Your facile argument ("the government owes itself") completely skips the fact that President Bush’s scheme would use regressive payroll taxes to fund breaks on more progressive income taxes. I explain this in a little more detail here.
[DALE FRANKS] Well, yeah, I guess I do skip over that fact. But only because it’s an entirely different argument on an entirely different subject. Good to see you managed to steer it off into a shameless plug for yourself at Daily Kos, though. |
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Written By:
David in AK
URL:
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By your argument, most of the US debt is worthless, because whois the biggest purchaser of US Treausry bonds? Why you guessed it, the US government! The whole debt issuance by the US government is a house of cards, and the only thing that keeps it from collapsing is the faith the US will honor its debts, whether to Hina, George Bush (yes, he own Treasury bonds) or itself.
[DALE FRANKS] Two things: First the US Government buys a lot of treasury bonds from private bondholders. We call this "retiring the debt". The Fed also buys a lof of bonds at the discount window, or in the fed funds market. That retires the debt for those short-term securities, too. Of the remainder, for the US government to hold it’s own debt...well, that’s just a non-sequitur. The implications of defaulting on a bond held by the public is entirely different than defaulting on a bond held by the US government. |
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Written By:
zen_more
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Please stop drinking the cool-aid.
Currently SS revenue is running a surplus and the general budget is running a deficit. The general budget must borrow money from somewhere and the SS trust fund might as well be getting better than plain old money market returns.
If the government were an individual it would be borrowing from its 401k. While that’s not necessarily the smartest thing in the world, those who do take out loans from their 401k are not writing "worthless" IOUs. (Unless the individual eventually goes bankrupt or defaults –if the US government goes bankrupt or begins defaulting on treasury bonds SS benefits will be toward the bottom of our list of worries)
To use your previous example, the problem is not who you borrow money from for your $3,000 TV, it’s the fact you’re borrowing it in the first place. If you had left the $3,000 in your 401k and taken out a loan for the TV your initial net financial position remains the same but whatever interest you do pay goes to the bank (China, Japan, and individual investors) rather than yourself (SS trust fund).
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Written By:
jwmullis
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The Trust Fund for Social Security is not a part of the general US Treasury. ’nuff said. |
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Written By:
Fargus
URL:
http://fargazmo.blogspot.com
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Section 4, 14th Amendment- read it, learn it, love it.
Says the pubic debt of the US specifically for pensions, is not to be questioned.
So cut the unconstituational crap GWB and everyone else
NUFF SAID MUFF HEADS
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Written By:
neologic
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"The Trust Fund for Social Security is not a part of the general US Treasury. ’nuff said."
And my savings account is not part of my chequing account. Yes, ’nuff said indeed. |
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Written By:
Matt McIntosh
URL:
http://godco.net/matt/verisimilitude/
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Actually, there is one major difference. Other entities that owe money to themselves cannot manufacture money out of thin air (actually thin paper) to pay it off. But the US government can.
Of course, that would set off a host of bad economic outcomes, with potential hyperinflation being the worst case scenario. So I don’t suppose the NYT would be interested in pointing out that difference. |
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Written By:
Joe Bonforte
URL:
http://
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For those who seem to be supporting the NYT position by quoting the Full Faith and Credit Clause, I suggest you accept that neither George Bush or Dale is questioning that. Bush’s point is these bonds will have to be paid back to the "Trust fund" by tax revenue. To put it another way these bonds are paid back to fund benefits from taxes. If we ignored the bonds and paid the benefits from taxes directly it would be the same people paying and the same people benefitting. The bonds are just an acounting device, thus not really a trust fund. All this stuff about the 14th amendment is a diversion from that simple fact, especially since no one here, in the Bush administration or anywhere else is arguing we not pay the bonds back. We are saying that calling making future taxpayers pay for these bonds is no different than paying for the benefits directly out of taxes. Nothing is actually being saved. We neither gain nor lose anything by having or calling these bonds a trust fund. |
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Written By:
Lance
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Does it also matter that when the beneficiary dies the SS payments usually stop? My (not very educated) understanding of a "trust" is that there is a specific amount of money held/invested that eventually goes to the trustee. But I don’t think this is the case for SS. Maybe it’s a problem with semantics, or maybe I don’t know enough about government financing to understand the real meaning of a trust fund. I’d appreciate any further education anyone wants to add to this post. I’m wondering about this point because I heard a liberal commentator on my local radio talk show get mad at Bush for his "trust fund" deception using the argument that Bush himself is the beneficiary of a trust from his wealthy family.
[DALE FRANKS] There is no money held in a personal account for anyone under Social Security. You do not have an account. All retirement benefits are paid out of current payroll taxes. That means your payroll taxes do not go into a muthical account from which you’ll be paid when you retire. Your payroll taxes go to pay current retirees, or failing that, the general budget spending of the United States. When you retire, taxpayers at that time will have their payroll taxes used to pay your benefits. There are not, and never have been, any personal accounts.
What we call the Social Security "Trust Fund" is that there is more money coming in from payroll taxes than is needed to pay benefits to current retirees. The government then takes this extra money and uses it to spend in the General Budget. In return, they give the Trust fund a "bond" for that money. The "Trust Fund", therefore, consists entirely of notes from the goverment, promising to pay the government back.
President Bush may, in fact, be the beneficiary of a trust fund. What that has to do with the price of tea in China is anyone’s guess. The difference between the Bush trust fund and Social Security is that in Bush’s case, the investments consist of bonds from other businesses and the government that constitute a legal obligation to pay Mr. Bush some amount of money. Mr. Bush’s trust fund holds legal obligations from other people.
If Mr. Bush owned a trust fund that consisted of a note from Mr Bush promising to pay himself $1 billion dollars, we would rightly say that Mr. Bush was a prospective mental patient, not that he was rich. But that is essentially what the Social Security trust fund is. |
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Written By:
JWG
URL:
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All you need to know about the future of social security is to look at demographic trends. When you’ve got less than 3 workers for every retiree, the level of entitlement programs in place now is simply not sustainable. Medicare and SS are going to get cut, one way or the other, no matter which party is running the federal government in 5 or 10 years. I would bet anything anyone cares to wager on that. The only question is whether the system starts getting reformed now and gives people time to adjust, or if it happens abruptly 7 years from now and the transition is rougher on everyone all around. Those claiming that everything is hunky dory are being irresponsible in the extreme and hurting people in the long run. |
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Written By:
Matt McIntosh
URL:
http://godco.net/matt/verisimilitude/
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Dale— My statement is hardly "an entirely different argument on an entirely different subject". Your sleight of hand obscures the difference between payroll taxpayers and income taxpayers; that difference serves as a clear guide to why the trust fund can’t be conflated with general revenues. |
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Written By:
David in AK
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http://
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That wasn’t clear at all, David. |
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Written By:
Mark
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http://
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Mark— What wasn’t clear? I apologize if I didn’t make my point clearly, so please let me know what I haven’t spelled out sufficiently. |
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Written By:
David in AK
URL:
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What we call the Social Security "Trust Fund" is that there is more money coming in from payroll taxes than is needed to pay benefits to current retirees. The government then takes this extra money and uses it to spend in the General Budget. In return, they give the Trust fund a "bond" for that money. The "Trust Fund", therefore, consists entirely of notes from the goverment, promising to pay the government back. This "extra money" you refer to comes from payroll taxes. Payroll taxes come out of, you guessed it, my paycheck. My paycheck comes from my employer, who compensates me for the hard work I do. The "Trust Fund", therefore, consists entirely of notes from the government, promising to pay ME back (via my proxy, the Trust Fund) in future benefits. I’m trying hard to avoid using hyperbole here, but your attitude towards this issue seems to lie somewhere between total insanity and willful ignorance. The fact that the government owes ME (not itself) future benefits.
Also, it isn’t at all clear to me what distinguishes the bonds in the "trust fund" from other government bonds. If the US govt was to simply wipe this debt off the books, the financial markets would almost certainly react by making it much more costly for us to borrow money.
If the government were to erase this debt, it would literally be stealing billions of dollars from the American people. It could also create a massive international American-debt-sell-off, something that’s already happening in Asia.
Horrible, horrible, HORRIBLE idea. |
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Written By:
N. Rogers
URL:
http://genericheretic.blogs.com/generic_heretic/
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If the government were to erase this debt, it would literally be stealing billions of dollars from the American people. Umm, incorrect. Excess payroll taxes have gone to fund other government programs, the other beneficiaries of which are at least nominally the American people. Therefore, the American people are not out a single dime. The money will simply have been spent for purposes other than that which it was collected.
Whether or not that is a good idea is a wholly different question. Given that millions of Americans have planned their retirements on the assumption that Social Security will still be there, I’d argue that an immediate elimination of the program would be unwise. |
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Written By:
Andrew
URL:
http://andrewolmsted.com
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N. Rogers,
Once again, Dale is not suggesting we not pay off the bonds! He is saying the trust fund is immaterial. Not to mention, by the way, that trust fund bonds are "special" SS security bonds. They are different.
In addition the bonds being paid back are to be used to cover benefits. They are owed to the government (itself) which then can use the money to pay whatever level of benefit congress decides. You are not owed anything in particular. Benefits can be raised or lowered at the government’s whim. Both have happened in the past. This further points out it is one part of the government loaning to the other, not you! The bonds are not yours. They are not to pay you back. It is an accounting gimmick, nothing more.
When these "special" bonds run out, any shortfall to pay benefits will be paid out from general revenues. If the system worked the way you suggest, then when the bonds run out you would see your benefits reduced accordingly. They may be. Of course that may happen anyway, precisely so that existing payroll taxes (and those "special" bonds) can last longer. The point remains; you have no legal right to those bonds proceeds. They may pay for the benefits (or the bonds to be used to pay the benefits) out of increased payroll taxes or from general revenues. Either way it will come from taxpayers, not the assets in the account. Whether you receive your benefits from taxes directly, or taxes used to pay off the bonds and then you, does not matter. The same amount of money needs to be raised in taxes in one form of another from taxpayers. Calling it paying off a bond rather than paying the SS system directly doesn’t change how things work in the real world.
Finally, this has nothing to do with reform of SS. This is how it works whether one wants to reform or change the system or not. In fact, even if it were truly a trust fund, with real assets the government could lay a claim on to help pay benefits for a few years, the fundamental argument over how to pay benefits doesn’t change. It is just a little less painful for a short while. Soon after we have the same argument no matter what solution you propose, whether raising taxes, cutting benefits or moving to an asset based system is best is still a debate we need to have regardless. The trust fund is just a diversion from that fundamental discussion.
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Written By:
Lance
URL:
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Therefore, the American people are not out a single dime. The money will simply have been spent for purposes other than that which it was collected. I stand corrected. What I meant to say was, "If the government were to erase this debt, it would literally be defrauding the American people out of billions of dollars."
Once again, Dale is not suggesting we not pay off the bonds! He is saying the trust fund is immaterial. Not to mention, by the way, that trust fund bonds are "special" SS security bonds. They are different.
Simply stating that these particular bonds are "special" does nothing to prove or disprove this dubious assertion.
More to the point, the trust fund is self-evidently material. Perhaps your confusion stems from the semantics involved here. The trust fund is perhaps more accurately described as a running tally of payroll-tax overpayments. The ONLY reason to attempt to marginalize the trust fund is because redeeming the bonds would necessitate raising income tax. This is, of course, how the system is supposed to work, but certain influences (Grover Norquist for instance) are against playing it straight and doing what’s right. Instead, they would propose doing whatever it takes to avoid raising income taxes.
To say that "the government owes itself money" is vast oversimplification of a complicated issue. Imagine the government as a big family. If Grandpa owes Aunt Social Security $10,000, it would be ridiculous to call the debt immaterial merely because they’re members of the same family. Related party transactions are complex, but are certainly not immaterial.
To agree with Dale on this point, one would have to view the trust fund as the biggest Ponzi scheme ever conceived.
I can’t write about this anymore. Please respond as soon as possible with another distortion, or perhaps explaining the specialness of the SS bonds. |
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Written By:
N. Rogers
URL:
http://
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Therefore, the American people are not out a single dime. The money will simply have been spent for purposes other than that which it was collected. I stand corrected. What I meant to say was, "If the government were to erase this debt, it would literally be defrauding the American people out of billions of dollars."
Once again, Dale is not suggesting we not pay off the bonds! He is saying the trust fund is immaterial. Not to mention, by the way, that trust fund bonds are "special" SS security bonds. They are different.
Simply stating that these particular bonds are "special" does nothing to prove or disprove this dubious assertion.
More to the point, the trust fund is self-evidently material. Perhaps your confusion stems from the semantics involved here. The trust fund is perhaps more accurately described as a running tally of payroll-tax overpayments. The ONLY reason to attempt to marginalize the trust fund is because redeeming the bonds would necessitate raising income tax. This is, of course, how the system is supposed to work, but certain influences (Grover Norquist for instance) are against playing it straight and doing what’s right. Instead, they would propose doing whatever it takes to avoid raising income taxes.
To say that "the government owes itself money" is vast oversimplification of a complicated issue. Imagine the government as a big family. If Grandpa owes Aunt Social Security $10,000, it would be ridiculous to call the debt immaterial merely because they’re members of the same family. Related party transactions are complex, but are certainly not immaterial.
To agree with Dale on this point, one would have to view the trust fund as the biggest Ponzi scheme ever conceived.
I can’t write about this anymore. Please respond as soon as possible with another distortion, or perhaps explaining the specialness of the SS bonds. |
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Written By:
N. Rogers
URL:
http://
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If Grandpa owes Aunt Social Security $10,000, it would be ridiculous to call the debt immaterial merely because they’re members of the same family. Related party transactions are complex, but are certainly not immaterial. The trouble with your argument is that Grandma has a legal claim on that money from Grandpa. In the case of social security, no one has a legal claim to social security benefits. They exist entirely at the pleasure of Congress, which may alter or elimate social security at any time.
So, if Grandpa can say, "Shzam!" and wink Grandma out of existence, the "debt" is purely hypothetical. |
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Written By:
Dale Franks
URL:
http://www.qando.net
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Dale seems to be arguing from a purely legal standpoint. That’s fine, but I prefer right vs. wrong as a guide. I maintain (to little avail around here) that it is wrong to pretend the debt in the trust fund is a sham, because doing so can then serve as a basis for not repaying those bonds from income tax (rather than payroll tax) revenues, or for reducing benefits. Legally, I don’t doubt that Congress can do whatever it wants, but I’m all for making electoral hell for the members who treat the trust fund, or debts thereto, as "hypothetical". |
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Written By:
David in AK
URL:
http://
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