Gettin Ugly


I got into a bit of an Internet tussle with Marketwatch 666. This was another of those posts from the defenders of Social Security, and like most of these articles, this one fell back on an old tired line. The author quoted Ronnie Reagan: (I wanted to barf)


Social Security can’t add to the deficit.




So I dashed off a comment:


Social Security does not add to the deficit. Ronnie was right.

Social Security DOES add to the DEBT of the country.

Both statements are true. Which one is the one to focus on?

In 2013 the answer is that it is the debt that matters, not the deficit, and SS is adding to the debt.


The author, R.J Sigmund, comes right back with: (and I’m grabbing for the wastebasket again)


Bruce, the debt is not a problem....the world economy is suffering from a shortage of safe assets, and the only way to alleviate the shortfall is to increase the debt


Then he goes on to add:


you've conveniently omitted the fact that it also earned more than $117b in interest on the government bonds in the trust fund....


I love it when this happens; folks playing “gotcha”, not even understanding the facts. I come back with my standard response:


Careful where you go with that interest income line. Interest is a NON CASH ITEM. SS needs cash to make benefit payments. So SS has to hock its bonds with Treasury to come up with the CASH needed. Treasury, in turn, must borrow from the public to fund the SS shortfall.


I told them to go to SSA, and look at the bottom line results at SS for 2011:




Every penny of the $45.379B cash shortfall had to be borrowed by the Treasury. Treasury did that by issuing more Debt to the Public. I added some number about what's in store for the future with cash deficits at SS:


2010 SS deficit = $47B,

2011 SS deficit =$48B,

2012 SS deficit = $60B,

2013- 2023 SS deficit = ~$1T


Anyway, I doubt I changed RJ's views on this too much. This is an emotive topic, and I suspect it is going to become more charged in the weeks to come. It’s very hard to have a debate with someone who starts with, “debt is not a problem”. It’s even harder when the debate is ended with: take your ranting back to zero hedge, where you might find some other chicken little types who'll buy into your theories...