Will you please answer the two clear questions posted up-thread:
“What should the US Government have done with surplus SS revenue if not purchase Treasury bills?”
“If the Social Security program, both taxes and expenditures, had never existed would the current US debt load be larger or smaller?”.
From here the definition of retiring debt:
Retiring a debt does not mean decreasing the total amount of indebtedness necessarily, it is about a specific loan. Paying off a bond held by SSTF by issuing new debt is exactly retiring debt owed to SSTF. Corporate bonds paid by issuing new bonds are retired also.
You also said
In the situation of a surplus, where SS buys bonds, how exactly are we to spend this money on Social Security? All SS obligations have been met from income.
If you go to a bank and withdraw $1,000 from your savings account, where do you think that money is coming from? It is either from other deposits that day, or from the bank cashing in short term bonds it bought to park it surplus money. Does this mean that your money is not fundamentally yours? Even if by some chance this money came from a mortgage payment you just made? In the same way, money from cashing in SS bonds is SS money.
I see the goalposts shifting again. You asserted the money was coming (in the present day) from the general fund when the SSTF is drawn upon–like it was in 2012 when $50 billion in SSTF bonds we cashed in. You now say that the SSTF is going to (in the future) draw from the general fund.
There is currently no evidence to support this; the methods used in 2012 explicitly did not do this–they did not “steal” $50 billion from taxes collected in 2012 to make up the shortfall, they simply transferred $50 billion of intra-governmental debt into private hands.
Your assertion now is that “some day” this debt will have to be repaid from the general fund; I have some serious doubts about this (sovereign debt does not work like personal household debt), but even if I assume this is true, so what? “Some day” we’ll all be dead, “some day” the economy will be so robust that $16 trillion is 1% of GDP, and “some day” people may decide that the inequities of wealth gained by class over the 30-odd years the SSTF was growing make it a moral imperative to tax the rich as a means of shoring up the debt.
Then so is an issue of stock, a mortgage, an annuity, even currency (at least when we were on the gold standard) or any of a dozen financial instruments involving the transfer of funds. Using “IOU” in this way debases the term such that it has little analytic meaning, and IMO is used simply to imply the bonds are a fiction, like the scrawled IOU’s you get from a deadbeat relative or a barfly.
I haven’t looked up your correction, but answering JAS09’s question “If the Social Security program, both taxes and expenditures, had never existed would the current US debt load be larger or smaller?” would go a long way toward clarifying your exact position on this. In my experience, budget scolds like to throw around the $16 trillion figure as the true “national debt” without noting that ~25% of that is the SSTF, but at the same time tell us that because SS expenditures now exceed the payroll tax, this new shortfall will cause the “national debt” to rise.
I’m not saying you have done this, but folks should realize those two statements are incompatible; either the debt is ~$11.5T and the SS shortfall will raise it, or the debt is ~$16T and the SS shortfall will not increase it.
Actually, you can use one credit card to pay off another–ever hear of balance transfers? The government actually does this every single day as short-term bonds mature and new ones are sold to pay them off. And if you’re a sovereign government–with the power to live forever, set your own income level, and (if you have enough of a military) declare your debts null and void in times of extreme crisis–this can go on indefinitely.
Wait; are you suggesting the SS system should have raised benefits during the fat years such that the amount going in = the amount going out? If so, please note that the 1983 Greenspan Commission specifically set things up this way (including placing the surplus in T-Bills) to address the demographic bomb of baby-boomer retirement, i.e. they bumped the payroll tax, which more strongly affects the middle class and poor.
Major budget deficits started around the same time the SS payroll tax was increased–in large measure because of cuts in income tax rates, which more strongly benefit the wealthy. If you interpret the trust fund as the manifestation of a “deal” between these two groups–the wealthy pay less tax for ~30 years while the middle class/poor pay more–there’s a moral argument that favors switching those terms now to balance out the deal.
This, in fact, is the exact reason why your contention that the taxpayer must “pay again” is wrong: It ignores that fact that there are different classes of taxpayer. The poor and middle class largely paid in the first place. But now (if we even get to the point where taxes will be used to cover the shortfall or the transfer of SSTF debt, which I still doubt) it is more likely that the wealthy will pay because the general fund comes largely from income tax. Again, I don’t think this is going to happen or that it needs to happen, but it does conveniently provide a motive for rich folks–who skew strongly conservative–to attack SS by any means necessary.
This is all very nice, but who gives a flying fuck? The taxpayer owed the money before; the taxpayer owes the money after.
This is all smoke and mirrors. You are trying very hard to obfuscate the facts - the money in the SSTF has been spent. It will need to be repaid. There is no source from which it can be repaid except out of the taxpayer’s pocket.
The Social Security Trust Fund is a debt. That debt is owed by the taxpayer.
It is exactly as I have described, several times over. The government took money away from the taxpayer and spent it. They also promised to take money away from the taxpayer and spend it again. The SSTF is a promise to take money away from the taxpayer, again, and spend it, again.
Regards,
Shodan
Among your several errors in this thread, you also seem to miss the point that the excess revenues from the Trust Fund that find their way into the General Fund actually do little but defer the need to issue debt to the public.
So, let’s say that in a particular imaginary year, the government planned to spend $1 trillion and run a deficit of $100 billion. If $10 billion in bonds were purchased by the Social Security Trust Fund in that year, then the Treasury gets $10 billion in cash from the Trust Fund and issues the appropriate bonds. With that cash, then only $90 billion must be raised from debt issued to the public.
No matter how you slice it, the government would have to raise $100 billion in cash through the sales of bonds, whether they are public debt or intragovernmental debt. The government does not end up doubly in the hole by issuing intragovernmental debt to the Social Security Trust Fund. Reading your posts, one could assume that debt issued to the public is “single” debt that only needs to be paid back once, but Trust Fund debt has to be paid back twice. Sorry, math does not bend to your political principles.
The fact is that no matter who gets issued any particular bond, whether it’s the 10 year old junior saver, the Chinese central bank, or the Social Security Trust Fund, the total amount of national debt doesn’t change with who ends up with the bond, and all bonds get paid off once, and that’s it.
Just correcting your misunderstanding of what this term means. I agree it is not important to the discussion, but you brought it up.
The money you put into your savings account has also been spent by the bank in giving money for mortgages, for instance. That will also have to be repaid out of the pockets of bank customers.
From the point of view of the non-SS part of the government, yes. It is a debt just like any other collection of bonds the government has sold, whether to China to to little Moishe’s uncle to give him for his bar mitzvah. But from the point of view of SS it is an asset, just like any bonds sitting in my portfolio, and owed to the taxpayers as SS recipients. If all thing were perfect every penny paid in by taxpayers (and employers) would be paid back to them collectively, and there is no impact on the budget at all.
If the government put $100 billion in the trust funds into Elbonian bonds (assuming they were equally low risk) the government’s debt to the SSTF would be $100 billion lower. But, to make budget, they would have to borrow $100 billion from someplace else, and the total debt of the government would be unchanged.
And, considering both parts of government, this $100 billion added debt from outside would be balanced by a new $100 billion dollar asset from outside, so there is no net change of indebtedness. And there isn’t by borrowing from the trust fund either.
You tried a concrete example a while back - and were wrong. Why don’t you try one again?
OK, one more time:
“What should the US Government have done with surplus SS revenue if not purchase Treasury bills?”
“If the Social Security program, both taxes and expenditures, had never existed would the current US debt load be larger or smaller?”.
The Puppeteers are on their way, since the imperviousness of the right to this question is greater than that of any General Products hull in Known Space.
I like Voyager’s approach. Let’s apply this same logic to money deposited in the bank: “The bank took money away from their customers and spent it. It will need to be repaid. There is no source from which it can be repaid except out of their customers’ pocket.”
Ahh, but one might say I’m not using the term “customers” and “bank” fairly. It’s not fair to lump depositors and borrowers into the same category, even if most customers are both (e.g. mortgage holders who also have a savings account). Moreover, it isn’t fair to declare “the bank” a monolithic entity; it glosses over intra-bank policies which, for example, grant depositors a right to assets collected by the bank–even if, on balance, the depositor owes the bank more than is on deposit.
I agree with both criticisms. So again, why is it fair to treat “government” and “taxpayer” as similar generic terms? Better yet, just answer Jas09’s questions.
Any day now, I’m sure…
Since answers are clearly not forthcoming, I’ll just leave this message from a reliable source as, hopefully, the final word in this matter.
[QUOTE=Ronald Reagan]
“Let’s lay it to rest once and for all … Social Security has nothing to do with the deficit. Social Security is totally funded by the payroll tax levied on employer and employee. If you reduce the outgo of Social Security, that money would not go into the general fund to reduce the deficit, it would go into the Social Security trust fund. So Social Security has nothing to do with balancing a budget or erasing or lowering the deficit.”
[/QUOTE]
Cite: http://www.youtube.com/watch?v=ihUoRD4pYzI
How dare you quote that socialist!
