# Bush: There is No Trust! **URL:** \ **Category:** The BBQ Pit\ **Created:** [February 10, 2005, 3:28am UTC](https://boards.straightdope.com/t/bush-there-is-no-trust/289334 "2005-02-10T03:28:12Z")\ **Posts on this page:** 20\ **Page:** 6
**Author:** ![Liberal](https://avatars.discourse-cdn.com/v4/letter/l/848f3c/32.png) [@Liberal](https://boards.straightdope.com/u/Liberal)\ **Post date:** [February 12, 2005, 3:51pm UTC](https://boards.straightdope.com/t/bush-there-is-no-trust/289334/101 "2005-02-12T15:51:12Z")
> [@Desmostylus](#): > > Well, I guess if I was crazy, lacked education, and had no fucking idea what I was talking about, I might think that too. I may lack education, but at least I know the subjunctive mode. ---
**Author:** ![Liberal](https://avatars.discourse-cdn.com/v4/letter/l/848f3c/32.png) [@Liberal](https://boards.straightdope.com/u/Liberal)\ **Post date:** [February 12, 2005, 3:56pm UTC](https://boards.straightdope.com/t/bush-there-is-no-trust/289334/102 "2005-02-12T15:56:05Z")
Scylla, how does the analysis you’ve given differ for systems in which the government either has competitors who mint money, or else doesn’t engage in minting it at all? I assume it would be unable to do what the authoritarian governments do with respect to the fantasy accounting. Would it just go broke like any other business? ---
**Author:** ![Biffy\_the\_Elephant\_Shrew](https://avatars.discourse-cdn.com/v4/letter/b/e47c2d/32.png) [@Biffy\_the\_Elephant\_Shrew](https://boards.straightdope.com/u/Biffy_the_Elephant_Shrew)\ **Post date:** [February 12, 2005, 4:09pm UTC](https://boards.straightdope.com/t/bush-there-is-no-trust/289334/103 "2005-02-12T16:09:58Z")
> [@Mr. Moto](#): > > I get no pleasure from sham trust funds. And I get no kick from sham pain. ---
**Author:** ![Scylla](https://avatars.discourse-cdn.com/v4/letter/s/a5b964/32.png) [@Scylla](https://boards.straightdope.com/u/Scylla)\ **Post date:** [February 12, 2005, 6:37pm UTC](https://boards.straightdope.com/t/bush-there-is-no-trust/289334/104 "2005-02-12T18:37:26Z")
> [@Liberal](#): > > Scylla, how does the analysis you’ve given differ for systems in which the government either has competitors who mint money, or else doesn’t engage in minting it at all? I assume it would be unable to do what the authoritarian governments do with respect to the fantasy accounting. Would it just go broke like any other business? If I understand your question correctly, this is such a case. In the terms that the government presents the SS trust fund to its citizens where it holds the monopoly on currency, it presents it as a solid obligation. In the terms that it presents it to foreign investors and those market sophisticates that can invest in treasuries and currencies (real terms) it clearly demonstrates that it is not a real obligation. I guess the next big question is, what does this social security “obligation” actually represent? What is my SS statement really showing me and what meaning does it have? Clearly the people who are receiving a SS benefit now are extracting some kind of value. Clearly the statements and the internal accounting that is the trust funds and the sham treasuries are meant to represent some kind of expectation of a value extraction in the future for those paying in. ---
**Author:** ![Ass\_For\_A\_Hat](https://avatars.discourse-cdn.com/v4/letter/a/ec9cab/32.png) [@Ass\_For\_A\_Hat](https://boards.straightdope.com/u/Ass_For_A_Hat)\ **Post date:** [February 12, 2005, 8:11pm UTC](https://boards.straightdope.com/t/bush-there-is-no-trust/289334/105 "2005-02-12T20:11:41Z")
> [@Scylla](#): > > The “prudent man rule” is pretty simple actually. It means fiduciaries can’t act like idiots. A fiduciary is a person in a responsible position for other people’s moneys’. > \ > Funds invested with due diligence through ERISA following the prudent man guidelines tend to do pretty well over 10 year time frames and up regardless of specific market performance. Is this what Bush’s SS privatization proposal is getting at? Isn’t he proposing private accounts to be directed by the individuals? This is consistent with the way most ERISA plans operate today. The majority of employer plans have participant directed investments. A plan fiduciary may have selected a menu of investment choices, but many companies try to absolve themselves of fiduciary liability for investment performance and push this responsibilty to the plan participants. In most cases participants don’t object, because they enjoy having the freedom to direct their own investments. What I don’t think we have evidence on yet though is what sort of job individual participants will do with this in the long term. Though ERISA has been around since 1974, 401(k) plans didn’t start to become common until the mid 1980’s. Participant direction of investments, and the ability to make investment changes on a near daily basis has only been widely available for the last 10 years or so. While pension plan participants may very well be better educated today than they were even 10 years ago, there is still plenty of evidence that many do a poor job of diversifying their investments. Just look at the Enron disaster. We all read the stories of retirement age employees that lost their entire pension savings due the collapse of the company’s stock. While they certainly didn’t deserve to be defrauded, what were 65 year old employees doing fully invested in just one stock? There aren’t a lot of details on the table at this point, and I look forward to finding out more about what Bush’s proposal really is. I’m just not convinced now though, that allowing individuals to take more investment risk with the benefits of a social program that is designed to guarantee a subsistence income in their later years, is in everyone’s interest. ---
**Author:** ![Polycarp](https://avatars.discourse-cdn.com/v4/letter/p/82dd89/32.png) [@Polycarp](https://boards.straightdope.com/u/Polycarp)\ **Post date:** [February 12, 2005, 8:51pm UTC](https://boards.straightdope.com/t/bush-there-is-no-trust/289334/106 "2005-02-12T20:51:59Z")
> [@Scylla](#): > > If I understand your question correctly, this is such a case. In the terms that the government presents the SS trust fund to its citizens where it holds the monopoly on currency, it presents it as a solid obligation. > > In the terms that it presents it to foreign investors and those market sophisticates that can invest in treasuries and currencies (real terms) it clearly demonstrates that it is not a real obligation. > > I guess the next big question is, what does this social security “obligation” actually represent? What is my SS statement really showing me and what meaning does it have? > > Clearly the people who are receiving a SS benefit now are extracting some kind of value. Clearly the statements and the internal accounting that is the trust funds and the sham treasuries are meant to represent some kind of expectation of a value extraction in the future for those paying in. That at rock bottom is my complaint with this whole issue – that it’s been **represented** in a fraudulent manner. I can concede that there may actually be no _legal_ obligation to pay benefits to those who have been expecting to be able to finance their retirement with them – but I would think that there is a _moral_ obligation, especially with that ongoing misrepresentation. I can walk 20 feet from where this computer sits and pull down a U.S. government leaflet addressed to me personally and personalized by computer with information regarding my SSAN and the associated data. It advises me of how much I’ve contributed to Social Security through taxes since 1967, and informs me of what I need for disability and retirement benefits (which I have in, though I’m not yet of age to draw on the latter and not disabled to an extent to make me eligible for the first). Not one word of this document even hints at the idea that (a) the money doesn’t really exist, (b) it’s not an entitlement, or (c) it can be taken away from me at any time. I’ve been in the top 1% of the electorate for awareness in realizing that SS deductions are in fact a tax, not a pension-fund allocation; I’ll bet you that of 100 people selected at random before SS reform became a hot topic, not one of them would have been aware of what you’ve presented. If Mr. Bush is able to convince the public that this was the case all along (apparently true), that they should accept it and be thankful for whatever largesse it decides to send their way, and gets little or no protests about it, then I have a word of advice for you: _Sell woolen textiles stock short_, because there’s a nation of sheep out there. ---
**Author:** ![elucidator](https://avatars.discourse-cdn.com/v4/letter/e/8edcca/32.png) [@elucidator](https://boards.straightdope.com/u/elucidator)\ **Post date:** [February 12, 2005, 8:56pm UTC](https://boards.straightdope.com/t/bush-there-is-no-trust/289334/107 "2005-02-12T20:56:40Z")
Save that every so often, there’s the sheepskin covering a lupine canine, and the man who approaches with shears is likely to walk away with fewer fingers than when he arrived. ---
**Author:** ![Scylla](https://avatars.discourse-cdn.com/v4/letter/s/a5b964/32.png) [@Scylla](https://boards.straightdope.com/u/Scylla)\ **Post date:** [February 12, 2005, 9:26pm UTC](https://boards.straightdope.com/t/bush-there-is-no-trust/289334/108 "2005-02-12T21:26:56Z")
> [@Polycarp](#): > > That at rock bottom is my complaint with this whole issue – that it’s been **represented** in a fraudulent manner. I can concede that there may actually be no _legal_ obligation to pay benefits to those who have been expecting to be able to finance their retirement with them – but I would think that there is a _moral_ obligation, especially with that ongoing misrepresentation. Well yes. Their clearly is a moral obligation of some sort. What should be clear though is the government is not capable of fulfilling this obligation. It does not have assets saved the purpose and it is not accounted for in the management of the currency. Oddly enough, this really hasn’t been much of a problem, and most likely won’t be a problem for some time. Some people don’t think it ever will. I am not one of them. As the contributions trend downward and the outflows to social security trend upward the problem will start to materialize. First, the ongoing excess contributions are counted on in the management of the currency by our government which is spending them. No longer having them means the currency is more difficult to float. The government has less to work with and must either raise taxes, attempt to float more bonds, or inflate the currency (or a combination of these.) The trick is to figure out how to get the hypothetical obligations into the real world without screwing up either the hypothetical obligations or the real ones. Do you follow me now? We have two sets of obligations from the same pool. **Both** sets of obligations were made as large as the pool could reasonably be made to fulfill. ---
**Author:** ![Desmostylus](https://avatars.discourse-cdn.com/v4/letter/d/c57346/32.png) [@Desmostylus](https://boards.straightdope.com/u/Desmostylus)\ **Post date:** [February 13, 2005, 9:00am UTC](https://boards.straightdope.com/t/bush-there-is-no-trust/289334/109 "2005-02-13T09:00:32Z")
> [@Scylla](#): > > Well yes. Their clearly is a moral obligation of some sort. What should be clear though is the government is not capable of fulfilling this obligation. It does not have assets saved the purpose and it is not accounted for in the management of the currency. There are a few problems with these sentences. Governments rarely back their bonds with assets, so it’s pretty much irrelevant that there are no assets saved to repay the T-bills that the US government issued. The currency argument is also irrelevant. Goverment bonds are backed by the government’s power to tax. You appear to be presenting tax revenue as something that _the US government has no control over_. Which of course, is false. Your reply to **Lib** ’s question about government monopoly over currency was also telling. You either don’t really know what money is, and don’t understand the role of non government actors in its creation, or you’re deliberately and knowingly spouting bullshit because it suits your agenda. ---
**Author:** ![Baldwin](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/baldwin/32/7264_2.png) [@Baldwin](https://boards.straightdope.com/u/Baldwin)\ **Post date:** [February 13, 2005, 2:30pm UTC](https://boards.straightdope.com/t/bush-there-is-no-trust/289334/110 "2005-02-13T14:30:00Z")
The current administration has certainly shown some control over tax revenue, in that they’ve vastly decreased the revenue stream through bold measures like huge tax cuts for the richest people in the world. So, billions of dollars that should be available for government programs are instead going into off-shore accounts. Has anybody in the mainstream media brought up the question of whether Bush is violating the 14th Amendment? ---
**Author:** ![Scylla](https://avatars.discourse-cdn.com/v4/letter/s/a5b964/32.png) [@Scylla](https://boards.straightdope.com/u/Scylla)\ **Post date:** [February 13, 2005, 5:50pm UTC](https://boards.straightdope.com/t/bush-there-is-no-trust/289334/111 "2005-02-13T17:50:50Z")
> [@Desmostylus](#): > > There are a few problems with these sentences. Governments rarely back their bonds with assets, so it’s pretty much irrelevant that there are no assets saved to repay the T-bills that the US government issued. The currency argument is also irrelevant. Goverment bonds are backed by the government’s power to tax. Government treasuries are “backed” by several things: First, their ability to tax (as you say,) second is their ability to print money, and third is the confidence the market has that they will maintain a stable and liquid currency. Irrelevant? You sir, are a total fucking moron. Ignorance combined with certitude is usually a fatal flaw. Irrelevant? Let us give an example to demonstrate your ignorance: Let us say that Argentina has a currency called a dollar equal to a dollar. They are issuing bonds paying 12% The US is issuing bonds paying 3%. You and I both have $1,000, which will X package of goods. You, being the idiot who thinks money supply and currency is irrelevant, purchases the Argentinian bond because it pays more and you laugh at poor dumb ignorant Scylla who buys the Treasury. When your bond matures you find it only converts back into $400 US dollars. In spite of the higher interest you’ve been losing value. You only have enough to buy .35X. My bond maturity produces a pile of cash that buys 1.1X. What has happened? Argentina failed to manage the money supply adequately. They printed too many dollars and the currency suffered from severe inflation. The backing of the bond was poor in this regard. Irrelevant? I repeat, you are a fucking moron. Now you’re an object lesson, too. > [@](#): > > You appear to be presenting tax revenue as something that _the US government has no control over_. Which of course, is false. I have said no such thing. Your failure to represent my statements accurately is further proof of your ineptitude. ---
**Author:** ![Mr.Moto](https://avatars.discourse-cdn.com/v4/letter/m/9de0a6/32.png) [@Mr.Moto](https://boards.straightdope.com/u/Mr.Moto)\ **Post date:** [February 13, 2005, 5:54pm UTC](https://boards.straightdope.com/t/bush-there-is-no-trust/289334/112 "2005-02-13T17:54:02Z")
> [@Baldwin](#): > > The current administration has certainly shown some control over tax revenue, in that they’ve vastly decreased the revenue stream through bold measures like huge tax cuts for the richest people in the world. So, billions of dollars that should be available for government programs are instead going into off-shore accounts. Um, if the rates were cut so much for rich folks, surely they wouldn’t need offshore accounts. Please provide some sort of citation for this. Thanks. ---
**Author:** ![Scylla](https://avatars.discourse-cdn.com/v4/letter/s/a5b964/32.png) [@Scylla](https://boards.straightdope.com/u/Scylla)\ **Post date:** [February 13, 2005, 6:03pm UTC](https://boards.straightdope.com/t/bush-there-is-no-trust/289334/113 "2005-02-13T18:03:14Z")
> [@Baldwin](#): > > The current administration has certainly shown some control over tax revenue, in that they’ve vastly decreased the revenue stream through bold measures like huge tax cuts for the richest people in the world. So, billions of dollars that should be available for government programs are instead going into off-shore accounts. Without saying the tax-cuts were right or wrong, it is a basic tenet of economic theory that in order to stimulate an economy in trouble you have to lower taxes and increase spending, which Bush did. How he lowered the taxes, and how he increased spending is of course a subject that one may gladly take issue with. Doing both though was pretty much a requirement. Consider that a failing economy produces less. Say the value of the economy is 100. If your taxes are set at a blanket 30% you get less revenue as the economy slows to, say, 50. If you lower taxes to 20% and spend and stimulate the economy in this fashion and the economy than grows to, say, 150, then your revenue increases and you have more money to spend. Finally, when taxation eases it does not have the effect of chasing money offshore, as you imply. The value of offshore tax-havens decreases, so the effect is actually the opposite of what you state. ---
**Author:** ![Baldwin](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/baldwin/32/7264_2.png) [@Baldwin](https://boards.straightdope.com/u/Baldwin)\ **Post date:** [February 14, 2005, 3:38am UTC](https://boards.straightdope.com/t/bush-there-is-no-trust/289334/114 "2005-02-14T03:38:23Z")
I’ll have to look it up, but I believe you’e mistaken about off-shore accounts, and that the shelter they provide for interest income will still attact the money freed up by a lower federal income tax rate. Far, far, outside my experience, so may be wrong. Has the Constitutional issue of Bush’s public statements been discussed elsewhere on the SDMB? Why don’t I just find out instead of bothering you folks? ---
**Author:** ![Mr.Moto](https://avatars.discourse-cdn.com/v4/letter/m/9de0a6/32.png) [@Mr.Moto](https://boards.straightdope.com/u/Mr.Moto)\ **Post date:** [February 14, 2005, 4:50am UTC](https://boards.straightdope.com/t/bush-there-is-no-trust/289334/115 "2005-02-14T04:50:46Z")
**Baldwin** , keep in mind there are significant costs involved in keeping offshore accounts. Chief among these are a loss of liquidity and the necessity in many cases to place these funds in accounts that significantly underperform other investments. Therefore, these investments only make sense in many cases as a hedge against taxation. Reduce taxes, and their appeal is diminished. Also, I’m sure you’re talking about this passage of the 14th Amendment: > [@](#): > > Section 4. The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. Now, to my ears, Bush wasn’t questioning the debt, merely the government funds that purport to hold those liabilities as assets. Just my opinion, though. If you feel otherwise, by all means, fire up a petition for impeachment. ---
**Author:** ![Polycarp](https://avatars.discourse-cdn.com/v4/letter/p/82dd89/32.png) [@Polycarp](https://boards.straightdope.com/u/Polycarp)\ **Post date:** [February 14, 2005, 5:18am UTC](https://boards.straightdope.com/t/bush-there-is-no-trust/289334/116 "2005-02-14T05:18:06Z")
> [@Scylla](#): > > Without saying the tax-cuts were right or wrong, it is a basic tenet of economic theory that in order to stimulate an economy in trouble you have to lower taxes and increase spending, which Bush did. How he lowered the taxes, and how he increased spending is of course a subject that one may gladly take issue with. > > Doing both though was pretty much a requirement. Consider that a failing economy produces less. Say the value of the economy is 100. If your taxes are set at a blanket 30% you get less revenue as the economy slows to, say, 50. If you lower taxes to 20% and spend and stimulate the economy in this fashion and the economy than grows to, say, 150, then your revenue increases and you have more money to spend. > > Finally, when taxation eases it does not have the effect of chasing money offshore, as you imply. The value of offshore tax-havens decreases, so the effect is actually the opposite of what you state. With the caveats you included, I cannot take issue with anything you say here. (And that’s scary! ;)) ---
**Author:** ![Desmostylus](https://avatars.discourse-cdn.com/v4/letter/d/c57346/32.png) [@Desmostylus](https://boards.straightdope.com/u/Desmostylus)\ **Post date:** [February 14, 2005, 8:12am UTC](https://boards.straightdope.com/t/bush-there-is-no-trust/289334/117 "2005-02-14T08:12:39Z")
> [@Scylla](#): > > Government treasuries are “backed” by several things: First, their ability to tax (as you say,) **second is their ability to print money** , and third is the confidence the market has that they will maintain a stable and liquid currency. Your example simply demonstrates that governments _cannot_ back their bonds by printing money. Hence, it cannot be said in any meaningful way that government bonds are backed by the ability to print money. You’d been rabbiting on about what a bond _isn’t_, whilst carefully avoiding an honest explanation of what a bond actually is. > [@Scylla](#): > > Without saying the tax-cuts were right or wrong, it is a basic tenet of economic theory that in order to stimulate an economy in trouble you have to lower taxes and increase spending, which Bush did. How he lowered the taxes, and how he increased spending is of course a subject that one may gladly take issue with. > > Doing both though was pretty much a requirement. Consider that a failing economy produces less. Say the value of the economy is 100. If your taxes are set at a blanket 30% you get less revenue as the economy slows to, say, 50. If you lower taxes to 20% and spend and stimulate the economy in this fashion and the economy than grows to, say, 150, then your revenue increases and you have more money to spend. He suckered you, **Poly**. What **Scylla** explained as “a besic tenet of economic theory” actually has a specific name that you’re probably quite familiar with. A name coined, in fact, by George HW Bush. Hint: [it starts with a “v”](http://en.wikipedia.org/wiki/Trickle_down_effect). ---
**Author:** ![Mr.Moto](https://avatars.discourse-cdn.com/v4/letter/m/9de0a6/32.png) [@Mr.Moto](https://boards.straightdope.com/u/Mr.Moto)\ **Post date:** [February 14, 2005, 11:19am UTC](https://boards.straightdope.com/t/bush-there-is-no-trust/289334/118 "2005-02-14T11:19:43Z")
What should have been done, then? Please enlighten us. Seems to me that running a budget surplus in the face of a softening economy is just economic madness. I may be wrong, so I’m willing to listen. ---
**Author:** ![Desmostylus](https://avatars.discourse-cdn.com/v4/letter/d/c57346/32.png) [@Desmostylus](https://boards.straightdope.com/u/Desmostylus)\ **Post date:** [February 14, 2005, 11:47am UTC](https://boards.straightdope.com/t/bush-there-is-no-trust/289334/119 "2005-02-14T11:47:37Z")
> [@Mr. Moto](#): > > What should have been done, then? Please enlighten us. > > Seems to me that running a budget surplus in the face of a softening economy is just economic madness. I may be wrong, so I’m willing to listen. I assume that you’re asking about what should have been done back in 2000 or 2001, to stimulate the US economy. A temporary tax cut, or a temporary increase in deficit spending, or a combination of the two, would have been quite appropriate responses. As I said, I _assume_ that’s what you’re asking about, and that you aren’t going to try to argue that the US economy is still in the toilet, and always will be from now on. ---
**Author:** ![Desmostylus](https://avatars.discourse-cdn.com/v4/letter/d/c57346/32.png) [@Desmostylus](https://boards.straightdope.com/u/Desmostylus)\ **Post date:** [February 14, 2005, 12:18pm UTC](https://boards.straightdope.com/t/bush-there-is-no-trust/289334/120 "2005-02-14T12:18:47Z")
> [@Mr. Moto](#): > > Therefore, these investments only make sense in many cases as a hedge against taxation. Reduce taxes, and their appeal is diminished. Naw, **Baldwin** ’s probably just giving a second-hand account of how a bunch of rich US citizens don’t have confidence in the value of the US dollar, and who think that Bush’s fiscal, i.e. taxation, policies are just an enormous wank: > [@](#): > > [A Word From A Dollar Bear > Robert Lenzner and Daniel Kruger , 01.10.05](http://www.forbes.com/window/free_forbes/2005/0110/036.html) > > Warren Buffett’s vote of no confidence in U.S. fiscal policies is up to $20 billion. > The dollar has fallen savagely against the euro for the past three years, and the trade deficit is running $55 billion a month. Is the currency rout over? Can the trade deficit be fixed with a rise in interest rates or an upward revaluation of the Chinese currency? Warren Buffett, the world’s most visible dollar bear, says the answer to both these questions is no. His bet against the dollar, reported at $12 billion in his last annual report (for Dec. 31, 2003), has gotten all the bigger. Now his Berkshire Hathaway has a $20 billion bet in favor of the euro, the pound and six other foreign currencies. [Previous page](https://boards.straightdope.com/t/bush-there-is-no-trust/289334.md?page=5) [Next page](https://boards.straightdope.com/t/bush-there-is-no-trust/289334.md?page=7)