WashingtonPost: Social Security, the trust fund and funny money

[Larry]

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?

Funny. I see a whole lot of people, including the author that is the subject of this thread, LOUDLY announcing that the trust fund DOES NOT EXIST. Referring to treasury bills as "funny money", "worthless pieces of paper", or "IOUs".

I see a whole lot of people announcing that the day SS cashed in a single dollar of the trust fund, that SS was "bankrupt".

----------

In fact, a whole lot of people trying to claim that, since the SS trust fund and the federal government's general revenue are both administered by the same entity, THAT THEY ARE THE SAME THING. pushing the notion that, when a t-bill is sold to the SS trust fund, that t-bill DOESN'T EXIST.

----------

In answer to you question "who cares", I will observe that there seem to be two groups of people, who care a whole lot.

The folks who want to not have to pay the money back. And the folks who think that thy have to.

---------- Post added April-25th-2012 at 06:40 AM ----------

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 ****.

The problem is the people who desperately want to ignore treasury bills, if those bills are owned by SS. (T-bills owned by anybody else are OK with them.) they will push any half-baked excuse to try to claim that t-bills magically cease to exist, the instant the SS trust fund touches them.

They'll argue (as the author which this thread has done) that, because the general revenue doesn't have cash in the bank with wich to redeem these t-bils, tha therefore those t-bills don't exist. (the fact that the same is true for all t-bills, they will spend a week refusing to admit).

Or they will try to claim that it is impossible for two entities controlled by the same entity to have obligations to each other. (Again, the fact that this is not in any way true, when pointed out to them with multiple examples, will be treated as if they aren't capable of reading those words).

---------- Post added April-25th-2012 at 06:45 AM ----------

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

I dunno. I don't see a lot of reasoning, there. What I see is just a thinly veiled argument that we should raise the ceiling on SS taxes.

I'll certainly agree that having SS bring in more money would certainly help its solvency.

But when I see proposals to raise the ceiling, what I see is a proposal to tax high-income earners ON INCOME WHICH WILL NOT BE INCLUDED IN THEIR BENEFITS, WHEN THEY RETIRE.

I've got a fairness problem, with that.

[gbear]

Larry,

The "on income which will not be included in their benefits when they retire" speaks to a fundamental perception issue I have with SS. The ceiling is somewhere around $108k (I'll let you know exactly some year when I hit it). The fundamental question is "what is social security?"

Is it an investment? If so it is a terrible one for most of us.

Is it insurance? I think is how it was originally intended, to make sure grandma and grandpa aren't sitting on the curb begging for enough money to get a bite to eat and a place to stay. I still think of it this way. However, many like my parents think of it as additional income they can use to buy a beach house. Their view is they put money into it their entire work life with the understanding they would get paid from it once they hit a certain age to retire. They say they have gotten nothing from it to which I counter that is like saying "I have gotten nothing from my car insurance because I haven't filed a claim in the 20 years I have been driving (true)." That is the nature of insurance. People pay more than they get, but they know the worst things which can happen to them will be somewhat mitigated.

I think both are valid positions, and at some point our society and our government will have to pick which view will hold.

[Larry]

Larry,

The "on income which will not be included in their benefits when they retire" speaks to a fundamental perception issue I have with SS. The ceiling is somewhere around $108k (I'll let you know exactly some year when I hit it). The fundamental question is "what is social security?"

Is it an investment? If so it is a terrible one for most of us.

Agreed.

That, also, is part of my "fairness problem" with the proposal to tax the rich more for SS.

Frankly, SS right now sucks for people making the ceiling. The guy making $110K (or more) pays in a whole lot more than he gets out, right now. (The guy who makes $20K his whole life, gets out a lot more than he puts in.)

To then go to the guy making $1M,and say "we're going to increase your SS taxes by a factor of 10. But we aren't going to raise the money you get out"?

That's just grossly unfair, to me.

To me, I'm a MUCH bigger fan of saving SS by raising the retirement age, thus shifting the amount paid in, and the amount taken out, by everybody.

[chipwhich]

The problem is the people who desperately want to ignore treasury bills, if those bills are owned by SS. (T-bills owned by anybody else are OK with them.) they will push any half-baked excuse to try to claim that t-bills magically cease to exist, the instant the SS trust fund touches them.

They'll argue (as the author which this thread has done) that, because the general revenue doesn't have cash in the bank with wich to redeem these t-bils, tha therefore those t-bills don't exist. (the fact that the same is true for all t-bills, they will spend a week refusing to admit).

Or they will try to claim that it is impossible for two entities controlled by the same entity to have obligations to each other. (Again, the fact that this is not in any way true, when pointed out to them with multiple examples, will be treated as if they aren't capable of reading those words).

Larry, I don't know why you are so wrapped around the argument of whether t-bills exist. Yes they do exist. Does that make you happy?

That said it doesn't alleviate the fact that social security is nothing more than an accounting shell game. That is the part you don't understand.

t-bills exist

t-bills exist

t-bills exist

Nobody denies that.

t-bills exist.

Feel better? Now back on topic of the OP.

[pointyfootball]

To me, I'm a MUCH bigger fan of saving SS by raising the retirement age, thus shifting the amount paid in, and the amount taken out, by everybody.

Me too. I would also agree with gbear's post that SS is an insurance, not an investment vehicle, even if many in our country have used it as such. Increase retirement age, reduce (or eliminate) benefits for those that meet certain income levels. And this coming from someone who's paid into it for 26 years with another 20 to go.

[Hubbs]

Funny. I see a whole lot of people, including the author that is the subject of this thread, LOUDLY announcing that the trust fund DOES NOT EXIST. Referring to treasury bills as "funny money", "worthless pieces of paper", or "IOUs".

I see a whole lot of people announcing that the day SS cashed in a single dollar of the trust fund, that SS was "bankrupt".

----------

In fact, a whole lot of people trying to claim that, since the SS trust fund and the federal government's general revenue are both administered by the same entity, THAT THEY ARE THE SAME THING. pushing the notion that, when a t-bill is sold to the SS trust fund, that t-bill DOESN'T EXIST.

----------

In answer to you question "who cares", I will observe that there seem to be two groups of people, who care a whole lot.

The folks who want to not have to pay the money back. And the folks who think that thy have to.

And neither of those groups exist. You've made up this entire conflict in your own head, and for some reason you've decided to be so passionately committed to the "side" that you've picked that you apparently have gone all in on "defending" your "side" no matter what, even when other people are telling you that they're not in any way drawing the dividing lines in the same way you are.

There's no such thing as paying yourself back. I know you think you're defending the income of the elderly, but you've gotten yourself wrapped up in an accounting technicality that has no meaning whatsoever. Swapping money from your left pocket to your right pocket doesn't change anything about your financial status. If the trust fund held a press conference tomorrow in which the administrators announced that they had physically printed every single bond owned by the fund, and then they proceeded to set all of the bonds on fire, absolutely nothing would change. I have no idea why you don't seem to understand that, but it's the truth.

The problem is the people who desperately want to ignore treasury bills, if those bills are owned by SS. (T-bills owned by anybody else are OK with them.) they will push any half-baked excuse to try to claim that t-bills magically cease to exist, the instant the SS trust fund touches them.

They'll argue (as the author which this thread has done) that, because the general revenue doesn't have cash in the bank with wich to redeem these t-bils, tha therefore those t-bills don't exist. (the fact that the same is true for all t-bills, they will spend a week refusing to admit).

No. Literally nobody has argued that. I know you've repeatedly insisted that somebody has, but that gets back to what I wrote above. You're acting as if something would change if all of the bonds were set on fire, and that's false. It's just false.

Or they will try to claim that it is impossible for two entities controlled by the same entity to have obligations to each other. (Again, the fact that this is not in any way true, when pointed out to them with multiple examples, will be treated as if they aren't capable of reading those words).

EDIT: I misread the above. My edited response:

Again, no. Again, literally nobody has argued that. What has been argued is that when two sub-entities have obligations to each other under the financial control of a larger controlling entity, those obligations are irrelevant from the perspective of the larger entity. They cancel each other out. Perfectly. Every time.

[chipwhich]

Again, no. Again, literally nobody has argued that. What has been argued is that when two sub-entities have obligations to each other under the financial control of a larger controlling entity, those obligations are irrelevant from the perspective of the larger entity. They cancel each other out. Perfectly. Every time.

Actually in the case of social security it's even worse. It's like the movie the gremlins. When the SSTF goes to cash in it's t-bill it spawns itself into another t-bill, but a nastier t-bill probably with money borrowed from the chinese. Since there is no money in the general fund to pay back the t-bill, the government goes and spawns another t-bill to pay the debt.

[Mursilis]

Larry,

The "on income which will not be included in their benefits when they retire" speaks to a fundamental perception issue I have with SS. The ceiling is somewhere around $108k (I'll let you know exactly some year when I hit it). The fundamental question is "what is social security?"

Is it an investment? If so it is a terrible one for most of us.

Is it insurance? I think is how it was originally intended, to make sure grandma and grandpa aren't sitting on the curb begging for enough money to get a bite to eat and a place to stay. I still think of it this way. However, many like my parents think of it as additional income they can use to buy a beach house. Their view is they put money into it their entire work life with the understanding they would get paid from it once they hit a certain age to retire. They say they have gotten nothing from it to which I counter that is like saying "I have gotten nothing from my car insurance because I haven't filed a claim in the 20 years I have been driving (true)." That is the nature of insurance. People pay more than they get, but they know the worst things which can happen to them will be somewhat mitigated.

I think both are valid positions, and at some point our society and our government will have to pick which view will hold.

The problem with SS is that it was originally passed as the first (an investment-type program), but has become the second (an insurance-type program). It's hardly surprising that your parents think about it as their beach house fund - that's how the program was sold to them.

[PeterMP]

I dunno. I don't see a lot of reasoning, there. What I see is just a thinly veiled argument that we should raise the ceiling on SS taxes.

I'll certainly agree that having SS bring in more money would certainly help its solvency.

But when I see proposals to raise the ceiling, what I see is a proposal to tax high-income earners ON INCOME WHICH WILL NOT BE INCLUDED IN THEIR BENEFITS, WHEN THEY RETIRE.

I've got a fairness problem, with that.

You don't think a shift from 10% of the money being over the cap to 18% of the money being over the cap as reasoning?

[Larry]

That said it doesn't alleviate the fact that social security is nothing more than an accounting shell game.

And back, once again, to the completely false assertion that if two entities are controlled by the same entity, then those subordinate entities don't exist.

I have control over all of my parent's assets.

This does not in any way imply that the fact that I have my name on multiple bank accounts is "an accounting shell game". Or that I have the right to "loan" their money to myself, and then claim that I have no obligation to give the money back "because you can't owe money to yourself".

t-bills exist

t-bills exist

t-bills exist

Nobody denies that.

t-bills exist.

Feel better? Now back on topic of the OP.

I have never stopped discussing the topic of the OP. In fact, I have quoted it, word for word, several times. (The only person in this thread to do so.)

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."

In other words, the trust fund is of no economic value.

See that highlighted part?

Now, please. Try to tell me, again, that there is nothing and no one in this thread trying to claim that US treasury bills have no value (if those bills are owned by SS). Try and tell me that I'm not addressing the OP.

---------- Post added April-25th-2012 at 10:10 AM ----------

Me too. I would also agree with gbear's post that SS is an insurance, not an investment vehicle, even if many in our country have used it as such.

Also agreed. SS is not the ultimate retirement plan, It is a minimum-wage safety net.

(I have a theory that this is one of the reasons why it's nuder attack, by people who want to replace it with a system where the benefits are tilted in the opposite direction. But that's speculation.)

Increase retirement age, reduce (or eliminate) benefits for those that meet certain income levels. And this coming from someone who's paid into it for 26 years with another 20 to go.

I would also say "and maybe increase the tax incentives we currently have, to encourage people to save money to supplement their own retirement. Look at ways to make IRAs and similar vehicles more attractive."

---------- Post added April-25th-2012 at 10:35 AM ----------

And neither of those groups exist. You've made up this entire conflict in your own head, and for some reason you've decided to be so passionately committed to the "side" that you've picked that you apparently have gone all in on "defending" your "side" no matter what, even when other people are telling you that they're not in any way drawing the dividing lines in the same way you are.

Really? No one in this entire thread has tried to argue that tbills owned by the SS trust fund have no value? I could have sworn that the the entire purpose of the OP was to make that vary claim. That, in fact, the OP is all about some guy who has written an entire book, devoted to the purpose of making that claim.

And no one in this thread has tried to argue that "you can't owe money to yourself"? Or that the entire SS trust fund is "an accounting gimmick"?

I must have imagined all of those posts. I wonder if I can quote imaginary posts.

There's no such thing as paying yourself back.

Did that imaginary post quote? Are you seeing that? Or am I just imagining it?

How about this one?

an accounting technicality that has no meaning whatsoever

Or these?

Swapping money from your left pocket to your right pocket

If [if 2.6 trillion dollars worth of t-bills were set on fire], absolutely nothing would change

----------

What has been argued is that when two sub-entities have obligations to each other under the financial control of a larger controlling entity, those obligations are irrelevant from the perspective of the larger entity.

1) I will point out that "the larger entity" isn't the only entity in the picture. The assertion that "they are irrelevant to the larger entity" does not in any way say "they are irrelevant, period".

2) Could you point out to me, in the imaginary posts I've quoted above, or in the probably 50 posts in this thread which have been making the repeated claims that the trust find does not exist, in which that phrase I've highlighted above was included?

Cause what I'm seeing, here is an argument that "it is possible to find a place to stand in which 2.6 trillion dollars worth of t-bills don't exist, and dammit, I'm going to stand there, and demand that everybody else stand there, too, and insult them if they don't join me in standing there" (And I'm going to steadfastly refuse to actually admit that I'm intentionally, voluntarily, choosing to stand in that place.)

---------- Post added April-25th-2012 at 10:39 AM ----------

Actually in the case of social security it's even worse. It's like the movie the gremlins. When the SSTF goes to cash in it's t-bill it spawns itself into another t-bill, but a nastier t-bill probably with money borrowed from the chinese. Since there is no money in the general fund to pay back the t-bill, the government goes and spawns another t-bill to pay the debt.

Congratulations on successfully repeating the completely false reasoning used in the OP.

I will now repeat the point that I made, pointing out that this reasoning is false, in post #4:

And by the exact same definition, so are all US Government t-bills.

I'll buy yours, for 10 cents on the dollar. Best offer you'll ever get, once the word leaks out that all US Government securities are worthless.

[JMS]

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.

I do not think the trust fund is pointless, nor the bonds meaningless. I don't have a problem with the trust fund having to buy federal bonds, even special bonds and thus recieve interest for it's surplus years. I much preffer that than allowing social security to play craps with funds by playing in the stock market... or sock away several trillion dollars in pillow cases... It seems to me US teasury bonds are the safest investment in tthe world, and SS getting 4-5% initerest on it's money is a wonderful thing.

I also think their are advantages both to the federal government and social secuirty in it being separate. For social security it removes it's existance from the day to day political squables and having to compete for funding wiith other important budget items. So being separate makes Social Securities survivial much more likely, than if it had too compete for funding with the defense budget for example. From the federal government's standpoint their are also advantages. Today the federal government is on the hook for only the money it has taken away from social security in the form of bond transfers. If social security were innitially part of the federal government then the federal government would be signing up for a huge entitlement which could threaten it's own financial solvency. We suspect the federal government would step in and fund short comings with social security. That's the charge, the fear. The reality is the federal government has never, never done so. To date when ever social security seemed like it was going into deficites, it was tweaked / fixed such that these defiictes ceased to exist. Age requirements were extended, or benifits growths were slowed. minor tweaks to make it more solvent. All along the justification to fix the program, again independent of the fed borrowing more to add into the program which has never been a major option in previous years... In truth isn't a major option today.

Social Security Trust does play an important role... for both social security trust and for the federal budget. It's separation is far from meaningless far from irronious. I would go further and say that the very reason folks want to desolve the trust and incorporate it into the federal government is to weaken it in order to destroy it.

---------- Post added April-25th-2012 at 10:56 AM ----------

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 ****.

We understand that you want to create your own reality and describe it as beyond question in an attempt to short circuit discusson. We just live in this reality where laws, accounting, federal savings bonds, contracts, and boards of directors, are real things which do have concrete consequences...

Social Security is not synonymous with the Federal Government, it is in fact a creditor of the federal government. You can wave your hands and try to ignore that but it is indeed a fact. So at the core of this discussion is you having a different view of reality, one based upon fantasy and political ideology than the reality we live in..... That is beyond debate.

What would be interesting to discuss would be why you wish ss and the federal budet to be folded together. Today they are not folded together. Social Security is factually separate regardless of the fact you think that separatioon is meaninngless or existing on paper alone.

---------- Post added April-25th-2012 at 11:46 AM ----------

In answer to you question "who cares", I will observe that there seem to be two groups of people, who care a whole lot.

The folks who want to not have to pay the money back. And the folks who think that thy have to.

I think the folks who "don't care" are also assuming their is a difference between bonds issued backed up by the full faith and credit of the US government to social security trust and bonds issued to everybody else. I think that's a pretty controvercial belief which has been glossed over.

If you add that into the mix the folks who don't care are basically the same nut job tea party whackadoodles who caused the credit rating of the United States to drop from AAA to AA by suggesting it didn't matter if the US defaulted on it's debt, and taking us to within hours or days of doing exactly that. It becames a debate between those "who don't care" who are a minority in an influencial fringe group of one US party itself a minority; and pretty much everybody else in the world who do care about paying their debts.

Again central to the argument is I pledge my full faith and credit is less determinitive of my responsibilities to pay, than who I pledge that full faith too. Which is rather wrong headed.

---------- Post added April-25th-2012 at 11:48 AM ----------

Did we go over the fact now that Social Security taxes might as well be considered income taxes?

Might but aren't.

[Thiebear]

JMS/Hubbs/Larry:

Question:

If Social Security is borrowed and IOU's are left

And we run out of money sooner than later where receipts only account for 75%.

Wouldn't that mean the tbills are now being borrowed from the General fund that normally draws from SS so doubling down on the trouble?

Its definitely not coming out the way i am thinking about it...

[JMS]

That said it doesn't alleviate the fact that social security is nothing more than an accounting shell game.

Like IBM, Google, or Microsoft are accounting shell games... Legal entities like social security adminisitration have concequences...

It's hallarous to me that a conservative would make the claim legal entities are irrelivent, meaningless, or just accounting shell games.. Hell you guys were trying to grant them citizenship; claiming they are people when it serves your miopic purposes.

[Predicto]

Now it is absolutely clear (to me) that you all are talking right past one another.

Carry on.

[JMS]

JMS/Hubbs/Larry:

Question:

If Social Security is borrowed and IOU's are left

And we run out of money sooner than later where receipts only account for 75%.

Social security reciepts dropping to 75% of benifits is supposed to occur in 2080 something about 70 years from now. There is a hell of a lot that can occur between now and then.

simple tweaks, increase in immigration, spike in the birth rate.. lots of things could affect those numbers. This is one projected eventuallity if congress doesn't take action between now and then. Which is rather unlikely.

Wouldn't that mean the tbills are now being borrowed from the General fund that normally draws from SS so doubling down on the trouble?

Initially it will mean ( right now ) that T-bills sold to SS trust fund would be cashed in to pay for the deficit. Ultimately in 2030 when the social security fund has blown through it's surplus of

2-3 trillion it has with the federal government it could mean the government will cover the short fall either with it's own revenue or borrowing...

Coarse Social Security has been in trouble in the 60's 70's, 80's and 90's and that trouble has always been fixed by tweaking benifits or revenue. I would argue it's much more likely another tweak is in order, a modest change to enrollment age, or slowing benifit increases, or raising the cap on taxable income....

I think we also must realize that social security is what 70 years old today... it's "crisis" is 20 years away, even if we did nothing... we could ensure all the social security deficits for the next 70 years with what the GOP spent in the first ten years of the bush tax cuts. So really the financial "crisis" which is 20 years off, isn't that much of a crisis. It's well within our ability to manage and afford, whichever way we decide to go.

Perhaps the arguement could be made insuring 50% of seniors live above the poverty line for 70 years is more important that a 3% tax break for millionaires for 10 years. Just one thought.

We have the money, we really just have to decide how we want to spend it.

Its definitely not coming out the way i am thinking about it...

Then perhaps that's because you have a preconcieved notion of the value of social security, not based upon it's utility to the american people or it's history.

[Larry]

If you add that into the mix the folks who don't care are basically the same nut job tea party whackadoodles who caused the credit rating of the United States to drop from AAA to AA by suggesting it didn't matter if the US defaulted on it's debt, and taking us to within hours or days of doing exactly that. It becames a debate between those "who don't care" who are a minority in an influencial fringe group of one US party itself a minority; and pretty much everybody else in the world who do care about paying their debts.

I will observe that I disagree with you. There was never any chance that the US Government would have defaulted on government treasuries.

I'm not saying "Congress would never have failed to pass the debt ceiling hike". I'm saying "IMO, even if Congress failed to pass the debt ceiling hike, the US Treasury would not have defaulted, or even delayed, or even have been late with one single debt." (Lots of other government programs would have run out of money. But servicing our debt would have been completely exempt from such shutdowns. Perhaps the only item in the entire federal budget so exempt. (Because faithfully honoring our debt is the only obligation which the Constitution specifically imposes on the government.)

In short, IMO, we may, back then, have been really, really, close to the biggest ****up in US history, possibly n World history. But "defaulting on our debt" was not one of the possible outcomes. (A depression bigger than the Great Depression? That I could see as a possible consequence. Just not a default on t-bills.)

And I would suggest that bringing in the Tea Party, like the Bush tax cuts, or any other additional topic, is something that the thread doesn't need.

[Predicto]

Some people have no idea of the real purpose behind social security. People who know they aren't going to starve in the streets in their old age, or if they get disabled - those people don't riot and they don't vote in dictators. Social security's biggest benefit is to stabilise our society. In essence, it is good for business.

Anyone who thinks its supposed to be a cozy retirement plan is a fool.

[JMS]

Now it is absolutely clear (to me) that you all are talking right past one another.

Carry on.

Questions for Predicto....

(1) Would you agree that the attacks on social security are political in nature.

(2) Would you agree direct attacks on social security are extremely unpopular with the country including Republican voters. Bush for example when he attempted to privatize social security was shouted down by his own party.

(3) Would you agree that folding social security benifits and income into the general ledger weakens social securities long term survivial.

(4) Given all of the above isn't the claim that social security bonds are "meaningless", and "not real assets" or that social security is "already bankrupt" are really just new tacts by the republicans to attack the trust. Do what they've been trying to do since 1933 and roll back the new deal and social security....

All the rest is gobble gook.... hand waving..... glossing over details to frame their argument as status quoe, simple book keeping change, or trivial. What they are really about is destroying social security the most sucessful government program ever; something they have not been able to do with a frontal assault they are now hypocritically trying to do by walking in a side door.

[Predicto]

Questions for Predicto....

(1) Would you agree that the attacks on social security are political in nature.

Yes, usually, but not necessarily by the people posting in this thread.

(2) Would you agree direct attacks on social security are extremely unpopular with the country including Republican voters. Bush for example when he attempted to privatize social security was shouted down by his own party.

Yes.

(3) Would you agree that folding social security benifits and income into the general ledger weakens social securities long term survivial.

Yes, as a political matter, absolutely. However, if one is looking at the simple question of "just how in debt are we as a nation," then the conversation makes sense. It all depends on what question you are asking - and you and Larry appear to be asking a different question than Hubbs is asking.

(4) Given all of the above isn't the claim that social security bonds are "meaningless", and "not real assets" or that social security is "already bankrupt" are really just new tacts by the republicans to attack the trust. Do what they've been trying to do since 1933 and roll back the new deal and social security....

Except Allen Smith, the guy being quoted in the article, is a liberal economist who wants to make sure that Social Security is strengthened, not dissolved.

All the rest is gobble gook.... hand waving..... glossing over details to frame their argument as status quoe, simple book keeping change, or trivial. What they are really about is destroying social security the most sucessful government program ever; something they have not been able to do with a frontal assault they are now hypocritically trying to do by walking in a side door.

I agree if you are talking about Paul Ryan or Grover Norquist. But that is not who you are debating in this thread. Hubbs is a libertarian, but he is not a hypocrite. He wants to talk about overall debt problems, so from his point of view, the classification of SS isn't the point of the discussion.

Or so it seems to me.

[JMS]

I will observe that I disagree with you. There was never any chance that the US Government would have defaulted on government treasuries.

Whether you are right or wrong, that was the stated reason for the US credit rating being dropped from tripple A to double A. Standards and Poor cited the political situation in the United States adding to the possibility of the United States defaulting on it's debt.

http://www.csmonitor.com/USA/Politics/2011/0806/S-P-downgrade-of-US-credit-rating-sends-clear-message-to-Congress-shape-up

S&P downgrade of US credit rating sends clear message to Congress: shape up

S&P, one of the three major credit-rating firms, downgraded its rating for US debt Friday night – a move that has the potential to further spook global markets and drive up borrowing costs in the US. The reason for the downgrade, S&P said, was congressional dysfunction.

I'm not saying "Congress would never have failed to pass the debt ceiling hike". I'm saying "IMO, even if Congress failed to pass the debt ceiling hike, the US Treasury would not have defaulted, or even delayed, or even have been late with one single debt." (Lots of other government programs would have run out of money. But servicing our debt would have been completely exempt from such shutdowns. Perhaps the only item in the entire federal budget so exempt. (Because faithfully honoring our debt is the only obligation which the Constitution specifically imposes on the government.)

Again the Constitution grants the power of the pocketbook to the Congress. Certainly the President and Treasury Secretary might have tried to pay our bills anyway, but doing so would certainly have usurped a power long understood to be of Congress. It would have sparked a constitutional crisis, and certainly was chaulk full of dangers of default...

One would like to think if Congress decides to run the country off a cliff, that the President would be impowered to step in. The obvious problem with that scenario is that it would creat an even greater problem. The President being able to Usurp a power reserved for another branch of government. Making congress irrelivent, toothless. If it would have even have occured.

In short, IMO, we may, back then, have been really, really, close to the biggest ****up in US history, possibly n World history. But "defaulting on our debt" was not one of the possible outcomes. (A depression bigger than the Great Depression? That I could see as a possible consequence. Just not a default on t-bills.)

You may very well be correct in your beliefs. I will argue however your belief was not a majority opinion nor was it a strong minority opinioin; that the President doesn't need congress to raise the debt cealing. Experts were discussing the likelyhood of the US Default and S&P's entire credit rating drop was geared to weight the growing likelyhood of a default.

http://www.nytimes.com/2011/07/14/us/politics/14fiscal.html?pagewanted=all

Tensions Escalate as Stakes Grow in Fiscal Clash

The Federal Reserve chairman, Ben S. Bernanke, warned on Wednesday of a “huge financial calamity” if President Obama and the Republicans cannot agree on a budget deal that allows the federal debt ceiling to be increased.

Now, with negotiations stalled and a potential default by the United States government just over the horizon

Should You Worry About a U.S. Default?

Standard & Poor’s, the ratings agency, lowered its outlook for the United States to “negative” on Monday, a warning that the country’s top-notch, triple-A credit rating may be lowered. Credit ratings are supposed to give crucial insight into a debtor’s likelihood of default, so a lot of investors and pundits made a big deal about this announcement.

http://economix.blogs.nytimes.com/2011/04/19/should-you-worry-about-a-u-s-default/

Simon Johnson, the former chief economist at the International Monetary Fund, is the co-author of “13 Bankers.”

Three views emerge on whether the United States will default on its government debts, as I talk to people on and close to Capitol Hill. The first is, hopefully yes, and this August offers a good opportunity. The second is, possibly yes, but this would be bad, so we need some form of fiscal austerity. The third is, under no circumstances, and any talk of a need for austerity is a hoax.

http://economix.blogs.nytimes.com/2011/07/07/will-the-united-states-default/

And I would suggest that bringing in the Tea Party, like the Bush tax cuts, or any other additional topic, is something that the thread doesn't need.

Larry respectfully I would suggest the Tea Party is already present in this thread, and that defaulting on our T-Bills is the central theme in both of these discussions by the same actors. I'm just acknowledging that fact.

T-Bills which social security holds are meaningless, indeed.

---------- Post added April-25th-2012 at 01:37 PM ----------

I agree if you are talking about Paul Ryan or Grover Norquist. But that is not who you are debating in this thread. Hubbs is a libertarian, but he is not a hypocrite. He wants to talk about overall debt problems, so from his point of view, the classification of SS isn't the point of the discussion.

Or so it seems to me.

I'm sorry for my own optuseness, but to frame a discussion as Hubbs has done, based upon fantasy that T-Bills are worthless, or social security is bankrupt, or accounting is somehow meaningless and use these incorrect premisses to suggest that actions are justified which we both agree would weaken social security does sound to me to be a self serving, political, side door, attack on the trust..

Social Security isn't in debt or bankrupt or devoid of assets. T-Bills including the special one's the social security has are the safest investment in the world.. Say that again... SAFEST INVESTMENT IN THE WORLD.. Those are facts, not opinions. They are legal, accounting, binding, and well acknoledge facts. To have a discussion which ignores those facts, which Hubbs well understands, (because they have been stated to him again and again) seems hypocritical when you are then using that argument to advance your own agenda. The template is hypocritical, and the term applies to those who employ such a template.

[Larry]

Some people have no idea of the real purpose behind social security. People who know they aren't going to starve in the streets in their old age, or if they get disabled - those people don't riot and they don't vote in dictators. Social security's biggest benefit is to stabilise our society. In essence, it is good for business.

Anyone who thinks its supposed to be a cozy retirement plan is a fool.

I think that's a big part if it.

Same with all firms of welfare or low-income support.

I think of it as "it keeps the peasants from storming the castle".

[Hubbs]

Really? No one in this entire thread has tried to argue that tbills owned by the SS trust fund have no value? I could have sworn that the the entire purpose of the OP was to make that vary claim. That, in fact, the OP is all about some guy who has written an entire book, devoted to the purpose of making that claim.

And no one in this thread has tried to argue that "you can't owe money to yourself"? Or that the entire SS trust fund is "an accounting gimmick"?

I must have imagined all of those posts. I wonder if I can quote imaginary posts.

Did that imaginary post quote? Are you seeing that? Or am I just imagining it?

How about this one?

Or these?

None of this has anything to do with the part of my post you quoted right beforehand. I said that the two groups who you claim "care" about the fact that the trust fund's debt was "legitimately incurred"—those who don't want to pay back previous generations for paying in and those who think we should—weren't relevant to this conversation. And they're not. I absolutely think we have an obligation to those who have paid in. I just don't think that the obligation rests upon an accounting gimmick. (Those groups don't care, by the way. I'm sure you can find these people on the Internet, but I personally have never encountered someone who actually argues that people who have been paying 6% of their paycheck for decades don't deserve anything. The closest I've seen is probably Rick Perry calling SS unconstitutional, but even he talked about how to repay those who have put so much in.)

Anyway, to respond to me saying that this isn't about whether or not we should repay earlier generations with, "Really? No one in this entire thread has tried to argue that tbills owned by the SS trust fund have no value?" just… doesn't make any sense. I mean, I guess I can respond in kind, so here goes:

Oh yeah? Well, waffle toboggan elephant Luke Skywalker. :pfft:

1) I will point out that "the larger entity" isn't the only entity in the picture. The assertion that "they are irrelevant to the larger entity" does not in any way say "they are irrelevant, period".

But I've repeatedly made it abundantly clear that I'm talking about the federal government as a whole when I say the bonds are meaningless. Even if I wasn't, however… actually, more on that later.

2) Could you point out to me, in the imaginary posts I've quoted above, or in the probably 50 posts in this thread which have been making the repeated claims that the trust find does not exist, in which that phrase I've highlighted above was included?

There's no way you seriously expect me to explain in every single post something I've explained multiple times in this thread.

Cause what I'm seeing, here is an argument that "it is possible to find a place to stand in which 2.6 trillion dollars worth of t-bills don't exist, and dammit, I'm going to stand there, and demand that everybody else stand there, too, and insult them if they don't join me in standing there" (And I'm going to steadfastly refuse to actually admit that I'm intentionally, voluntarily, choosing to stand in that place.)

Okay, we've reached "later."

Like I said, I've been talking about the finances of the federal government as a whole, specifically debt held by the public. But now I'm wondering what exactly you believe the trust fund is accomplishing by holding its bonds on its books even when looking at other things. Does the interest income that comes from the general fund matter? Theoretically I believe it could to go toward the (comparatively) minor costs of keeping the SSA functioning. Otherwise it either goes back to the general fund when SS is in the black for that year, or is used to make up for a SS deficit that year. All of this would still occur if the trust fund didn't bother with its bond nonsense, except we'd use the label "transfers" rather than "interest payments." So, no, the interest income doesn't matter.

Do the bonds guarantee payments at a certain age? No, that's been changed before and will likely be changed again rather soon. Do the bonds guarantee certain benefits? No, they've been changed before and there's a decent chance they will change again soon (means testing). Do the bonds guarantee payments in the first place? No, the payments are guaranteed by law and would happen if the bonds didn't exist. Furthermore, SS payments and government debt payments are essentially of equal political importance. The only way either will ever fail to happen on anything other than a "we ran into the debt ceiling again, you'll get this next week" basis is if the Treasury is simply incapable of coming up with the money, and if that's the case then we'll actually have even bigger things to worry about (like the economic apocalypse).

Now, I'm sure that I could be unaware of some minor things that the trust fund accomplishes. Certainly it's managed to create quite a lengthy discussion. And if you're aware of some of those things, other than the potential for some random whacko on the Internet to believe that the only type of "legitimately incurred" debt takes the form of bonds he will never see on books he will never look at monitored by accountants he will never meet employed by an agency he will never interact with beyond the postal system, feel free to share. I would hope that you have a long list, given how much you seem to care about this. I find Predicto and JMS agreeing that SS would be more politically vulnerable without the trust fund interesting but unconvincing considering the fact that old people rule politics with a wrinkly iron fist and SS has its third rail reputation as something to be changed only when everyone seems to agree that we have to, all of which has absolutely nothing to do with the trust fund. But when it comes to the big things—retirement age, benefits, guaranteed payment, and most importantly, debt held by the public—the trust fund is irrelevant with a capital, well, IRRELEVANT.

---------- Post added April-25th-2012 at 09:01 PM ----------

I'm sorry for my own optuseness, but to frame a discussion as Hubbs has done, based upon fantasy that T-Bills are worthless, or social security is bankrupt, or accounting is somehow meaningless and use these incorrect premisses to suggest that actions are justified which we both agree would weaken social security does sound to me to be a self serving, political, side door, attack on the trust..

Oh, JMS, JMS....

Please, tell me what actions I've suggested in this thread. Other than calling the trust fund meaningless. That I highly endorse.

[chipwhich]

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.)

When the government has to pay the trust fund money back, where do they get the cash to do so?

---------- Post added April-25th-2012 at 09:39 PM ----------

And back, once again, to the completely false assertion that if two entities are controlled by the same entity, then those subordinate entities don't exist.

No one said they don't exist.

The government exists. T-bills exist. The trust fund exists. Happy?

I have control over all of my parent's assets.

This does not in any way imply that the fact that I have my name on multiple bank accounts is "an accounting shell game". Or that I have the right to "loan" their money to myself, and then claim that I have no obligation to give the money back "because you can't owe money to yourself".

But that isn't what is happening. What is happening, to use your scenario, is you are taking money from your parents estate from the trust fund to make your mortgage payment and leaving the estate a guarantee of repayment. Then you are paying your mortgage payment with the trust fund money, but you don't then have money to pay all the other bills so you borrow more money from the banks. While paying down the mortgage, you are transferring that debt to the trust fund. Then you are trying to claim you have all this equity in your mortgage while claiming your parents estate is increasing. Meanwhile you haven't increased your assets or your savings. All you have done is create more debt.

It's a simple fiscal scenario, no wonder we are in so much debt. Americans don't understand finance.

I have never stopped discussing the topic of the OP. In fact, I have quoted it, word for word, several times. (The only person in this thread to do so.)

No, you just keep beating the drum you understand. There is a t-bill (thats a fact). There is a trust fund (thats a fact) There is a government (thats a fact). But you imply (not a fact) that if you have $10 in your left pocket, move the $10 to your right pocket, you now have two pockets with $10 in them.

Now, please. Try to tell me, again, that there is nothing and no one in this thread trying to claim that US treasury bills have no value (if those bills are owned by SS).

Who said they have no value?

[Larry]

When the government has to pay the trust fund money back, where do they get the cash to do so?

The exact same place they get it for every single t-bill which has ever been issued, for our entire national history.

Want to try to claim that they don't exist, too?

[chipwhich]

The exact same place they get it for every single t-bill which has ever been issued, for our entire national history.

Want to try to claim that they don't exist, too?

Borrow it? See my post above.