You’re right. I’m thinking of “Debt Held by the Public”. And stop with the “wrong again” stuff. All I’m saying is that anything that increases government revenue or cuts government spending helps reduce the deficit and anything that decreases revenue or increases spending will increase the deficit, and that’s true whether we’re talking social security or anything else.
There are two possibilities here:
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All monies paid as SS tax, and income derived from them, will at some point in the future be paid out in benefits.
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We will take money away from SS and apply it to the general fund.
In the first case, no changes to Social Security can or will have any affect on the deficit unless you want to play some dishonest game and say that surplus in SS somehow offsets the non SS debt.
In the second case, we are asking people who have paid a regressive payroll tax to not only forgo future benefits, but to use the “premiums” they paid to pay down the deficit.
I work for a computer company, and when my department buys a new computer we sure as hell pay the part of the company that makes it. When I worked for the Bell system my center paid long distance also. The owner would pay for his groceries. The profit would go back into his pocket, but most of his payment would go to the suppliers of the groceries, and to the clerks who stock the shelves.
The system could have been set up so the money went into and came out of a general fund - but it wasn’t, and I think we all would agree that this is a good thing.
So? If I have T-bills in my portfolio, the government is borrowing from me. Would I be in some way responsible for the growth of the deficit?
I think that we might be getting somewhere here. Did the owner of the grocery store actually profit from his own grocery purchase?
I think this whole analogy is completely off point.
How about this:
Tomorrow, Social Security sells all it’s T-Bills and invests the money in corporate bonds. All future SS surpluses are used to buy more bonds, and when payments exceed revenue those corporate bonds are cashed in.
In that situation would any change to SS affect the deficit? No, of course not.
How is our current situation any different, unless the actual agenda is to reduce Social Security expenditures so that some money can be removed from it’s budget to be added to the general fund.
From the point of view of the grocery store books, yes. From the point of view of his books, maybe. If the profit goes back to his personal account, it can be said he profited, but it might better be considered a discount on his grocery purchase. (No purchase, no profit.) If the profit is being plowed back into the store, for expansion, say, he doesn’t profit at all, but his business might become more valuable.
Now, to be closer to reality, let’s say he lends the store $10,000 from his private account at 5% interest. You can’t tell if this is a good deal or not without knowing how much interest the store would have to pay from outside. But assuming that the store is above a lemonade stand, don’t you see that there the loan on the stores books and on his books are two different things?
Or, as I asked Shodan in the GQ thread (and never got an answer) what if we bought Canadian bonds and they bought ours? Same deal - no difference in the deficit.
I’m just guessing that people who have a problem with this have never had to work on a departmental budget. The principle of “all the money in the corporation isn’t yours” is one you learn pretty quickly.
It is highly misleading to call social security a regressive tax. It is certainly true in the sense that it is a flat tax up until the cap at which point the higher you make the lower a percentage it is of your income. However, the system itself is highly progressive when you factor in taxes paid and benefits received, which is the logical way of evaluating it.
The Congressional Budget weighs in on the subject here.
The issue for me is the totality of our debt and the long-term impact. Funding SS through government debt contributes greatly to this already crushing burden. Just as a mathematical exercise, investing in Canadian bonds would not. That would be Canada’s burden. OTOH, if we return the favor, that act contributes to our debt.
It’s already a program in the red, so it’s all accounting nonsense:
None of this “debate” obscures these facts: there’s not enough money to cover the benefits due, we spend all of the money immediately, we pretend we socked something away in the form of a government IOU to itself, and that IOU contributes to what will continue to be a crippling debt. Anyone is free to spin that any way they’d like, but them’s the facts, and a rosy spin on SS’s viability or an attempt to paint it as a “solvent” wing of an otherwise struggling “business” is silliness. I don’t understand the OP’s confusion over how entitlements are connected to our debt problem. It’s the single biggest challenge:
However, money is fungible. The fact is that none of the mechanics of the current system are guaranteed. With a few changes to the system (tax unearned income, add a means test to benefits, eliminate the cap), we could devise the system so that it is in a perpetual year over year surplus. We then could continuously borrow from the social security fund to handle general obligations of the government. At that point I’m sure you would agree that it isn’t really some separate “department” of the budget; it is in fact just money going into the general fund.
The proper way to look at it is to consider the entire government inflows and outflows.
To draw on a completely different type of analogy than what has been used in this thread already, consider the bank bailouts. When Citibank, for example, received bailout funds from the government and subsequently paid out large executive bonuses, most people didn’t buy the reasoning that the bonus dollars came from a separate pool of funds at the bank, which is exactly the argument that was used. Your average person boiled it down to the basics, which was that dollars came in from the government and went out to executives. Democrats can easily understand the concept of money being fungible in a case like that, but are somehow incapable of doing so when it comes to social security.
If Canada had a similar system, with a Social Security System that buys their bonds, whether their system does it or ours does it is totally immaterial to their level of debt. Ditto ours. I’m assuming the amounts on both ends are the same, as are the interest rates, to show the point.
The difference between SS and most other entitlements is that SS is self-funding, where welfare, for example, is not. Clearly SS revenues and payments have to be changed to avoid a situation where the trust fund runs out and really starts contributing to the deficit. If that is done, the deficit for the non-SS parts of the government is exactly the same with SS and without SS. If the bond were not sold to SS, they’d be sold someplace else.
Now, if someone could demonstrate that the SS surplus has freed Congress to go deeper in debt than they would be without it, he’d have a point, but I’ve seen no such evidence.
The “system” may be progressive, but the taxes funding it are not. The marginal rate after $106K (that’s what you guys always talk about) is 0. Why does the distinction matter? Because one can argue the tax is fair if the benefits vs taxes paid is progressive, but by no means is it anything other than regressive when you take that tax and apply it to another “system”.
That’s because Democrats would not take money paid by wage earners, and set aside to pay for seniors, to add to the general fund. It’s like saying Dillinger understands that the money in banks is fungible.
That’s correct. I’d be against it because the tax is regressive (even if the benefits are progressive - in your case no more benefits to to the payees) and because it breaks the concept that SS payments are targeted to SS benefits - even if current dollars go to current recipients. We do need to adjust the system to make it whole even under conservative demographic and economic projections. This is much harder to do if one side is ranting about Ponzi schemes. If we only had Republicans like Reagan around.
The fact that up until this year SS made this picture look better certainly didn’t stop people from wanting to cripple the system. There are many views of the books, and since functionally SS does not impact the general fund, I think looking at them separately makes more sense in understanding the problem.
I don’t think the outrage was a result of which pool the money came from. The bonus’ I get depend in large part on the performance of the company as a whole, and the company going into the toilet has a direct impact on the bonus I get. And my work has little influence on the bottom line. Executives directly responsible for the near death of the company acting as if they did a great job was what pissed people off. I don’t think Citibank has repaid the TARP money yet, but the other banks did, and that didn’t make the bonuses right.
In any case, were the executives only able to give themselves bonuses because of the TARP money? if not, then there was no real connection - just as a surplus in SS did not enable Congress to create a bigger deficit.
Social Security is not financed by government debt. That’s an absurd statement, especially since it has been running a surplus for years. The government has issued T-bills to finance it’s deficit, but they are sold to all kinds of governments, institutions, and individuals. If Social Security did not buy US T-bills it would invest it another way (Enron stock? Madoff?).
Social Security is funded by payroll taxes; the military is not. Social Security runs a surplus; the highway system does not. Social Security has loaned money to the US govt; Medicaid has not.
All of those and other programs are responsible for the deficit, not Social Security.
I am completely missing your point. If SS invests its money in Canadian bonds, the U.S. debt has not increased a penny. We will have no obligation to drum up funds when the bonds are due, Canada will. If Canada invests in our bonds, vice versa. I am missing your point, because mine is inarguable–whoever issues the bonds has increased their debt. Period.
As I stated previously:
What part of that do you dispute? SS incoming funds are not sufficient to pay for current benefits, the funds are spent immediately, and what is left is an IOU that will be satisfied by either higher taxes or the issuance of new debt. Congress is and will be deeper in debt as a result of our current SS process, because SS creates its own unique demand for debt (which is NOT satisfied by bonds or bills that would have been sold in any event), and this demand is not some immaterial trickle. It moves markets, that level of demand. The Trust Fund exists solely for SS. It’s inarguable–they have spent the money, it’s gone, and now they’ve promised they’ll pay it back. These funds have permitted Congress to spend money, money they would not otherwise have had, and they did. The money is spent. And all they needed to do was promise to pay it back later. They are in debt for it.
However they could otherwise park the money, they way that they do is to increase the nation’s debt. That’s what the Trust Fund is, and more than that, the trust fund won’t somehow transform into greenbacks as a result of coming due. We’ll issue more debt to pay them off. Honestly, I don’t know why this is in dispute. One could argue that SS by itself did not create the total debt mess we find ourselves in. The government as a whole lacked the discipline to avoid this. Nonetheless:
And this, again, from the cite I provided:
So, we can sit around on a message board pooh-poohing the connection between entitlements and the debt crisis, but I can assure you, President Obama is losing sleep over it. It must be dealt with.
Yes, you have missed the point. This was all explained in the previous thread(s). I’ll save you a re-read now:
The non-S.S. Federal budget is unrelated to S.S.
If S.S. hadn’t bought its bonds, U.S. Treasury would have sold them to someone else.
I’d say “Hope this helps,” but I’ve yet to see anyone’s opinion change on this matter, no matter how well the correct answer is explained. 
I think some people might be more comfortable if SS bought foreign (say, Canadian) bonds, then all the people who would have bought those Canadian bonds might then buy US bonds instead. Then, when the US starts to default on bonds, which seems to be the doomsday scenario, they would be defaulting on Canadian owned bonds rather than SS owned. Of course, that would mean that the Canadians would then feel free to default on the bonds SS owns. Every other investment on earth is a promise to pay (to over simplify), just like US government bonds.
SS has a huge surplus, it’s got to go somewhere. Those people who think that it should not go into US bonds should suggest some better, more secure place to invest. If the we keep spending the way we have then the USofA might not be a good investment in the future, I agree with this. So far, lending money to the US is still seen, world wide, as a save bet.