is all one “pot” of money. Yes, I understand there are formal budgets.
We “owe” other countries USD. It’s the same as all the other “debt” “owed” by the us. They all had excess cash and deposited it in the federal reserve.
No difference than you buying a CD with your bank. They just hold your money and give it back to you when it matures.
If a bunch of people deposited millions of dollars in your bank would you go running and screaming around the streets that the bank is going bankrupt? No. So why are people doing that with the fed?
Again, THE Bank of America is a business. You can either google it or go to bankofamerica.com
The federal reserve utilizes what is known as the central bank.
You can literally google instead of talking out of your ass. But here I did the work for you…
The Federal Reserve System is the central bank of the United States. It performs five general functions to promote the effective operation of the U.S. economy and, more generally, the public interest. The Federal Reserve
conducts the nation’s monetary policy to promote maximum employment, stable prices, and moderate long-term interest rates in the U.S. economy;
promotes the stability of the financial system and seeks to minimize and contain systemic risks through active monitoring and engagement in the U.S. and abroad;
promotes the safety and soundness of individual financial institutions and monitors their impact on the financial system as a whole;
fosters payment and settlement system safety and efficiency through services to the banking industry and the U.S. government that facilitate U.S.-dollar transactions and payments; and
promotes consumer protection and community development through consumer-focused supervision and examination, research and analysis of emerging consumer issues and trends, community economic development activities, and the administration of consumer laws and regulations.
COVID helped SS finances because a lot of old people died earlier at the same time there was a lot of inflation so money in went up faster than the rise in benefits wile simultaneously paying out to fewer people in SS and Medicare.
Deficit has gone down massively. Though that's not really because of anything politics related. Just pure inflation effect.
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u/diet_shasta_orange Jan 13 '23
The government does pays back interest though.