# Can you debunk these claims about Social Security? **URL:** \ **Category:** Great Debates\ **Created:** [August 4, 2010, 9:29pm UTC](https://boards.straightdope.com/t/can-you-debunk-these-claims-about-social-security/549193 "2010-08-04T21:29:01Z")\ **Posts on this page:** 12\ **Page:** 6
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [August 9, 2010, 3:20am UTC](https://boards.straightdope.com/t/can-you-debunk-these-claims-about-social-security/549193/101 "2010-08-09T03:20:38Z")
> [@amarone](#): > > > [@treis](#): > > > > No it doesn’t. It’s true that the Federal Government would lose X trillion amount of liabilities, but they would also lose X trillion assets. It is a wash, and the net effect is bupkis. > > What are these assets that they have lost? Bonds that they issued to themselves? These are not assets. > > The government takes cold hard cash from SS payers, spends it, and replaces it with a promise that it will pay the benefits later. > > Let us say you give me $100 to go out and buy groceries tomorrow. I spend the $100 on the traditional hookers and blow and write a note promising to buy the groceries. Is that note an asset to me? Of course not. I am $100 in the hole (still talking about the hookers?) and need to get the money by borrowing it or earning it elsewhere (the analogy fails here - the government doesn’t earn - it just taxes and borrows). Would you feel better if the social security trust fund held Canadian bonds? Would that make it more of a real asset? > [@](#): > > Is the note an asset to the SS-receivers? Yes, but the government has merely promised to make payments, i.e. it has borrowed the money. Where is the money going to come from to pay the coupon and the note? I suppose the government could just print it, but few would be happy with that solution. How do you think they repay ANY of their bonds. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [August 9, 2010, 3:22am UTC](https://boards.straightdope.com/t/can-you-debunk-these-claims-about-social-security/549193/102 "2010-08-09T03:22:33Z")
> [@treis](#): > > > [@DanBlather](#): > > > > But it would be OK if they bought govt bonds of another country, right? > > Yes, those are assets. If I loan you 10 bucks, that’s 10 bucks + interest I can expect back in the future. And the same holds true of US government bonds. Enough people think US treasuries are the safest investment in the world that the interest rate is below 0.25%. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [August 9, 2010, 3:27am UTC](https://boards.straightdope.com/t/can-you-debunk-these-claims-about-social-security/549193/103 "2010-08-09T03:27:57Z")
> [@Ruminator](#): > > > [@DanBlather](#): > > > > But it would be OK if they bought govt bonds of another country, right? > > No, the best bonds to buy are from institutions of a higher order in the hierarchy. An institution of a higher authority than the USA might be bonds from the Galactic Federation of Planets. Since there is no such thing, the USA writing IOUs to itself is just an accounting trick. huh? > [@](#): > > A institution writing an IOU to itself does not work like that at all. An IOU does not represent time-shifted consumption since the all of the present tax receipts are used for today’s spending. A institution’s IOU to itself is not “savings” – it is an accounting trick. D you think the bonds i the trust fund are clam on real assets or not? > [@](#): > > Now, on the other hand, if you were to present a “wheat grain voucher” to the Galactic Federation of Planets for redemption and a spaceship beams down tons of grain, that voucher (the Galactic IOU) could then be considered “real” savings. No humans had to do additional work to have the future grain appear, the aliens honored the IOU voucher and beamed it down. The alien’s IOU is “savings” but the USA IOU is not. Aren’t you calling all unsecured debt “not a real asset”? Ibuy an unsecured bond from GM, every last thing they own is borrowed against beyond their their value. That GM bond is a real asset (a crappy one perhaps but a real asset nonetheless). ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [August 9, 2010, 3:29am UTC](https://boards.straightdope.com/t/can-you-debunk-these-claims-about-social-security/549193/104 "2010-08-09T03:29:57Z")
> [@Ruminator](#): > > > [@Ravenman](#): > > > > our country guarantees that the bonds MUST be repaid. > > Ha! > > They only have to be repaid in “nominal” dollar amounts – not “real” purchasing power. I’m not aware of any country’s paper debt that guarantees repayment in “real purchasing power” indexed to CPI or global commodities (oil, grain, or gold). Is there such a country? > > The “nominal” part is easy to do: inflate the currency. Or add new rules and restrictions to the bond redemptions to lessen their value (basically a “debt default” in disguise.) I don’t think it matters but Yes there are inflation protected securities, they’re called TIPS. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [August 9, 2010, 3:31am UTC](https://boards.straightdope.com/t/can-you-debunk-these-claims-about-social-security/549193/105 "2010-08-09T03:31:57Z")
> [@Ruminator](#): > > > [@jtgain](#): > > > > That is all any note receivable is. A promise to pay at a future date. Just because it is from myself doesn’t make it worthless. > > > > Presumably I have an income and have budgeted an ability to repay that amount in a fixed term just like anyone else. > > You’re father&son analogy doesn’t quite match what the government does. The “government” doesn’t earn its own money. The citizens earn the money. > > Here’s a closer analogy: > > Your son runs a lemonade stand for several summers and as a good father, you take his money and put it in the piggy bank. > After he’s collected $50,000, he spends all of it on a SUV, gifts for the mistress, and hair transplants. > The piggy bank now has $0 in it. To make up for it, he writes $50k in IOUs. > Here’s the key: the father himself doesn’t earn $50k in future money to pay it back. He actually forces his son (and his son’s sons (his grandchildren)) to keep running the lemonade to contribute NEW money to fund those IOUs. There are no “savings” because his son has to exert NEW EFFORT and PRODUCE NEW OUTPUT to replenish that $50k. This delusion would actually be somewhat sustainable if the father only blew that $50k that one time or spent a fraction of his son’s piggy bank. In reality, the father is spending ALL THE MONEY PLUS EXTRA MONEY not his son’s piggy bank and then forcing his sons to pay it all back plus interest. > > I suppose you could twist words around and say that the father’s “income” is actually his ability to force his sons to work more and extract that future output. That would certainly be an interesting definition of “income.” Almost every critic of sociasl security seems to have an inability to grasp how transfer payments work. ---
**Author:** ![Ruminator](https://avatars.discourse-cdn.com/v4/letter/r/b9bd4f/32.png) [@Ruminator](https://boards.straightdope.com/u/Ruminator)\ **Post date:** [August 9, 2010, 9:27am UTC](https://boards.straightdope.com/t/can-you-debunk-these-claims-about-social-security/549193/106 "2010-08-09T09:27:57Z")
> [@Damuri\_Ajashi](#): > > Almost every critic of sociasl security seems to have an inability to grasp how transfer payments work. Using government wording such as, _“your surplus SS funds are safe because it’s been invested in t-bills”_ has nothing to do with transfer payments. You can have a sensible philosophy about “transfer of payments” without this accounting fiction. You can also have the surplus taxes for \ completely spent and converted to IOUs that have nothing to do with “transfer of payments” “Transfer of payments” and “IOUs” are separate concepts. ---
**Author:** ![treis](https://avatars.discourse-cdn.com/v4/letter/t/bc79bd/32.png) [@treis](https://boards.straightdope.com/u/treis)\ **Post date:** [August 9, 2010, 9:30am UTC](https://boards.straightdope.com/t/can-you-debunk-these-claims-about-social-security/549193/107 "2010-08-09T09:30:16Z")
> [@Damuri\_Ajashi](#): > > > [@treis](#): > > > > No it doesn’t. It’s true that the Federal Government would lose X trillion amount of liabilities, but they would also lose X trillion assets. It is a wash, and the net effect is bupkis. > > If they say fuck you, we are repealing social security, do you think they are also saying and we’re going to renege on our debt too? No, Congress can modify SS without having to void any debt. > [@Damuri\_Ajashi](#): > > And the same holds true of US government bonds. Enough people think US treasuries are the safest investment in the world that the interest rate is below 0.25%. Uh hu and maybe you can check one of the half dozen posts I’ve made where I explained how loaning money to yourself doesn’t count as savings. ---
**Author:** ![Ruminator](https://avatars.discourse-cdn.com/v4/letter/r/b9bd4f/32.png) [@Ruminator](https://boards.straightdope.com/u/Ruminator)\ **Post date:** [August 9, 2010, 12:31pm UTC](https://boards.straightdope.com/t/can-you-debunk-these-claims-about-social-security/549193/108 "2010-08-09T12:31:24Z")
> [@Damuri\_Ajashi](#): > > Yes there are inflation protected securities, they’re called TIPS. #1 – If you think TIPS guarantees “Real Purchasing Power”, you’re not fully educated on how they actually work. Have you ever bought any? I have. #2 – SS surplus funds have not been converted to TIPS-IOUs. Also, the vast majority of the USA $13 trillion debt is not TIPS. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [August 9, 2010, 4:34pm UTC](https://boards.straightdope.com/t/can-you-debunk-these-claims-about-social-security/549193/109 "2010-08-09T16:34:15Z")
> [@Ruminator](#): > > No, you’re making the false assumption that people would _behave exactly the same way_ whether the 12.5% contribution was a mandatory tax or a voluntary contribution to any personal purpose. > > When the 12.5% is not a tax and under the control of the individual citizen, there are a number of different possible outcomes: > > [ul][li]he could buy foreign bonds (Euro denominated, China yuan denominated, etc)[_]buy title to foreign real estate (Mexico, undeveloped islands, etc)[_]accumulate the funds to capitalize his own business[/li][li] buy gold, silver, or preserved copies of Harry Potter novels and bury them in the ground; dig them up 20 years later to sell[/li][li]work less 12.5% less hours to get the same income, and put those personal hours towards personal projects such as planting a garden for food, or erecting a windmill to generate electricity[/li][li]maybe possibly even invest in USA T-Bills (but not $13 trillion)[/li][/ul] There are a number of other outcomes which you oddly did not include. He could invest the money into something safe and high yielding. like Enron stock. He could invest in real estate. He could look for the highest returning current investment, and go with that, even though it is almost certainly not a good choice. (Swedish investors did exactly this, as Thaler notes in “Nudge.” ) The refusal to actually consider risk and adopt lower returning though safer investment vehicles is exactly what got us into this mess. And some people never learn. What happens when the money is gone and we have a class of retirees without adequate income? Do we bail them out, or do you guys say , like for those tricked into getting bad mortgages, that it is all their fault? One thing missing from the coverage of the crash is that the value of the SS investment went down with the market in general. Why is that? ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [August 9, 2010, 4:42pm UTC](https://boards.straightdope.com/t/can-you-debunk-these-claims-about-social-security/549193/110 "2010-08-09T16:42:24Z")
> [@treis](#): > > Uh hu and maybe you can check one of the half dozen posts I’ve made where I explained how loaning money to yourself doesn’t count as savings. It is clear that your view isn’t nuanced enough to see the legal and administrative barriers between Social Security and the rest of the government. You think that the regular government reneging on bonds in the SS trust fund wouldn’t have the same impact as them reneging on bonds owned by the Chinese? The undercurrent in all this is that conservatives want to stir up doubts that the government can pay its debts, no doubt to help starve the beast. Perhaps they should start blaming the nitwits who turned a surplus into a deficit, and the bigger nitwits who care about the deficit except for those parts which come from tax cuts for the rich. Odd that the lovers of the market are deaf to its message about the safety of US government debt. ---
**Author:** ![Omar\_Little](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/omar_little/32/269_2.png) [@Omar\_Little](https://boards.straightdope.com/u/Omar_Little)\ **Post date:** [August 9, 2010, 5:43pm UTC](https://boards.straightdope.com/t/can-you-debunk-these-claims-about-social-security/549193/111 "2010-08-09T17:43:37Z")
> [@Snowboarder\_Bo](#): > > Yeah but what you said was that a profession would deliberately raise it’s prices in order to incentivize more people to join that profession, > > > [@Wilbo523](#): > > > > There’s a reason that some professions make more than others, it is to incentivize people to seek out those types of professions. > > and I think that is wrong. WRONG. No one sets prices for that reason. Go find me a cite from a lawyer who wrote “I charge $500 an hour in the hope that it will encourage more people to want to be lawyers, not because that’s what I think my services are worth to my clients.” and I’ll believe you that it CAN happen the way you said. > > So, as I said before, unless you have some cites, you don’t have to bother trying to defend what you wrote. In other words, unless you have a cite, you have nothing. Not only do you not understand economics, you aren’t very good at comprehension either. No where in my quote above did I say that the profession sets the wage to incentivize others to join it. And for you to infer it, shows your lack of critical thinking skills. Society, the market, whatever you want to call it, incentivizes people to join certain professions by raising the amount they are willing to pay for those types of services. ---
**Author:** ![treis](https://avatars.discourse-cdn.com/v4/letter/t/bc79bd/32.png) [@treis](https://boards.straightdope.com/u/treis)\ **Post date:** [August 9, 2010, 11:34pm UTC](https://boards.straightdope.com/t/can-you-debunk-these-claims-about-social-security/549193/112 "2010-08-09T23:34:05Z")
> [@Voyager](#): > > > [@treis](#): > > > > Uh hu and maybe you can check one of the half dozen posts I’ve made where I explained how loaning money to yourself doesn’t count as savings. > > It is clear that your view isn’t nuanced enough to see the legal and administrative barriers between Social Security and the rest of the government. You think that the regular government reneging on bonds in the SS trust fund wouldn’t have the same impact as them reneging on bonds owned by the Chinese? Allow me to quote myself: > [@treis](#): > > The point is that the loaning and borrowing party are the same. Congress could pass a law tomorrow saying that the SS trust fund is returned to the treasury, and the trust fund will simply vanish off the accounting books. There is no reneging on any bonds. The bonds are still be paid, with the only difference being that the fictional difference between payer and payee is eliminated. > [@Voyager](#): > > The undercurrent in all this is that conservatives want to stir up doubts that the government can pay its debts, no doubt to help starve the beast. Perhaps they should start blaming the nitwits who turned a surplus into a deficit, and the bigger nitwits who care about the deficit except for those parts which come from tax cuts for the rich. Odd that the lovers of the market are deaf to its message about the safety of US government debt. Or perhaps they should blame the nitwits that believe SS is fully funded with a safe trust. I’m not arguing for or against SS. I’m arguing for honesty in accounting. [Previous page](https://boards.straightdope.com/t/can-you-debunk-these-claims-about-social-security/549193.md?page=5)