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On Senator Ron Johnson Vs Krugman
Paul Krugman had another of his nasty moment on TV Sunday (ABC -Link) when he took on Senator Ron Johnson (R, WI). The topic was Social Security. I want to throw my two cents into this fray.
Senator Johnson made the comment:
Social Security is in danger of “going broke” unless action is taken. “When I hear people saying Social Security is solvent to the year 2035, it’s not.”
Krugman fired back with:
Your facts are false. The Social Security thing—Social Security, it has a dedicated revenue base, it has a trust fund based on that dedicated revenue base. You can’t change the rules midstream and say, ‘Oh well, suddenly the trust fund doesn’t count.’ ”
Is SS going broke as the Senator claims? Or is Krugman right, when he says that SS is solid because it has a big Trust Fund?
There is not much 'out-there' on this topic that could could convince either side. You have the vast majority of the conservative thinkers/writers who have concluded that the SSTF is a sham, and you have all of the progressives who see it in precisely the opposite light.
I would like to use two credible sources on this issue in an attempt to determine who's right. The Office and Management and Budget (OMB) has opined on this, so has the Congressional Research Service (CRS). I think these sources are as credible as can be had. The CRE is supposed to be apolitical, while the OMB is decidedly political. The following information from OMB comes from 2010, a period when Peter Orszag was the boss at OMB. Given that Pete was running the show, one would have anticipated a Populist 'spin' from OMB on the question of TFs; not the case at all.
CRS made the following observations regarding the Trust Fund for the Federal Employee Retirement Fund (FERS). I'm not going to spend a 1000 words convincing you that FERS = SS. (But if PK asks me to, I will). They are very similar entities, they collect revenues, they invest surpluses in Special Issue Treasury Securities and they make benefit payments to covered workers.
CRE had this to say about the TF for FERS (Link):
The assets in private-sector pension funds represent a “store of wealth” that firms can use to meet pension obligations as they come due. The CSRDF, however, is not a store of wealth for the federal government.
Got that PK? The CRE says there is no wealth (aka money) in the TF:
The OMB provides more clarity on TFs. From the Budget of the United States Government, Fiscal Year 2010: Analytical Perspectives (Link)
Balances in the trust fund are available for future benefit payments and other trust fund expenditures, but only in a bookkeeping sense.
Ah! There is no money in the TFs. They are bookkeeping entries. OMB concurs with CRE - TFs are not a store of wealth. More:
The holdings of the trust funds are not assets of the Government as a whole that can be drawn down in the future to fund benefits.
How many ways does OMB have to say this to convince PK? Another:
The existence of large trust fund balances, therefore, does not, by itself, increase the Government’s ability to pay benefits.
Is this getting through to progressives like PK? This is not the tin hats talking PK. This is your "guys".
Senator Johnson made the statement that the SSTF accounting was similar to a person who writes themselves an IOU for $20, and then somehow believes he actually has an asset. PK objected. This is what the OMB has to say about it; no wiggle room for PK with this:
These trust fund balances are assets of the program agencies and corresponding liabilities of the Treasury, netting to zero for the Government as a whole.
Got that PK? The Senator was correct. Writing an IOU to oneself nets to zero. If the OMB was the arbiter of the TV debate, it would have said that the Senator had the facts, and Krugman was blowing smoke.
Krugman, on the other hand, is claiming victory. He still believes that the SSTF has real fairy dust in it. He maintains that he alone has the facts. In his typically snarky manner:: (Link)
I have to say, it’s extremely telling that conservative Republicans don’t seem able to make their case without resorting, right from the beginning, to obviously dumb fallacies.
Who's right? PK or the Senator? Which side is suffering from "dumb fallacies?" This is a critically important point to resolve. Either we continue to live in PK's fantasy land, or we recognize that SS is a here-and-now issue. There is no middle ground. One side or the other is "right" on this one. For the US, it's a make-or-break issue.
Note:
Where did the 'money' go that PK thinks is available today? It was spent years ago.
The 'economic miracle' of Bill Clinton was bought with money looted from SS. Bill sucked out $565b in his eight years. No one even noticed.
George Bush really raided SS. A total of $1.5T leaked out during his years. Who 'paid' for Iraq and Afghanistan? SS did.
If anyone is upset about the status quo, they can point to either a Republican or a Democrat. They're equally to blame. But looking backward, and laying blame, is a fool's game. The fact is the money is gone and SS is Paygo today. It's running big annual deficits. SS will produce $75b of red ink in 2013 (equivalent to 10% of the deficit). The deficits will pass $100b in 2016 and explode from there on. The beast is howling - and Krugman thinks it's his cat purring.
The
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Response -
Zombies Have Already Killed The Deficit Commission:http://krugman.blogs.nytimes.com/2010/06/21/zombies-have-already-killed-the-deficit-commission/
Cute Krugman post. It's funny that he doesn't even realize that he's the one trying to have it both ways. Either Social Security past surpluses meant nothing, and its current "savings" mean nothing, or they both mean something. He got an extremely basic logical point 100% wrong.
I won't say the "savings" mean absolutely nothing. They have a minor technical importance, as Krugman points out. Although the "savings" are not real savings - loans you made in the past to yourself are not assets, as the only payment due to you is from yourself - the SS fund balance does have a formal importance in that SS spending authority runs out if the balance falls to zero. The importance is mostly political, as an argument that boomers who were paying in during the surplus years deserve more benefits than the same tax rates on the next generation would fund. The counter argument would be that they decided democratically to spend those surpluses on other parts of the federal budget and now we've got to divide up our wealth fairly and sustainably, so tough luck bubs. It will be a scrabble.
Unless their comes a time when Gov't debt is no longer sellable. Then there will be no action that they can take to send the checks.
Yes, I ran a surplus for a number of years too and I invested in myself as well. I bought good food to stay healthy, I bought lots of entertainment, a cool house and a big screen TV, and I bought a really fast car too. I figured I should invest in myself, you know, nice stuff, because I needed stimulas, I needed to feel good about myself. And everyone knows you need to look successful to be successful, a good tan and clothes. And successful people throw around a lot of money too, you got to play the part. Now I know that some of you might think I just blew the money on good times but really, it was an investment, and while it hasn't quite paid off they way I had hoped, I'm sure with the proper progressive mind set my ship will sail in at any moment. And besides, I always got Social Security to fall back on, right? Hey brother, you got a dime?
"First, you can simply view the program as part of the general federal budget, with the the dedicated tax bit just a formality."
People who make budgets that aren't rooted in complete fucking fantasies generally hold this view.
@Bruce: Looking beyond the specifics and just seeing this shit for what it really is,
1. We're going to pay for all of this via debt monetization.
2. We're going to pay for all of this by going to war.
Getting mired in Social Security-specific debates misses the bigger picture. Our federal government at 106.65% debt to GDP and increasing (even post sequester/post tax increases). There is no way out. No way out, Bruce.
Another thing to consider: Total governmental revenues (fed/state/local): $5.06 trillion. Total governmental spending (fed/state/local): $6.48 trillion. Fedgov is still $1.04 trillion in the hole this year, but there is also the $380 billion in state/local debt to be thinking about here. You're a bond guy, you know the muni market could blow this shit up spectacularly. Now think about all those gigantically large, functionally bankrupt states just sitting their, looming, patchwork funding just to make payrolls. Think fedgov is going to let California default? How about Illinois? What to do then? Monetize. That, or outright world fucking war, those are the options. Congress isn't going to do jack shit to change what you're talking about with S.S. (or Medicare, or any fucking thing else).
seems that repetition is the way to discuss monetary matters...sooooooo
the government raises cash by selling treasuries to fund its deficits
SS is part of the deficit that requires funding
the government will sell treasuries to fund the SS, whether these were issued and held as a book entry on the governments balance sheet or whether they will be issued in future.
SS holdings of US treasuries are a book entry and benefits represent a drawdown with a rate that pays beneficiaries of the SS.
Fiscal policy until monetized by the FED by the purchase of treasuries. The line does indeed get fuzzy.
in my local newspaper the headline yesterday was bribes and corruption at the Naval Resource Center, 400K, over a period of years, and several different contractors. Most the bribes were made to repair and resupply the war effort, in an expedited fashion. (conventional procurement was too slow and our boys needed all the high tech stuff to beat back the enemy - oh wait here's a news flash, Obama secretly negotiating with the Taliban to convince the established government in Kabul that the US prescence is required indefinitely - we're talking with the enemy to rathcet up the violcence against the puppet regime of Karzai?)
now on the back page of the same paper, we see several contractors at the Marine Corp bases were convicted of STEALING 3 million dollars worth of medical supplies on their way to the war zone. $400 K front page, $3 million in medical supplies back page, (medic!! sorry buddy all I've got are these old WW2 band aids and the glue is shot, better push hard) while the US is negotiating with terrorists to keep up the pressure on the moderate regime we back so America can pay military contractors to supply the troops in Afghanistan, and YOU WANT TO DO WHAT TO MY SOCIAL SECURITY???
Fair share sacrifice for the war effort !
Thanks from Uncle Sugar.
Actually, for the first time, I vote with Krugman. The "trust fund" is there, it is not about "bookeeping" - SS may be the largest holder of US Treasury. What is not there is the general fund replacement of SS cash flows now that it has gone to "outflow" as any actuary expected decades ago.
Before Johnson spends another general fund budget item, maybe he should consider how he needs to payoff the SS fund. After all, this problem exists since Pres. Johnson's time who changed Fed Govt accounting of SS security cash flow to be that of "general revenue". Instead of bashing SS, Johnson, someone should slap Johnson's hand for continuing to spend well beyond what the Govt can afford.
And "afford" has little to do with global competitiveness, the economy health, war funding, etc. It has a large to-do with the SS fund now disbursing instead of accumulating. President Johnson's accounting subterfuge shouldn't be viewed as "bookeeping". The American taxpayer has been paying 15% on wages - the Govt should make payment and simultaneously lower general spending that recognized a retirement payment as general revenue.
What is the difference between the treasuries that our government evidently purchased with my payroll taxes and the treasuries that the Fed is purchasing with newly created money? When treasuries are sold by our government, that money is spent. Its gone, right? So what funds do they use to buy them back at maturity? they have to sell even more bonds, right, not only to buy the old bonds but to create more spending money. Now even if the treasuries held in trust for SS were paid for with taxpayer money, how are they going to be funded at maturity? They will have to sell more treasuries, and the only way that will happen in the foreseeable future is by printing more money by the Fed. Now explain too me how this is sustainable. The SS trust fund is part of the same ponzi as the whole treasury scheme. It started out relatively small and has used the credibility of America to sell this deflateable balloon that will like go POP before it has a chance to just wither away. SS expenditures are going up rapidly faster than inflation while revenues are flat and the trust fund is melting away in value. Too bad you didn't own some Old GM stock. You might have a better understanding of unsustainability as even with our own government's backstop, investors were wiped out, regardless of laws on the books. Government will do what Government must do. Bend over and grab your ankles, cause its coming for all of us.
< gubbermint drone shill
< garden variety idiot
Socialist, lib-tard, propagandist... is that the same thing as a gubbermint shill?
only on days with a "y" in them...is why a voted "idiot"
Actually, for the first time, I vote with Krugman. The "trust fund" is there, it is not about "bookeeping" - SS may be the largest holder of US Treasury. What is not there is the general fund replacement of SS cash flows now that it has gone to "outflow" as any actuary expected decades ago.
Before Johnson spends another general fund budget item, maybe he should consider how he needs to payoff the SS fund. After all, this problem exists since Pres. Johnson's time who changed Fed Govt accounting of SS security cash flow to be that of "general revenue". Instead of bashing SS, Johnson, someone should slap Johnson's hand for continuing to spend well beyond what the Govt can afford.
And "afford" has little to do with global competitiveness, the economy health, war funding, etc. It has a large to-do with the SS fund now disbursing instead of accumulating. President Johnson's accounting subterfuge shouldn't be viewed as "bookeeping". The American taxpayer has been paying 15% on wages - the Govt should make payment and simultaneously lower general spending that recognized a retirement payment as general revenue.
The SSTF is exactly what it says it is: an arrangement where we trust the US government to fund SS when the time arises. There is no money in it. It is not backed by any tangible assets. But it is backed by power of the US government to tax and to borrow and ultimately to print money.
So don't worry Bruce. The US government will ultimately come up with every cent promised. Of course, it may totally destroy the purchasing power of the dollar in order to do so. But that is really a problem for those poor suckers who have invested their life savings in US Treasury bills and other dollar denominated debt. I wonder how many US Treasuries Dr. Krugman owns...
What I cannot understand is why Mr. Kasting continually harps on SS while Medicare is a much bigger problem. The effect is to give the impression that if we could just solve the SS problem, everything would be fine. This is far from the case. Even if we were somehow able to magically fix SS, it would only delay the inevitable by a few years.
bruce krasting is playing games!
this whole SS issue he keeps bringing up endlessly for his paymaster - Peterson - is a fully functional taxing authority that can be changed at the will of congress - its been a dedicated cash flow stream since 1933
the whole krasting mime is a red herring - that accounting is not functional / legitimate within the same institution as a trustee - by that measure the reserves within a life insurance subsidiary company that has debt on the holding company is not dedicated collateral against the future obligations of the life policies - yet every state insurance department and license - sees solvency and recognizes those reserves as DISTINCT and SEPERATE
yet krasting doesnt consider accounting and reserve protocols that have existed for over 100 years UNDER GAAP is the same as private insurance industry using the same treatment as Social Security
further - every state that has a dedicated tax stream for a given bond offering is rated on the basis of that dedicated stream and its ability to be changed over time - check out NY / CA / TX municipal bond offerings
I have no problem if a pubic life insurer buys a US Treasury bond and then claims it is an asset that is pledged to make future payments.
But if that insurance company issued an IOU that had nothing behind it but some vague promise to pay, and then pledged the IOU as the asset to secure future payments I would object. I would certainly not buy life insurance from that company.
FYI - I'm not on anybody's payroll but my own.
The reserves of a life insurance company consist of marketable stocks and bonds from third-party issuers.
Those reserves do NOT consist of IOUs from the insurance company itself.
Your analogy fails on this point.
The SS fund has plenty of "tangible assets" as it is one of the largest holders of US Treasury bonds. Senator Johnson just doesn't want to pay off on those bonds. So why should we pay off Japanese, Chinese, even Federal Reserve hands, if we are not going to payoff to the heavily taxed retirees of the next couple of decades.
Scare tactics can make huge hay out of nonsense. With the baby boomers now just edging into retirement, the next few decades will see a huge drawdown in SS Treasury bond holdings - totally expected. And somewhere in the 2030s it may go to "S0" holdings, as expected. But the socked away Treasury bonds are there for that purpose - the problem is that the General Budget, the budget Senator Johnson wants to keep unrealistic and fraudulently-funded spending levels on, won't be able to redeem the SS Treasury bonds while remaining at this level (unless Bernanke can redeem those bonds along with Chinese holdings!).
tangible : capable of being perceived by touch - palpable
The SSTF trust fund is just a set of bookkeeping entries. It doesn't contain gold or jewels or land. When the time comes for the government to pay out the SSTF, it will have to come up with dollars. It could get them by taxing young people who are still working, but they may have other ideas about that and may vote out politicans who try to raise taxes. It could borrow the money, but it already owes a lot of money and one wonders how long it will be able to borrow money at reasonable interest rates. Or it could print the money.
But if you think everything is fine, then more power to you! As for me, I think I'll avoid dollar denominated assets. After all, they pay virtually nothing anyway so I don't see that I am losing out by not owning them.
You didn't address his point. The same could be said for ANY of our treasury securities (just a set of bookkeeping entries) Why are only those held by the SSTF supposed to get a haircut?
'Why are only those held by the SSTF supposed to get a haircut?'
Because they are non-marketable. They cannot be sold to a third party, only redeemed by the issuer.
If you own a house, but by deed restriction can only sell it back to the builder, do you think that house deserves a haircut? If the builder is in financial difficulty, can you sell that house at all, for any price?
In different words, if Soc Sec were an honest set-up, it would purchase marketable Treasuries at auction or in the secondary market, like every other Treasury investor does.
But Soc Sec does not buy marketable Treasuries, because it was designed so that politicians could pilfer its cash flow and leave IOUs saying 'we'll pay you back some day.'
'Someday' has arrived ...
machineh, You make an excellent point with a legitimate comparison.
prior to running into your post I was going to say that there should be a test sale of the paper in the SSTF, say 200 billion, to test the market reaction to the true "dollar" value on the open market, net of funds expended to get a lawsuit through to force payment at par.
Of course the SCOTUS will rule that there is no duty to pay, just like that they always have ruled on the legitimacy of the asset.
Was I not clear? I'm sorry. I think ALL treasury securities will get a haircut via inflation. The government will repay every cent it owes. But that money will buy much less than it does now. And this applies to corporate debt as well. That is why I don't hold any dollar denominated debt.
"The government will repay every cent it owes."
Does this assume this government survives? Did the Third Reich make whole, all holders of Wiemar obligations?
And sure, future treasury obligations are as good as the full "faith and credit." Becoming redeemable on "someone elses" watch aside, maybe?
Next up, 100 year non marketable SS securities? Then what, million year ones?
Damn, back in '79-'80 it sure was hard to get the holders of what was left of the Great California Pyramid Scheme to double down.
http://isteve.blogspot.com/2009/03/great-california-pyramid-scheme-mania...
Maybe, because SS recipients don't have nukes!
As soon as PK injects one of his "snarky" statements, you know he is full of shit.
A concise person who has all his facts never has to go to that level to make a point.
PK does this all the time.
He earned that Noble like Barry (sarc off)
Thought experiment:
I'm at the US treasury's SS trust fund office.
Please, may I cash $1 Billion of the SS Treasuries in the TRUST Fund?
Yes, but it will take e few days.
Why?
Because the US Treasury doesn't have any cash. If we had any cash we wouldn't be running a yearly deficit.
To cash you out we will have to BORROW, that is sell $1 Billion of Treasuries.
Don't worry if we can't borrow it we'll just have Ben print the dollars.
They need to switch the Treasuries representing SS debt to Ben. Let social security invest in an income producing endeavor so that future cash flows are never an issue.
As much as I repeat this it needs to be repeated again as it is the only solution I feel can work.
I welcome all other options that work and make the program healthy and unreliant on the money-wasting Gov't.
So when China, Japan, Germany, Buffett, pension funds, the Koch Brothers and my Grandma try to cash in their treasury notes the same hypothetical conversation occurs? Of course it doesn't. They get their damn money as stated. Somehow the SS Trust Fund is not given the same promissory rights.
When will you people understand that when hacks like Krasting haul out their SS I.O.U. crap they are just doing the bidding of the Oligarchs. They are trying to separate taxpayers from their money.
They are also separating dollar holders, the world over, from their value via inflation. I don't even care if you're in a deflationary environment. If they are creating 3% inflation of the money to pay off others, that's theft from dollar savers.
Too late son, "your money" was actually a tax collected and spent by Uncle Sugar, however, I'm sure BK would take your money if you would like to get some skin in the game.
One more time: The Fund is a Fraud.
No, you are very confused. It's not my money. The money I pay in SS taxes goes to current beneficiaries. Again, SS is not a pension system.
With your continued false narrative about the fund being a fraud because the money is not there, all I can say is that your radio hasn't been honest with you. Your argument would be analogus to the US Treasury saying to China when she redeems her treasury notes "Sorry, the original investment has been spent and the notes are frauds." Yes, your argument is just that silly.
They are doing that. It's called inflation, and it explains why China was the number one buyer of gold last year.
Also, it's been over 50 years since the Supreme Ct. said we have no ownership rights of our SS. This was a green light to the Gov. to spend it and pay back w/ funny money. Of course, they were already squandering it. Then, only 11 yrs later, that crook Nixon closed the Gold Window. End the FED and this theft stops.
The treasuries held by government trust funds are non-marketable and require additional taxes and/or debt to redeem. Only if China borrowed the money from itself and falsely pretended the IOU it issued itself was an asset would your analogy hold. Since the treasuries China holds are not also a liability for China, your analogy fails.
So where does the money come from when China redeems the US treasuries it holds upon maturity? Is that not analogous to your little presentation? Doesn't the US have to create more debt to redeem those treasuries under your scenario? That money isn't sitting in a box marked China.
You, like Krasting, are trying to pretend that SS Trust Fund treasuries are some extraordinary accounting maneuver like the world has never seen.
BY your argument the trust fund or treasuries are irrelevant as to actually be able to collect cash for them our government, they would have to sell more or just print the money. If this were true, why are we paying any kind of taxes at all. There is only the illusion of value or worth and when one looks at our current and growing debt, it becomes apparent that none of this will ever be worth what we are told it is, as at best with this rampant money printing, bond printing place we find ourselves, any residual value will be devalued away through monetization. We will be faced with becoming nationalistic like the Japanese and be forced to by our government's fake bonds in order to prevent the whole economy from collapsing. BUt on the positive side they will at least be printing the money to buy them with!
Do you simply not understand inflation, deficit spending and the unsustainability of Ponzi schemes?
Currency (USD) is not MONEY (see Aristotle's definition), and currency (USD) is not a store of WEALTH. In 1913, a twenty-dollar gold coin OR twenty-dollar paper bill would buy a nice men's suit; today, a 1913 gold coin would still do so, but a 1913 paper bill would not. The difference between storing WEALTH in a 1913 gold coin or in a 1913 paper bill is all the difference in the world.
SS is not a pension system; it is a FRAUD, perpetuated by corrupt / manipulative politicians on a gullible public. And if China were so foolish as to attempt to redeem US Treasuries (en masse) today, the dollar would crash and they would receive little if anything for their efforts. The radio, television and newspapers in general have not been honest with us, if they perpetuate goverment propaganda about SS being a "safety net", a "reliable source of retirement income" or anything besides a Ponzi scheme.
ACCOUNTING based on LIES and FRAUD is not accounting, any more than mathematics based on wishes and fantasy is not mathematics. I cannot WISH for 2+2 = 100,000 , even in vector math, and get a reliable result. WISHING for SS to even help provide for your old age is buying into the Ponzi; without other investments, you will starve when you need income the most.
Congress can change, reduce or DISCONTINUE SS payments anytime it becomes necessary. You have NO CONTRACT, no investment and no recourse for such eventuality. READ THE LAW (Flemming v. Nestor) and understand; you have nothing, your contributions went into the general tax revenues, and there is nothing backing up those IOUs in the SSTF. If the Treasury were to increase taxes to the level needed to redeem those IOUs, the economy would be one great, smoking hole in the ground. And we are BORROWING / PRINTING $1.3 Trillion / year, every year for the last five, with no end in sight; where would the funds to redeem these Treasury IOUs come from?
You can have your own opinions; you can have your own ideas, suggestions, solutions (and I'd love to hear them!). You cannot have your own mathematics, or your own set of facts regardless of reality. Please, tell me where we find the money to make SS solvent, without greatly raising tax rates (beyond what the economy can sustain) and driving unemployment towards unity.
Who advocated China redeeming all those t-bills at the same time? That is not what was presented. As far as the LAW goes, apparently you didn't read it very carefully. The Social Security System cannot pay out more in benefits than it receives in revenue. That is the law! The moment that event happens, there is an automatic cut in benefits. That is the law! SS will be there for a child born today. The only way for it not to be is by an act of Congress to end it. A law!
You may have your own opinions about SS, you may not like SS, but your dissembling will not make your false facts reality.
You still don't get it, or refuse to.
"The Social Security System cannot pay out more in benefits than it receives in revenue." You really don't understand inflation. The "dollars" deducted from your paycheck are worth MORE in purchasing power than the "dollars" you receive in your SS check; inflation guarantees that, so that part of the "law" is irrelevant. A really Machiavellian politician might have counted on that when the system was designed, don't you think?
"SS will be there for a child born today. The only way for it not to be is by an act of Congress to end it. A law!" Which benefits "guaranteed" by the laws passed by the Roman Senate were inviolate during the reign of Caligula? Which survived the collapse of the Roman Empire?
Or, conversely, inflation again: how useful is a SS check when milk is $10 / gallon, gasoline $10 / gallon and eggs $50 / dozen? "Cannot pay out more in benefits than it receives in revenue!" but surely it can pay LESS? Isn't that what's happening NOW?
"You may have your own opinions about SS, you may not like SS, but your dissembling will not make your false facts reality."
I feel for you, I really do: you so want to BELIEVE, to make it all go away, to have what you paid in come back and be worth what you put in, or more; but such will not happen, because it CANNOT happen. Those who created this non-system (systems are stable, predictable, and self-stabilizing, if they are to survive) could NOT forsee the problems we now have, and those operating it NOW cannot admit defeat, for it would cost them power, prestige and possibly life itself.
Here's an analogy for you: imagine two abusive parents told their child the sky was green, each and every day ("Isn't that a lovely green sky? What a lovely green overhead today!") from birth until first grade. The poor sprat goes off to school, and runs into a classroom full of kids (and a teacher) who disabuse him of his green misapprehension. He goes home in tears, and cries "Why did you tell me that the sky was green? It's wrong, no one else thinks the sky is green, and I'm so confused!" The parents reply, "We didn't tell you because we wanted to protect you! The truth about the sky would hurt you, and we wanted to spare you that pain!"
Here at ZH we will not lie and tell you the sky is green. You have been abused; I hope you can recover. I gave no false facts; you have no investment, the SS scheme is a Ponzi by any reasonable definition. The Treasury IOUs are not backed by anything real, and if the Chinese cannot redeem all their T-bills at once, then what good are they? They certainly aren't worth what they are claimed if they are not redeemable on demand. And Congress will do whatever it wants, trying to maintain a status quo that is crumbling beneath them (and beneath us all).
I am not dissembling; I am totally serious, and gave you one reference (Flemming v. Nestor) that should open your eyes, if you want them opened. Or you can go back to sleep (and skip the rest of the first grade), if it makes you feel better. I have no problem with SS either way; we will wind it down slowly, in a controlled fashion, or crash the currency, and bring it down all at once, with infinite pain and suffering; it's not up to me, either way.
I am sorry you were abused; I will not perpetuate it to keep you from feeling the pain of enlightenment.
Again. We need to have Social Security and Govt pension Funds invest in something that does not require taxpayer service through taxes.
The mortgage market is the perfect place for them to invest. If you let Americans fund the plans for themselves, you will eliminate having to tax the rich in order to pay benefits.
The Government can not invest what it does not have.
Any SS surpluses are spent by the Government on current expenses.
If they didn't do that the yearly deficit would go up by the corresponding amount.
Why do Americans find it so hard to believe that their Government is lying to them??!!
Yes they can. The Fed is directly printing money to buy the $85 billion MBS each month. After 2 years it will work out to the same amount as the SS trust fund. To pay off SS Trust Fund it's just a bookkeeping entry, no cash needed. Debt allocated to SS just gets bought by the Fed. End of day Gov't owes the same amount of debt and Social Security has full control of it's assets for the first time and can earn a return which is not reliant on income taxes in the future to pay benefits. Personally I am much more comfortable having housing collateral and income back my social security benefits than relying on government promises.
Get this through and politicians won't need the bankers to get elected.
got my vote! and at treasury rates for mortgage borrowing rates too!
I think somewhere between 4.5-5% rates would fund SS as needed and cover the cost of servicing, etc
Currently SS Fund is earning 3.8%.
http://www.ssa.gov/cgi-bin/investheld.cgi
that would be the hostorical purchase yield over the last x=40 years? someone said that there are 2.7 trillion of treasury securities (book enry or marketable, since all treasury debt is marketable, even to itself, i am not sure of the need for the disticntion) with a life of 7.5 years.
7.5 year treasuries are only yielding 1%, so that would mean these treasuries are on a whopping profit, but are (slowly?) being replaced with treasuries yielding a lot less?
its all a circle jerk...
been looking at the above posts and the most sensible suggestions I can see is that either the Fed simply prints money in lieu of benefits calaculated by a pension provider who doesn't make mistakes OR rather than the SSF "investing" in coupon bearing treasuries, it "invests" in prime MBS.
shrugs..
In a movie two guys had a locked box full of money, it broke open and they used it to fund a lavish lifestyle.
Hey wait, where's the money? Those are IOUs, just as good as money. Hey Lamborghini, $170k, might want to hold on to that one.
If you put Krugman and Bernanke in a room, I'd have a hard time figuring out which one is Harry or Lloyd. Actually I think Harry and Lloyd would look like Edison and Einstein compared to them.
The only thing you need to know about SS is the average $30k a year worker pays about $1200 a year into SS. The average benefit paid to a retiree is about $1200 a month. It takes 12 $30k workers to pay for one recipient of SS. How do you sustain that?
Recycle.