Eight False Things The Public “Knows” Prior To Election Day

Great Debates
81

Bah!

I hear you, but the fact still remains that the best place to invest money and be guaranteed some stability is with US Treasury bonds. I invest about 20% of my retirement saving into bonds as the most stable part of my portfolio, and I will be increasing this amount as I get older. Many other investors feel the same way I do, that is why they are trading at record high levels with high bid to cover ratios even though their yields are at all time lows. Hell, explain to me why so many investors world wide are trying to buy our bonds even though the return is at a lower rate than anything seen since the 60s. Look at this chart if you don’t believe me. But even thought the return on Government bonds is shit right now, but people can’t buy them fast enough. The bid to cover ratio of US bonds is over 4 right now, which is indicative of a very high demand. How do you explain it?

Even if it is an accounting trick, as you assert, I would much rather the surplus be invested in Treasuries than Citibank and BP stock. The government is going to sell the damn bonds anyway, why not let the trust fund by them instead of the Chinese. At least the Trust fund won’t use them as leverage against us.

82

The bonds would have been sold to someone else. And the treasury department would have been liable for the debt when they matured. No dispute there. That’s the function of the bonds - they create incoming cash now and a debt that’ll need to be paid in the future.

The catch is on the other end of the deal - the social security “investing” its surplus by buying bonds. When those bonds mature it’ll just be one branch of the United States government paying money to another branch of the United States government. And like any other bond payment, the actual income will have to come in from taxes at that time (or from the sale of more bonds).

83

It’s very simple. It’s the difference between you giving me a check for $5000 which I deposit in my savings account and me giving myself a check for $5000 which I deposit in my savings account. We both have the money in our checking accounts and both of our checks are good and $5000 ended up in my savings account either way. But I’m assuming you can see that one transaction represented me receiving real income and one did not.

84

So the you will agree that the US Debt is not nearly as bad as everyone is making out because one half of it is owed to itself, right? According to Wikipedia (the only cite I am going to dig up on a Friday night after 3 glasses of wine and a party full of hyped up 6 year olds), the federal reserve and the US governement holds 49.37% of all government debt. This means we just agreed that the US debt has been cut in half, right? Agree to this and I will concede all your other points.

85

That depends. If the United States abolishs social security and declares that all surplus taxes paid into the program is gone, then a huge amount of debt will be eliminated. But I don’t see that as a likely possibility.

86

But you seem to be arguing that the bonds held by the Social Security Trust fund are worthless, imaginary, a IOU written by the government to itself. If this is true, then surely half the debt is just as imaginary, right?

87

Well surely that isn’t true! I mean, I’ve seen footage of the Death [del]Eaters[/del]Panels myself, roaming the countryside at night in search of [del]victims[/del][del]Harry Potter[/del]patients. Plus, all the Teabaggers keep talking about how it’s already ruined the country, and they’re never wrong and would never tell a lie.

88

I’m not even much of an economics buff, but even I know this isn’t true just from reading the stuff the President’s economists have written. Of course they
think the size of the state’s share in the economy and the features of that state’s economy will affect the proportion of that state’s share of jobs created by economic stimulus. To think otherwise is to defy logic, to say nothing of economics. Your caricature basically reduces Christina Romer et al. to idiots, which however much you disagree with them, they are not.

There are a number of problems here. First, it isn’t true that it is impossible to measure jobs created or saved. For every chunk of money you hand out, you ask the receiver to document the jobs created or saved by it. It’s a crude measurement, largely because it doesn’t capture any of the stimulus effects of the spending (i.e., jobs indirectly created or saved by the additional economic activity spurred by the directly created or saved jobs). But it’s a baseline. You can pull these reporting spreadsheets for each state from recovery.org, and see dollar-by-dollar what each recipient is saying about how many jobs their money created or saved.

Second, your original claim rests on the notion that it would be odd to see that the Stimulus had disproportionate effects on one state. But if the effects of the Stimulus are unmeasureable, then it doesn’t actually say anything about the Stimulus to suggest that one State has had disproportionate job growth.

Third, and most importantly, AFAICT it isn’t true that Texas has over half of the jobs created since 2008 according the BLS. I think maybe you’re half-remembering some other statistic.

89

That sounds like that third glass of wine talking.

90

It’s interesting to watch conservatives and liberals argue at cross-purposes on the subject of job creation. Conservatives favor tax cuts, which they “know” lead to job creation. Liberals favor government spending, which they “know” lead to job creation. And both sides are quick to point out how their opponent’s position is unbacked by any solid evidence that it produces results.

91

I don’t want to participate in a content-free miscommunication, but since the question, rhetorical or not, is directed at me, let me address it.

First: My question ws not rhetorical. I don’t want to confuse you with Mr. Moto, but where would you want the SocSec Trust Fund to invest its surplus, Little Nemo ? That was after all the only question I had in the post to which you responded. Are you going to go with the banknotes under the mattress? Gold bullion? Or is U.S. treasury debt good enough for you?

As to your question, about “where the money is going to come from”, that is a very good question (in its own trivial and obvious way). Perhaps you’d like to start a thread on the chance for future U.S. default, or why Washington is politically incapable of rational economic policies.

But for you to inject this query as a repsonse to my query to Mr. Moto suggests your thinking is as confused as his.

92

Re-reading my post, I worry that it will leave you as confused as ever. Let me condense this into brief clear points that most of us can agree on.

(1) The trend of the U.S. in general (and its Government Treasury in particular) toward insolvency is a very real, very important problem.
(2) The “Baby Boomer” demographic is part of the problem (though Medicare may be more of a specific concern than Soc Sec).

But while the debt and entitlement demographics are both big important problems,
(3) to pretend that the “problem” is that Soc Sec has accepted phony Treasury paper instead of gold bullion as a store for its surplus is just plain silly and originates solely as a way for tricky right-wingers to confuse voters.

If you choose to continue the discussion, please answer Question X above.

93

But I notice that for all your counter-questions, you haven’t answer mine: where do you think the money to pay off those treasury bonds is going to come from?

In theory, the government should be making real investments with the surplus. Buying up actual assets that can be resold in the future. But practically speaking that’s not going to work - any government program to purchase assets on that scale would have a huge distorting effect on the economy (without even getting into the effect selling them off would later produce).

So the best realistic plan would be to stop pretending there’s a social security surplus that’s being set aside and invested. The money that is being collected this year is being spent this year. Whatever we pay out for social security in 2030 will have to be paid for in money the government will collect in 2030.

94

To whom do I go to hold financially accountable when pie-in-the-sky pronouncements about the health care bill saving money and Social Security having a magic reserve of gingerbread dollars turn out to be untrue?

95

This “conversation” is frustrating because I’m not sure we disagree on any important issue here; it’s more of a different perspective. I’ll go one more round of rejoinder because flawed perspective will lead to flawed thinking.

Little Nemo, you didn’t really answer the Question. It wasn’t intended to be difficult or tricky.

I specifically stated that U.S. insolvency was a big and important problem. Did I need to use a bigger font for that? :smack: But that insolvency is unrelated to the bizarre misconception you have about the Soc Sec surplus.

Look: Suppose a unit of Citibank maintains an investment fund in banking shares. Suppose that the fund is $10 million and split equally among ten banks; suppose one of those ten banks is Citibank itself. Does that mean the fund has only $9 million of “real” investment, and the $1 million in Citibank is fake? I know from some of your other posts that you’re not a typical right-wing idiot, but some of them claim that the U.S. debt paper held by the SocSec Trust Fund is “unreal” in a way that, say, Zimbabwe bonds would not be.

Now, one can wonder if and when Moody’s is going to downgrade U.S. Treasury debt, but do so please in another thread. The paper held by Soc Sec is no more “fake” than the shares of Citibank, in the hypothetical example above, held by its investment unit.

This is the kind of gibberish that makes you sound like a right-wing idiot (even if one of those labels doesn’t apply). Bonds of other countries (even Zimbabwe) would be “real investments” that could be “resold in the future”; why don’t U.S. bonds qualify?

I agree we should stop pretending that falsities about Soc Sec are true, and am trying to explain the falsity in your thinking. :smiley:

Do you understand this much: For every $1 million that Soc Sec invests in Zimbabwe bonds instead of U.S. bonds, the U.S. Treasury would borrow $1 million from someone else? (For definiteness let’s stipulate that it borrows the $1 million from Zimbabwe!) When someone redeems that $1 million bond, the U.S. Treasury will have to come up with cash, but it will have to come up with that cash whether it’s Soc Sec or Zimbabwe that’s redeeming the bond! (You seem peculiarly focused on where that $1 million will come from. It can come from taxes, new debt, or some form of fiat money.)

If Zimbabwe seems too sardonic, substitute the Kingdom of Denmark. If Soc Sec bought Denmark bonds, and Denmark turned around and used that money to buy U.S. bonds, would it have much effect on U.S. solvency? No. Do you understand why the fixation on the way SocSec invests its surplus doesn’t enlighten, but confuses?

96

4) The stimulus didn’t work.
Reality: The stimulus worked, but was not enough. In fact, according to the Congressional Budget Office, the stimulus raised employment by between 1.4 million and 3.3 million jobs.

This one bugs the hell out of me. The stimulus was sold to us as a way of preventing the unemployment rate from going over 8%. So no, it didn’t work as measured by the goals set up by Obama. You can move the goalposts and prove that anything “worked”.

Obama’s Stimulus Plan: Failing by Its Own Measure (Time Magazine Business Section)

97

I’m not convinced. Suppose we expect that global warming will raise the sea levels by 1 foot, and predict that cap-and-trade would cut this down to 6 inches. But it turns out, our predictions about the sea levels was wrong, and absent any policy they would have raised by 2 feet, and cap-and-trade only cut it down to 1.5 feet. In that case, can you say the policy didn’t work? Of course not. In fact, it worked exactly as advertised, but the modeling was wrong.

Obviously, we can never know with certainty the counterfactual situation in which no policy was implemented. So we can’t ever know all the numbers in that hypothetical. But I don’t see why our inability to know should mean that whenever the initial prediction is false we can conclude that the policy didn’t work.

98

But you don’t know that absent any policy it would have risen 2 ft. If you knew that, it would have been the goal used in the first place.

Further, where is the cut-off? What if unemployment had rise to15% or 25%? Would the stimulus have “worked” because it didn’t rise to 20% or 30%?

99

That’s right, as I acknowledged in my post. So maybe policymakers shouldn’t make predictions about the overall effect if the model is uncertain, but that the difference between the prediction and the outcome doesn’t prove failure.

It depends. All we can do is ask what the best evidence says would have happened without the policy, and compare that to what happened. Any other metric for evaluation is irrational. And maybe that metric is too uncertain to be useful, but it is the only metric that makes any sense.

100

Agreed. But in this case, they did.

I disagree. The only objective way to say if something worked is to measure it against what it was supposed to do. And our models aren’t good enough to know what would have happened w/o the policy.

At best, I would say that we have to admit we don’t know whether the stimulus worked or not, because we don’t know what things would have been like w/o it. But since Obama (stupidly) gave us the metric, that’s the one we should use.