WashingtonPost: Social Security, the trust fund and funny money

[Hubbs]

Not one person in this thread has made any reference whatsoever to "super-duper-important special bonds"

Drop the insults and discuss facts.

What in the world are you talking about? You're talking about the trust fund's bonds higher up in this post.

I'll ask you the same thing I asked JMS. What's the difference between what the Treasury has tp do if SS runs a deficit and redeems some of its bonds and what the Treasury has to do if SS runs a deficit and the bonds don't exist?

Oh, and a follow up: Do you or do you not acknowledge that there is a difference between an entity owing a different and separate entity money and an entity "owing itself" money?

[JMS]

JMS, please explain to the audience the huge, enormous difference between what the Treasury has to do when the trust fund runs a deficit and redeems its super-duper-important special bonds and what the Treasury would have to do if SS was running a deficit and those bonds didn't exist.

JMS, please explain .. what the Treasury has to do when the trust fund runs a deficit and redeems its .. bonds and what the Treasury would have to do if SS was running a deficit .....

US Creditors includinig Social Security don't "redeem" bonds. The borrower (the federall government) pay those bonds off when they mature. at which time the federal government typically issues new bonds which then can be purchased again by social security or the federal reserve, or mililtary retirement funds, or federal workers retirement funds, or private firms in the US, or foreign governments.. Works exactly the same as any other bond holder.

what the Treasury would have to do if SS was running a deficit .....

Well the years Sociaal Security did run a "deficit" (1983, 2010,2011) it used some of the surplus money held in reserve for such purposes to pay the difference. Over it's first seventy years it accumulated pretty large surplusses to be used for this purpose. I belieive these surpluses will be sufficient to pay social security defiictes through 2033. Yes the social security trust fun has invested hundreds of billions with the federal government and yes it will use those funds when the bonds mature to pay it's bills. But it will likely never come to that. like in 1983 the program will likely be tweaked an be placed in the black again as has been done several times over it's existance.

However if it is not, worst case.. In what the GOP spent for tthe Bush tax cuts over ten years, Social Security deficites could be paid for the next seventy years. such federal payments will never amount to more than 25% of social security payments going out seventy four years or until 2086.

Social Security’s expenditures exceeded non-interest income in 2010 and 2011, the first such occurrences since 1983, and the Trustees estimate that these expenditures will remain greater than non-interest income throughout the 75-year projection period. The deficit of non-interest income relative to expenditures was about $49 billion in 2010 and $45 billion in 2011, and the Trustees project that it will average about $66 billion between 2012 and 2018 before rising steeply as the economy slows after the recovery is complete and the number of beneficiaries continues to grow at a substantially faster rate than the number of covered workers. Redemption of trust fund assets from the General Fund of the Treasury will provide the resources needed to offset the annual cash-flow deficits. Since these redemptions will be less than interest earnings through 2020, nominal trust fund balances will continue to grow. The trust fund ratio, which indicates the number of years of program cost that could be financed solely with current trust fund reserves, peaked in 2008, declined through 2011, and is expected to decline further in future years. After 2020, Treasury will redeem trust fund assets in amounts that exceed interest earnings until exhaustion of trust fund reserves in 2033, three years earlier than projected last year. Thereafter, tax income would be sufficient to pay only about three-quarters of scheduled benefits through 2086.

http://www.ssa.gov/oact/TRSUM/index.htmlv

To simplify further. What is tthe differences between paying your grocery biill, and paying your credit card? Both are payments, outgoing expenditures. One is discresiionary, the other is not. One represents a decisioon you made the day you went to the store, the other represents a decisiion/agreement you made quite some time prior.

[Hubbs]

US Creditors includinig Social Security don't "redeem" bonds. The borrower (the federall government) pay those bonds off when they mature. at which time the federal government typically issues new bonds which then can be purchased again by social security or the federal reserve, or mililtary retirement funds, or federal workers retirement funds, or private firms in the US, or foreign governments.. Works exactly the same as any other bond holder.

Incorrect. By law, the trust fund must buy special non-marketable securities that cannot be sold but can be redeemed at any time.

Well the years Sociaal Security did run a "deficit" (1983, 2010,2011) it used some of the surplus money held in reserve for such purposes to pay the difference. Over it's first seventy years it accumulated pretty large surplusses to be used for this purpose. I belieive these surpluses will be sufficient to pay social security defiictes through 2033. Yes the social security trust fun has invested hundreds of billions with the federal government and yes it will use those funds when the bonds mature to pay it's bills. But it will likely never come to that. like in 1983 the program will likely be tweaked an be placed in the black again as has been done several times over it's existance.

However if it is not, worst case.. In what the GOP spent for tthe Bush tax cuts over ten years, Social Security deficites could be paid for the next seventy years. such federal payments will never amount to more than 25% of social security payments going out seventy four years or until 2086.

Yes, the trust fund has gone to the Treasury and said, "We have a shortfall of $X, so here are some of our special bonds with interest amounting to $X. Now you have to sell $X in general bonds and give us the money." Nobody is disputing that, and it is in fact precisely the point.

Also, as awesome as it would be to turn this into a festival of partisan talking points, tax cuts are not relevant to this conversation.

[JMS]

Every year we shorten the life of Social Security.

Every year we shout that its fine.

The Baby Boomers WILL destroy some contries as they are such a percentage of the population due to WWII.

They have not really started retiring and there is a double edged sword: They are working longer now, they are retiring early now.

in 2009 we say its fine till 2017

in 2010 we say its going red in 2010 (oops), but we say its good for 70 years.

in 2011 we say its going red 3 years sooner.

In 2012 we say its going red 8 years sooner.

in 2013 we say its going red 9 years sooner.

in 2014 we say its red (oops)

baby boomers are hitting it harder now and for the next 10 years.

The Administrator of the fund coming out yesterday was not a re-election ploy.

Sociail Security is small potatos economicially standinng. You solve its problems and you save tens of billiions of dollars starting in 20 years. (Literally) That's why Obama didn't touch it. We've got bigger fish to fry.

Healthcare is what is goiong to bankrupt us in the next 15 years. Healthcare is consuminng our GDP. We are overpaying in healthcare costs by more than 1 trillion dollars a year and that number is growing annually. The Federal Government is the largest consumer of healthcare services. That's where the real fiscal heavy lifting must be done and why Obama tackled that first.

Social Security isn't an immediate crisis, and won't even be a drain on our budget for 20 years.... and then a rerlatively modest drain at that.

[twa]

To simplify further. What is tthe differences between paying your grocery biill, and paying your credit card? Both are payments, outgoing expenditures. One is discresiionary, the other is not. One represents a decisioon you made the day you went to the store, the other represents a decisiion/agreement you made quite some time prior.

One is a rather flexible obligation, the other a contract with financial penalties?

to simplify the difference further....you don't pay for the groceries,you are not getting them

you don't pay the CC and they will Attempt to collect

goods purchased vs unsecured debt

that credit rating is going down for good reason

[Larry]

What in the world are you talking about? You're talking about the trust fund's bonds higher up in this post.

:secret: I quoted you.

Your claim about "super-duper-important special bonds".

You know, when you were trying to insult people rather than discuss the facts.

I'll ask you the same thing I asked JMS. What's the difference between what the Treasury has tp do if SS runs a deficit and redeems some of its bonds and what the Treasury has to do if SS runs a deficit and the bonds don't exist?

And as I just pointed out, that's not the same thing you asked JMS.

But, it is the same thing, without the insult.

You want to know the difference?

One is a debt, incurred by the people of the United States. Something which the US Constitution says, must be redeemed.

The other is a campaign promise.

----------

Now, to you:

What's the difference between "what the Treasury has tp do if SS runs a deficit and redeems some of its bonds" (your question), and what the Treasury has to do if somebody else redeems some of it's bonds?

Oh, and a follow up: Do you or do you not acknowledge that there is a difference between an entity owing a different and separate entity money and an entity "owing itself" money?

You are falsely attempting to rephrase the situation.

The Social Security Trust Fund is not the US Government general revenue fund.

Yes, both of them are owned and controlled by the US Government. But they are not the same thing.

Hypothetically, say I own a business. Can the business loan me some money?

If the business loans me some money, then does that debt exist?

I'm in the process of getting paperwork filled out, to create a trust for my Father. (It's something to do with his estate planning.) Now that Dad has filled out the paperwork, establishing the trust, I have to open a bank account for the trust to use. The attorney says that the account doesn't have to have any special name on it. It can simply be a normal checking account, with my name on the account. It will simply be used by the trust.

But I'm pretty certain that that trust can't loan me money. (I certainly assume it would be a violation of the trust. Probably criminal, in fact.)

And, if the trust could loan me money, then that would be a perfectly valid debt. One that I would be legally, and morally, obligated to pay back. Even though I'd be paying it back, by writing a check from a checking account that had my name on it, and depositing that check into an account that had my name on it.

Or, here's a third way of looking at it:

The US Treasury holds the people's money.

Does that mean that, when a US Citizen loans money to the US Government, then that person "owes himself", and therefore, the government doesn't have to pay the money back?

[JMS]

Incorrect. By law, the trust fund must buy special non-marketable securities that cannot be sold but can be redeemed at any time.

I wouldn't say I was incorrect, I would say your above statement added more detail and was wrong.

Every bond the Social Security owns has a maturity date associated with it... See the social security assets report for March 2012..

http://www.ssa.gov/cgi-bin/investheld.cgi

But you were right that congress change the law and those "special bonds" can be cashed in at any time by the social security board if needed.

By law, income to the trust funds must be invested, on a daily basis, in securities guaranteed as to both principal and interest by the Federal government. All securities held by the trust funds are "special issues" of the United States Treasury. Such securities are available only to the trust funds.

In the past, the trust funds have held marketable Treasury securities, which are available to the general public. Unlike marketable securities, special issues can be redeemed at any time at face value. Marketable securities are subject to the forces of the open market and may suffer a loss, or enjoy a gain, if sold before maturity. Investment in special issues gives the trust funds the same flexibility as holding cash.

Also, as awesome as it would be to turn this into a festival of partisan talking points, tax cuts are not relevant to this conversation.

More hypocracy.. Like the entire social security debate isn't already an exersize in partisan politics.

I think it's relevant to know that the folks claiming social security is in such trouble and represents such a crisis have already added and are looking to further add many times the cost of SS projected defiict in descresionary debt targeted for the benifit of a different demographic (aka.. very wealthy people).... I think that's relavent both to place a scale on the SS "crisis", and to show the hypocracy of those

calling out Social Security as in such a crisis.

---------- Post added April-24th-2012 at 12:18 PM ----------

to simplify the difference further....you don't pay for the groceries,you are not getting them

you don't pay the CC and they will Attempt to collect

goods purchased vs unsecured debt

that credit rating is going down for good reason

Exactly right. Although since uncle sam has an army and all, the more immidiate concern for the government if it doesn't pay it's bonds is the credit rating and inability to borrow future funds at such a nice low interest rate. Which ultimately will cost the government more money as it is forced to pay more to service it's existing debt.

Ultimately there is a lot of difference between the treasury paying debt like social security bonds, and the treasury paying other discresionary budget items.

[Hubbs]

:secret: I quoted you.

Your claim about "super-duper-important special bonds".

You know, when you were trying to insult people rather than discuss the facts.

Yes, you quoted me, and your response to what you quoted was to say that nobody was talking about the trust fund's bonds. And I really have no idea why you said that because even you were talking about the trust fund's bonds.

And as I just pointed out, that's not the same thing you asked JMS.

But, it is the same thing, without the insult.

The fact that you think that "super-duper-important special bonds" is somehow an insult to JMS, rather than a sarcastic description of the sheer meaninglessness of those bonds, is rather strange.

As for the rest, holy crap. Has your entire point this whole time been the notion that myself and others were saying, "When SS runs a deficit it means it no longer has any assets and the federal government has to make up for the deficit by going further into debt," and you've been rushing in and saying, "No, when SS runs a deficit its still have plenty of assets... that just so happen to make the federal government make up for the deficit by going further into debt."? Because if that's the case, then I don't think you need to keep going, as I'm pretty sure that nobody, including the economist in the OP, disagrees with you. I think you may have been taking the suggestion that the trust fund doesn't exist a bit too literally.

[Larry]

Yes, you quoted me, and your response to what you quoted was to say that nobody was talking about the trust fund's bonds.

Quote me.

As for the rest, holy crap. Has your entire point this whole time been the notion that myself and others were saying, "When SS runs a deficit it means it no longer has any assets and the federal government has to make up for the deficit by going further into debt," and you've been rushing in and saying, "No, when SS runs a deficit its still have plenty of assets... that just so happen to make the federal government make up for the deficit by going further into debt."? Because if that's the case, then I don't think you need to keep going, as I'm pretty sure that nobody, including the economist in the OP, disagrees with you. I think you may have been taking the suggestion that the trust fund doesn't exist a bit too literally.

I've clearly stated my point.

Try quoting it, instead of trying to rephrase it into something that you'd rather debate.

Or, here, I'll state it again:

The author's claim that "If the SS trust fund redeems it's t-bills, then the government will have to borrow the money from somewhere else. Therefore, the t-bills in the SS trust fund are worthless" is identical to the statement "If anybody redeems it's t-bills, then the government will have to borrow the money from somewhere else. Therefore, anybody's t-bills are worthless"

Both statements, the author's and mine, start with a true statement, and then claim that "therefore <a complete lie>".

[Hubbs]

I wouldn't say I was incorrect, I would say your above statement added more detail and was wrong.

Every bond the Social Security owns has a maturity date associated with it... See the social security assets report for March 2012..

http://www.ssa.gov/cgi-bin/investheld.cgi

But you were right that congress change the law and those "special bonds" can be cashed in at any time by the social security board if needed.

By law, income to the trust funds must be invested, on a daily basis, in securities guaranteed as to both principal and interest by the Federal government. All securities held by the trust funds are "special issues" of the United States Treasury. Such securities are available only to the trust funds.

In the past, the trust funds have held marketable Treasury securities, which are available to the general public. Unlike marketable securities, special issues can be redeemed at any time at face value. Marketable securities are subject to the forces of the open market and may suffer a loss, or enjoy a gain, if sold before maturity. Investment in special issues gives the trust funds the same flexibility as holding cash.

What part of my statement was wrong? I never said the trust fund's bonds didn't also have maturities.

More hypocracy.. Like the entire social security debate isn't already an exersize in partisan politics.

You realize that I think Bush was a horrible president and have thought that since I first started seriously following politics, right?

I think it's relevant to know that the folks claiming social security is in such trouble and represents such a crisis have already added and are looking to further add many times the cost of SS projected defiict in descresionary debt targeted for the benifit of a different demographic (aka.. very wealthy people).... I think that's relavent both to place a scale on the SS "crisis", and to show the hypocracy of those

calling out Social Security as in such a crisis.

Social Security's not in a crisis, or at least not in a crisis that's very easy to fix. We just don't yet have the political will to fix it. I think we're getting pretty close, though.

[JMS]

The fact that you think that "super-duper-important special bonds" is somehow an insult to JMS, rather than a sarcastic description of the sheer meaninglessness of those bonds, is rather strange.

Why do you thinkk they are meaningless? They are different but why does that make them meaninigless? hundreds of billiions of dollars for decades have been distributed this way.

As for the rest, holy crap. Has your entire point this whole time been the notion that myself and others were saying, "When SS runs a deficit it means it no longer has any assets and the federal government has to make up for the deficit by going further into debt," and you've been rushing in and saying, "No, when SS runs a deficit its still have plenty of assets... that just so happen to make the federal government make up for the deficit by going further into debt."?

Its the factual error of that statement. You are saying in effect if I run a deficit, aka spend more than I take in this month or this year or for the next 3 years; I will not or can not have any assets. Social Security has made money just about every year for 78 years and has loaned that money to the federal government. Asserting that that money is just gone.. is not rational...

The absurdity in your position is ( if I understand your position)... is that if your money isn't in your pillow case or mattress it's essentially gone...

It is a plea to suspend the fundimental laws of our economy, in order to entertain your position.... The response is "no",

It's also wrong. Social Security loans makes up about 20% of federal debt.... are you suggesting we default on the other 80% of our debt? No? Why Not? Because that debt is somehow more worthy under your myopic political philosophy? Cause the wind id blowing from the east? Because Pluto is in the shadow of jupiter? Because the social security bonds are not identical to the bonds we give to china or somebody else?

Because if that's the case, then I don't think you need to keep going, as I'm pretty sure that nobody, including the economist in the OP, disagrees with you. I think you may have been taking the suggestion that the trust fund doesn't exist a bit too literally.

I think the disagreement comes in the fact that you are taking a generality, and a flawed one at that; and trying to extrapolate out from that specifics. You loose details when you generalize but that doesn't give you the logical right to replace those details like you want and still be making sense....

Social Security Trust is a US creditor. It might not have the same type of bonds as China, or the Federal Reserve, but it holds the same pledge... backed by the full faith and credit of the US government. It's bonds are more liquid, and might have higher or lower interest rates, but the pledge is the same.

[Hubbs]

Quote me.

Seeing as I already did once, I assume that means that when you said that nobody's talking about the super-duper-important bonds, you were only referring to the label. So that gets back to the strange and false notion that I was somehow trying to personally insult JMS by calling the bonds names. Which I'll keep doing if I feel like it, because, again, I'm not trying to personally insult anyone here, I'm trying to insult the bonds, because the bonds are completely meaningless. They're so super-duper-important that they're extra-super-duper-important.

I've clearly stated my point.

Try quoting it, instead of trying to rephrase it into something that you'd rather debate.

No, you really haven't, because I don't even know what you're arguing about at this point, other than the following claim, which in a deliciously ironic manner is rephrasing what the economist, myself, and others in this thread have been saying into something that you'd rather debate...

Or, here, I'll state it again:

The author's claim that "If the SS trust fund redeems it's t-bills, then the government will have to borrow the money from somewhere else. Therefore, the t-bills in the SS trust fund are worthless" is identical to the statement "If anybody redeems it's t-bills, then the government will have to borrow the money from somewhere else. Therefore, anybody's t-bills are worthless"

Both statements, the author's and mine, start with a true statement, and then claim that "therefore <a complete lie>".

...which is, again, nothing more than once again insisting that the others and I are debating whether or not the accountants who handle the general fund or the accountants who handle the SS trust fund will tabulate the numbers involved. We're not. You know perfectly well what we mean when we say that the bonds are worthless, and you're choosing a different meaning so that you can apparently waste your own time arguing about the meaning that you'd like us to be using instead of the meaning we're actually using. I have no idea why you're doing it, to be honest.

---------- Post added April-24th-2012 at 01:27 PM ----------

Why do you thinkk they are meaningless? They are different but why does that make them meaninigless? hundreds of billiions of dollars for decades have been distributed this way.

Because the deficit goes up by the exact same amount either way.

I'm gonna start running out of ways to say this.

Its the factual error of that statement. You are saying in effect if I run a deficit, aka spend more than I take in this month or this year or for the next 3 years; I will not or can not have any assets.

No I'm not, I'm saying the opposite of that.

Social Security has made money just about every year for 78 years and has loaned that money to the federal government. Asserting that that money is just gone.. is not rational...

:doh:

I have absolutely no idea how, at this point, you still think that I'm specifically talking about how the trust fund classifies its assets instead of the federal government as a whole.

It's also just wrong. Social Security loans makes up about 20% of federal debt.... are you suggesting we default on the other 80% of our debt? No? Why Not? Because that debt is somehow more worthy under your myopic political philosophy? Cause the wind id blowing from the east? Because Pluto is in the shadow of jupiter? Because the social security bonds are not identical to the bonds we give to china or somebody else?

I think JMS just went plaid.

I think the disagreement comes in the fact that you are taking a generality, and a flawed one at that; and trying to extrapolate out from that specifics. You loose details when you generalize but that doesn't give you the logical right to replace those details like you want and still be making sense....

Social Security Trust is a US creditor. It might not have the same type of bonds as China, or the Federal Reserve, but it holds the same pledge... backed by the full faith and credit of the US government. It's bonds are more liquid, and might have higher or lower interest rates, but the pledge is the same.

And absolutely none of that is relevant to anything I've said.

[Predicto]

What an *******, that economist. Trying to peddle his "no economic value" web of lies.

Just for the record, Allen Smith is not a libertarian, and I don't think he is making the same point about social security that you think he is making.

By the way, here is a picture of Allen Smith's car (not a joke)

[JMS]

Social Security's not in a crisis, or at least not in a crisis that's very easy to fix. We just don't yet have the political will to fix it. I think we're getting pretty close, though.

The fact that left unchanged social security will start to cost the US taxpayer general revenue funds in 20 years is not a crisis in Washington terms. It's not even close to a crisis.

Hell the tea party yahoo's on the hill let the federal government come within hours, days of defaulting on the national debt... Now that was a crisis involving Trillions of dollars today.

Social Security will cost us tens of billions in 20 years!!... Nothing. well little anyway..

Social Security isn't in crisis, The folkls proposing it is are partisan hacks who are looking to dismantle it..

---------- Post added April-24th-2012 at 01:45 PM ----------

(why are Social Securityy Bonds meaningless)

Because the deficit goes up by the exact same amount either way.

? Which is true every time the federal government pays off one of it's maturinig bonds. I still don't understand your posittion

No I'm not, I'm saying the opposite of that.

From HUBBS Post #36

the notion that myself and others were saying, "When SS runs a deficit it means it no longer has any assets and the federal government has to make up for the deficit by going further into debt,"

? Really? So you are just going to say what you don't mean rather than tell me what tthe hell you are saying? Because your quote said exactly that.... ""When SS runs a deficit it means it no longer has any assets "

You are trying to conflate the bonds whiich social secuirty holds which surely are assets on anybodies book, and the debt those bonds represent to tthe federal government.. wave your hands and say they aren't really debt for the absurd reason they have to be paid for? And if they aren't really debt, SS can't call them assets?

I have absolutely no idea how, at this point, you still think that I'm specifically talking about how the trust fund classifies its assets instead of the federal government as a whole.

Yes you aren't talking about how the trust fund classifies it's assets, or the federal government classifies it's debt, or reality as it exists on tthis plain of existance. You are talking about the fact that when the Federal government pay's debt it costs money, when we buy a shinny new tank it costs money. we can choose not tto buy the tank... why can't we choose not to pay our debt... ( specifically social security debt ).. Hey that debt after we've borrowed it costs money.... It's not a positive for the economy... it's a DRAAAAGG on our economy...

I know where my problem is.. I'm actually reading your posts to try to understand what you are saying rather than getting a scalpel a blender, a little milk and some ovoltine and transfering the ideas physically from your brain to mine through the digestive process. That would be much less frusterating for me. I'll be right over.

[Hubbs]

? Which is true every time the federal government pays off one of it's maturinig bonds. I still don't understand your posittion

My position is that the bonds the trust fund holds are completely meaningless to the federal government's deficits and debt, and therefore the trust fund is pretty much a pointless accounting endeavor.

? Really? So you are just going to say what you don't mean rather than tell me what tthe hell you are saying? Because your quote said exactly that.... ""When SS runs a deficit it means it no longer has any assets "

That was my example of what I'm not saying.

Yes you aren't talking about how the trust fund classifies it's assets, or the federal government classifies it's debt, or reality as it exists on tthis plain of existance. You are talking about the fact that when the Federal government pay's debt it costs money, when we buy a shinny new tank it costs money. we can choose not tto buy the tank... why can't we choose not to pay our debt... ( specifically social security debt )..

I know where my problem is.. I'm actually reading your posts to try to understand what you are saying rather than getting a scalpel a blender, a little milk and some ovoltine and transfering the ideas physically from your brain to mine through the digestive process. That would be much less frusterating for me. I'll be right over.

I've never talked about not paying off any of our debt in this thread.

---------- Post added April-24th-2012 at 02:08 PM ----------

Just for the record, Allen Smith is not a libertarian, and I don't think he is making the same point about social security that you think he is making.

By the way, here is a picture of Allen Smith's car (not a joke)

First of all, wow.

Second, for some reason I thought Smith had written the entire article. Although if he's talking about an "empty trust fund" it seems that he and I are offering opinions that are at least rather similar. And I don't think the quote goes against anything I've said here. The trust fund is about as important as America's population of unicorns.

[JMS]

My position is that the bonds the trust fund holds are completely meaningless to the federal government's deficits and debt, and therefore the trust fund is pretty much a pointless accounting endeavor.

"The SS bonds are completely meaningless to the fed gov deficites and debt"..... except that those bonds represent about 20% of the natiional debt and is a mechanism used to fund the annual deficit.. So factually you are wrong. They are meaningful, and valuable...

They don't reduce the deficit, nor debt... they are a funding mechanism.

"therefore the trust fund is pretty much a pointless accounting endeavor.".... except that that trust fund is responsible for liftinig about half of all elderly above the poverty line, and fund our debt, and enable our deficit, and give liquidity to our entire government.... so pretty much wrong on that point too.

That was my example of what I'm not saying.

Then you did say it in a confusinig and illogical way, but at least you are consistant.

I've never talked about not paying off any of our debt in this thread.

Yes you have just said "the bonds the trust fund holds are completely meaningless"... you didn't actually say they were valueless?

How silly of my to jump to that conclusion.

So here is your first point and let me take this as the jist of what you were trying to clalrify...

Ah, I see. Your point being that when the economist says "no economic value," he's wrong, because the trust fund has special bonds that it shows to the Treasury, and the Treasury then has to sell enough regular bonds to make up for whatever the shortfall is. As opposed to what would happen if the fund didn't have those special bonds, when it would instead show its books the Treasury, and the Treasury... then has to sell enough regular bonds to make up for whatever the shortfall is. In other words, the end result is exactly the same as it would be if the special bonds never existed in the first place.

What an *******, that economist. Trying to peddle his "no economic value" web of lies

So because the bonds can be exchanged at any time before they mature, they are can necessitate immediately exchanginng them for market bonds, and thus don't help social security or the federal governmentn?

Only Social Security holds 20% of the nattional debt ini thos bonds? Only Social lSecurity is making about 4% annually on trillions which it currently has loaned to the federal government via those bonds.

I think you are trying to make the case for foldinig tthe social security trust into the federal budget because why I don't know.

Suffice it to say the trust is not part of tthe federal budget, never has been, never will be. The existing arrangement works betteer for SSN, it better ensures SS stay's above the day to day political battles which go on in the budget procecss. It's also not all that bad for the Federal government.

[Larry]

No, you really haven't, because I don't even know what you're arguing about at this point, other than the following claim, which in a deliciously ironic manner is rephrasing what the economist, myself, and others in this thread have been saying into something that you'd rather debate...

You are correct. I intentionally shortened the OP's point.

I don't think I altered it's point in any way. (And you didn't note any way in which I altered it. You simply used the fact that it was not an exact word for word quote, as an excuse to ignore my point entirely.

I will now proceed, using the post's exact words, so that you won't have that excuse. (You'll have to come up with a different one.)

I'll even quote the previous post, in which I quoted the Op's exact words:

The original article opens with two sentences:

1. It says: , "Neither the redemption of trust fund bonds, nor interest paid on those bonds, provides any new net income to the Treasury, which must finance redemptions and interest payments through some combination of increased taxation, reductions in other government spending, or additional borrowing from the public."
   
2. In other words, the trust fund is of no economic value.

I observe that sentence 1 is completely true. And that it in no way, shape, or form so much as implies sentence 2.

Proof:

Sentence #1, . . .

Neither the redemption of trust fund bonds, nor interest paid on those bonds, provides any new net income to the Treasury, which must finance redemptions and interest payments through some combination of increased taxation, reductions in other government spending, or additional borrowing from the public.

. . . , while true, is equally true, if you replace the words "trust fund bonds", with the words "all US Treasury bonds".

(This is, in fact, the exact fact that I pointed out, in post #4 of this thread.)

Doing so results in the sentence . . .

Neither the redemption of all US Treasury bonds, nor interest paid on those bonds, provides any new net income to the Treasury, which must finance redemptions and interest payments through some combination of increased taxation, reductions in other government spending, or additional borrowing from the public.

. . . , which is also, equally, true.

Ant yet, if the author's version of sentence #1, leads to the author's version of sentence #2, then my version of sentence #1 also leads to an identically-modified version of sentence #2.

In other words, all US Treasury bonds [are] of no economic value

. . . , which I think that even the most partisan in this thread will admit is untrue. (Please, let me know if my assumption is incorrect, and if you do, in fact, want to argue that all US Treasury bonds are without value.)

----------

In short,

The argument that "The t-bills in the trust fund are worthless, because the government has to borrow money to redeem them" . . .

is just as valid as the argument that "All t-bills are worthless, because the government has to borrow money to redeem them"

(They're both completely invalid.)

[Predicto]

My position is that the bonds the trust fund holds are completely meaningless to the federal government's deficits and debt, and therefore the trust fund is pretty much a pointless accounting endeavor.

First of all, wow.

Second, for some reason I thought Smith had written the entire article. Although if he's talking about an "empty trust fund" it seems that he and I are offering opinions that are at least rather similar. And I don't think the quote goes against anything I've said here. The trust fund is about as important as America's population of unicorns.

I pretty much agree with you on that, and I suspect Larry and JMS do too. I think you all might be arguing past one another.

[Larry]

I pretty much agree with you on that, and I suspect Larry and JMS do too. I think you all might be arguing past one another.

You would be absolutely incorrect.

The fact that those t-bills count as both an asset and as a debt when you lump all government funds together, does not in any way mean that they were not legitimately incurred debt, incurred with the obligation that they were the most secure investment in the world. The safest possible place to invest the people's money.

I fully understand that there are people who would like it if the government could borrow that money for decades, and then pretend like they don't have to pay it back. (I have speculation as to why they're trying to push that idea. But it's probably better if I leave the speculation out of it.)

[Hubbs]

You would be absolutely incorrect.

The fact that those t-bills count as both an asset and as a debt when you lump all government funds together, does not in any way mean that they were not legitimately incurred debt, incurred with the obligation that they were the most secure investment in the world. The safest possible place to invest the people's money.

I fully understand that there are people who would like it if the government could borrow that money for decades, and then pretend like they don't have to pay it back. (I have speculation as to why they're trying to push that idea. But it's probably better if I leave the speculation out of it.)

Allow me to present a brief counterpoint:

Who cares?!?

I'm a bit squeezed for time at the moment and thus won't be able to get to your response to my earlier post until (probably) tomorrow. But once you've acknowledged the fact that because the trust fund is both an asset and a debt to the federal government as a whole, and therefore cancels itself out completely to the federal government as a whole, and therefore is completely irrelevant to the federal government as a whole, what in the world are you arguing? Nobody—nobody—is saying that it wasn't "legitimately incurred debt." It's part of the official tabulation of the national debt, for God's sake. Nobody has said that the trust fund wasn't set up to buy US government debt because that debt was considered to be super-safe. I don't even think anybody has suggested that it shouldn't be paid back. (Can't is another matter entirely.)

You say "borrow that money for decades" and then say "not have to pay it back" as if there are two separate entities borrowing and paying. It's the same damn entity. Do you bother to tabulate how much money you shift between your left and right pockets, as if your left might "owe" your right? They're part of the same pants. They're worn by the same person. What on Earth is so important about the difference between your pockets that you're making all of this effort?

[chipwhich]

Allow me to present a brief counterpoint:

Who cares?

I'm a bit squeezed for time at the moment and thus won't be able to get to your response to my earlier post until (probably) tomorrow. But once you've acknowledged the fact that because the trust fund is both an asset and a debt to the federal government as a whole, and therefore cancels itself out completely to the federal government as a whole, and therefore is completely irrelevant to the federal government as a whole, what in the world are you arguing? Nobody—nobody—is saying that it wasn't "legitimately incurred debt." Nobody has said that the trust fund wasn't set up to buy US government debt because that debt was considered to be super-safe. I don't even think anybody has suggested that it shouldn't be paid back. (Can't is another matter entirely.)

You say "borrow that money for decades" and then say "not have to pay it back" as if there are two separate entities borrowing and paying. It's the same entity. Do you bother to tabulate how much money you shift between your left and right pockets, as if your left might "owe" your right? They're part of the same pants. They're worn by the same person. What on Earth is so important about the difference between your pockets that you're making all of this effort?

Sorry I was out for this days chasing your tail.

Shifting money between pockets is what is unexplainable to Larry and JMS. They think that SS is a legitimate separate entity with it's own profit and loss statement and don't realize it's nothing more than a bookkeeping exercise.

If they can't understand that, you can't explain it to them.

We are just shoveling ****.

[PeterMP]

I saw this and thought I'd through it out there. One of Social Securities biggest issues, income disparity:

http://www.cepr.net/index.php/blogs/beat-the-press/the-primary-cause-of-social-securitys-bleak-outlook-is-upward-redistribution

[Hubbs]

I saw this and thought I'd through it out there. One of Social Securities biggest issues, income disparity:

http://www.cepr.net/index.php/blogs/beat-the-press/the-primary-cause-of-social-securitys-bleak-outlook-is-upward-redistribution

...one of the many reasons why I think that income disparity is an issue that right-wingers should properly address because it will directly determine the economic future of this country.

[Switchgear]

National Debt = Public Debt + Intergovernmental holdings

When SS buys bonds with its surplus (as required by law) the Intergovernmental holdings part goes up, but the money received from SS can be used to pay down Public Debt. Say you had a 50 Billion dollar yearly shortfall (dare to dream), that is, your National Debt increased 50 Billion in one year. If you had a 100 Billion dollar SS surplus, then your Public Debt would still drop by 50 Billion.

ND = PD + IGH

50 = -50 + 100

In this example, positive numbers represent debts increasing, negative numbers represent debts decreasing.

That's essentially what has been going on for as long as SS has been running a surplus. Some years the SS surplus was big enough to make Public Debt drop, most years it wasn't. The numbers that have been reported as the yearly deficit (or surplus) have been the Public Debt number. The government has been using the SS surplus to make the budget deficit seem much better than it actually has been.

What is going to happen once SS stops running a surplus (it hasn't yet) is that SS is going to start cashing in their bonds, and the Intergovernmental Holding number will start to drop. The National Debt isn't going to change, but the Public Debt (the money we have to borrow from other sources) is going to go up by however much SS cashes in, plus the yearly deficit.

For example:

ND = PD + IGH

50 = 100 + -50

My prediction is that once Public Debt numbers look worse than the National Debt numbers, the government will start using the National Debt increase to report the yearly deficit. It doesn't really matter, to be honest, it's just polishing a turd. The important numbers are here:

Current Debt Held by the Public Intragovernmental Holdings Total Public Debt Outstanding

04/23/2012 10,858,204,873,838.22 4,761,969,175,722.01 15,620,174,049,560.23

Both parties have been using this crap to make themselves look better, and we're all getting screwed in the process.

[Fergasun]

Did we go over the fact now that Social Security taxes might as well be considered income taxes? Since the Federal Government has decided to use Social Security taxes to fund the government (and Medicare).... there's no point to really making any distinction between payroll taxes and income tax (although this will piss off the people who like to complain about 47% of the country not paying taxes).

It's kind've funny how those people will complain about 47% who don't pay their perceived "fair share" yet get mad when folks demand some other 1% (or even less) pay their "fair share".

Sorry for busting in on the thread with this; but that was my first thought whenever I read articles about Social Security. To point out that the money is used to fund Treasury, period; and not simply the entitlement programs.