They’re not loaning money to themselves. I think you need to try to construct your argument without this assumption because it is wrong. The government does not own the contents of the trust. Lets say that the SSTF could hold other securities and the SSTF held Canadian bonds instead of US bonds. The federal government cannot reach into the SSTF and sell those bonds to pay for another aircraft carrier or a war in Syria, can it? No? then it doesn’t own the contents of that trust and when they borrow money from that trust, they are not borrowing money from themselves.
Keep the personal comments to a minimum, please.
The trust fund holds things of value. The government has an obligation. The negative value those bonds represent to the government (and the tax liability to the taxpayers) is balanced by the positive value of those bonds in the SSTF. Its almost like you are TRYING to look at things sideways.
And how does that make the bonds worthless?
You are eliminating the obligor on those bonds without explaining why that is appropriate.
All these analogies are flawed and unnecessary. Government debt that is not owned by the government has value so long as the government has good credit. The debt held by the SSTF is not owned by the government.
If our deficit in any given year was limited to the amount by which the SSTF was increased, then perhaps for those years, we wouldn’t have borrowed all that money but for the SSTF but in most years we borrow a lot more than the SSTF surplus which leads me to believe that absent the SSTF, our budget would have been about the same size.
Of course that’s a bit off topic. The central question is whether the SSTF holds anything of value and of course the answer is yes.
You really should read up on trusts, trustees and shit like that.
You’re jumping through all sorts of hoops to blur the distinction between the SS benficiaries and the SSTF and the government and the taxpayers.
Actually this is more of a psychological concept - that somehow counting the debt as higher would reduce spending and tax cuts. Since tax cuts have been a major part of the Republican agenda, this doesn’t sound too plausible. Today the positive cash flow is gone. Have Republicans stopped supporting tax cuts? (And if you like, have Democrats stopped supporting spending increases?)
Just like any bond. The interest rate shows that the market is pretty confident that the government and the taxpayers will indeed pay back the loans.
I bolded the part that’s really important. What it all adds up to is a tax liability to us taxpayers. If there were no trust fund, it would still add up to a tax liability for tax payer. That’s what makes them worthless.
It’s completely on topic. If the excess funds didn’t result in any actual savings then nothing was actually saved. The money was collected and spent and the only option left is for the tax payers to carry all the burden of future benefit payments.
And it’s fine to speculate what effect the SSTF had on borrowing, but people have actually looked at it analytically. I linked to one research paper that studied the effect of trust funds on deficit spending - they found that every trust fund dollar resulted in nearly a dollar of extra federal deficit spending. That’s not off topic - it’s the key reason the trust fund failed to build any actual wealth to pay for future benefit payments.
I agree it’s naive to think anything in particular would have resulted in significant genuine savings. I’m not arguing it would have. What I’m saying is it’s possible to look at the effect of the trust funds and analyze whether they resulted in any actual net savings or if they just added to deficit spending. In actuality there was little if any net savings so we can’t say there’s “money” in the trust fund.
When you’re talking about $3 trillion dollars and a promise to pay benefits to virtually every American, the government has little to do with paying it back. It’s the taxpayers who will be paying for the benefit payments. Just like we would if there were no bonds.
Because you are not a branch of government.
AFAIK.
Regards,
Shodan
I am explaining to you for the umpteenth time that you are wrong.
If the SSTF isn’t part of the government, then it isn’t covered by the 14th Amendment and therefore has no value according to Ravenman’s definition. If it is covered by the 14th Amendment then it is part of the government because the 14th Amendment applies to debt incurred by the government.
The obligations of the SSTF are carried on the government books as debt. I think I explained that to you before.
So, in your view, Social Security is set up by the government, run by the government, its obligations are part of the government debt, and its obligations are guaranteed by the US Constitution that establishes and controls the government - but it isn’t part of the government.
Uh-huh.
Regards,
Shodan
I’m not sure if you’re intentionally trying to be obtuse with Damuri’s point, but it’s clear that the Social Security system is a government function, but the finances of the trust fund (as well as a handful of other trust funds) are separated from the general government’s finances.
It’s somewhat like a franchise of a fast food chain. If you buy a McDonald’s franchise, yes, you are part of McDonald’s in a major respect. But it is false to say that the McDonald’s Corporation has day-to-day control of your operations, and so in that respect your business is independent of McDonald’s. If the franchise buys meat patties from McDonald’s corporate, that’s a real transaction – it doesn’t mean it isn’t a real purchase simply because one part of McDonald’s received money from a different part of McDonald’s.
That’s not a good analogy. McDonalds franchises are owned by people distinct and different from McDonalds corporation. That’s not true of social security and the rest of the government - they are both owned by the citizens of the us.
A better analogy would be a large company with an independently operated subsidiary. Day to day, the subsidiary is managed by its own managers, but those managers report to the parent company.
If the subsidiary needs to purchase goods or services from its parent, it does pay for them. It’s called transfer pricing and it’s an important part of accounting and economics.
That doesn’t make it a “real” transaction though. All the finances are ultimately the responsibility of the parent. All the debt flows back to parent and its shareholders, to the extent those shareholders own equity in the parent.
In fact, if you try to hide debt in subsidiaries you wind up in an Enron type situation - the subsidiaries at worst obfuscate the real health of the company, and at best you can clearly see they’re the debts of the parent. But they never are distinct from the parent.
Are the contracts between subsidiaries and their parents legally valid?
And what’s with the implying that the Social Security Trust Fund is hiding debt, what with your references to Enron? There is no hidden debt. Google “national debt” and the figures are right there. Everyone knows the value of the trust fund, everyone knows the debt to the public, everyone knows intragovernmental debt. There is no Enron comparison here – that’s just your imagination and political hangups speaking.
Not really. I don’t know exactly what you think legally valid means. A subsidiary isn’t going to sue its parent to enforce a contract. In reality a company would be wary of how investors perceive its action, but certainly nothing could keep it from nullifying some contract between the parent and a wholly owned subsidiary. Lots of private companies create subsidiaries for various reasons and they can do anything that doesn’t run afoul of the IRS or state laws.
The obfuscation comes from the topic of this thread. The idea that there’s some wealth that has been saved up in the trust fund when there is none - it’s just a $3 trillion obligation owed to the American people by the American people.
And you don’t know anything about my politics. You don’t have to be bad at economics and not understand public finance to be a liberal. I’ve never said I think we shouldn’t fully fund social security. The point is that we simply haven’t saved $3 trillion in our trust fund. There’s nothing political about that.
I love the double standards here – a contract isn’t really a contract between a subsidiary because a subsidiary probably wouldn’t sue to enforce the contract; but others argue that the trust fund doesn’t exist because Congress could decide in the future to change the law.
In my world, reality isn’t defined by what some party may or may not choose to do in the future.
It’s not a double standard. It’s the same exact issue. That’s what makes it a good analogy. In both cases there’s ultimately only one party involved. Admittedly in the case of Social Security the one party is “all American citizens”, but in both cases that one party can elect to handle the situation however they want.
Anyway that’s not why there isn’t any “money” in the Trust Fund.
Thinking about your points a little more, I think you underestimate the importance of subsidiaries. While your comments focus on the balance sheet of the parent, one of the main reasons for subsidiaries to exist at all is to shield the parent from liability - establishing a separate legal entity with a different identity and independent operations is helpful in that regard.
If a subsidiary were only to be a mere shell with no substantive difference between the company and its parent (which is basically what you claim the trust fund to be), then their is no distinction between the two, and liability can be shared between the organizations. Obviously, corporations tend not to want that, and I think the government has aimed similarly in establishing the trust fund (not for liability purposes of course, but for other reasons).
In short, I think you go way too far in erasing valid distinctions between parent and subsidiary, simply because you’re excessively focused on the idea of balance sheets being the only factor in your argument.
The question of the thread is “Is there “money” in the Social Security Trust Fund?” That is a question that has a lot to do with balance sheets. So I’m focused on it, but it’s not excessively focused; nor is it the only factor in my argument.
Also, no analogy is perfect. Businesses exist to conduct business with things besides itself and its owners. They sell things to other businesses and people, they buy things from other businesses and people.
That’s not true of social security. Its raison d’être is to pay benefits to the American people. It’s funded by the American people. We can either pay the benefits that’ve been promised or not pay them. If we do pay them we’ll need to pay them with taxation. Trying to pretend there is some valid distinction in this simple equation is the obfuscation I keep talking about.