By now we’re aware that The Washington Post supports serious changes in Social Security. In fact, the paper editorialized Friday that the word “thuggish” comes to mind when discussing ads from the AARP opposing Social Security cuts. “The crunch time for the congressional super committee has arrived, and with it comes a new round of self-centered, shortsighted intransigence on the part of AARP and its fellow don’t-touch-my benefits purists,” the Post opined. But editorials are one thing; news stories are another.
At the end of October, the Post published a lopsided special report that strayed pretty far into opinion territory. The article, titled “The debt fallout: How Social Security went ‘cash negative’ earlier than expected,” offered bits and pieces of information about the country’s most popular government program—but didn’t come close to telling the whole story. In fact, William Greider, who writes about Social Security for The Nation, wrote that the Post “committed what I call fact-filled mendacity—a pejorative mash of scary buzz words and opaque statistics that encourages readers to reach false conclusions.”
First, the story tackled the system’s finances. “Last year, as a debate over the runaway national debt gathered steam in Washington, Social Security passed a treacherous milestone,” wrote Post reporter Lori Montgomery, asserting that the program went “cash negative” because the recession has “caused tax revenue to plummet” while “the cost of benefits outstripped tax collections for the first time since the early 1980s.”
This was misleading. In a letter to the editor, Janice Gregory, president of the National Academy of Social Insurance—a nonprofit, nonpartisan organization made up of the country’s leading experts on social insurance—wrote:
Social Security did not “go cash negative” in 2010. Such claims ignore the $118 billion that Social Security received in interest payments from the program’s $2.6 billion reserves, which are invested in US bonds. This interest is real cash and is legitimate income to the program, just as would be true of income on bonds held by you or me, China, a large bank, or any other entity.
Gregory, whose letter has not yet been published, told the paper that interest income had contributed to a $69 billion surplus in 2010, which was invested in more U.S. bonds.
Some revenue also comes from taxing a portion of recipients’ Social Security benefits, and that money goes into the trust fund as dedicated revenues. These revenue sources, along with payroll taxes, insure that full benefits can be paid until 2036. After that, the system will be able to pay seventy-five percent of expected benefits, a point the Post did make, albeit with a negative frame—“Benefits would have to be cut by about 25 percent across the board.” And supporters say small changes, like raising the amount of income subject to payroll taxes and subjecting some fringe benefits to the tax, are all that are needed to fix Social Security without cutting benefits.
“Social Security is sucking money out of the Treasury,” the Post warned, blaming the payroll tax holiday enacted last December as a way to boost the economy. “Replacing cash lost to a one-year payroll tax holiday will require an additional $105 billion,” the Post told readers. “If the payroll tax break is expanded next year, as President Obama has proposed, Social Security will need an extra $267 billion to pay promised benefits.”
Yes, the tax holiday law required that the Treasury replace the lost revenue to make sure seniors and disabled people still received their full benefits. But laying the blame on the tax holiday is a tad disingenuous, especially since the Post editorially supported the suspension of payroll taxes back in December as a “justified compromise.” And again in September it supported Obama’s call for extending and expanding the payroll tax cut, saying “it could encourage both spending and hiring.” To make the Social Security trust funds whole, there will need to be a transfer from the Treasury’s general fund, which would raise the deficit by the amount of the transfer. That could give ammunition to Social Security opponents who have implied the program contributes to deficits, which it does not.
About Social Security lack of funds.Fact is Greenspan 3 times pushed huge export of big industry and middleclass jobs to China and so much for any representation by elected any party politicians. What Media is silent about is How much TAX base is gone and allowed by these acts.Bet a Big amount and plenty to handle Social Security today. Also 2 wars only pushed by Globalists New World Order is true drain and who are the real Terrorists?If this is a Free Country why don't elected people act for us not take Greed payoffs? Who besides Ron Paul cares about America and our Freedoms? Too bad Media downplays his wisdom we don't get from others who don't care to do their job.
Rich McClelland,
#1 Posted by Rich McClelland, CJR on Tue 8 Nov 2011 at 12:27 PM
It's no exaggeration to say absolutely nothing the Post reports on Social Security can be trusted.
#2 Posted by Jeff, CJR on Tue 8 Nov 2011 at 12:29 PM
The commies play hide the ball with Social Security funding.
When the subject of cutting benefits arises... Then the employment taxes are to be considered insurance premiums entitled recipients to benefits and COLA's.
When the subject of taxation arises, then the "poor" are being unfairly taxed...
But commies must isolate these positions.
When it is pointed out to them that the typical U.S. household headed by a person age 65 or older has a net worth 47 times greater than a household headed by someone under 35.. And that the typical person over age 65 is much less likely to be below the poverty line than a younger person...
Then all Hell breaks loose.
WHY should the "poor" be taxed to pay COLA's to people who are, on average, 47 times richer than they are?
HUH?
If the Social Security Trust Fund is real... IF the the IOU's in the file cabinets in Greenbelt are "real" assets... Then why not just dole them out to the elderly like savings bonds or T-bills?
HUH?
The answer, of course, is that these IOU's aren't really assets and consequently the Trust Fund isn't really a fund. The IOU's are non-transferrable, unsecured and unenforceable promises to pay money. It is illegal to sell these "assets" in any free market anywhere in the world. These "assets" confer no title to any property, confess no judgment of any kind, and offer no right of recourse to holders.
#3 Posted by padikiller, CJR on Tue 8 Nov 2011 at 01:48 PM
CJR’s misleading Social Security story
It was initially thought that Social Security’s outlays would exceed its revenues in 2018, but now that year has been moved ahead to 2017.2. That means Social Security’s finances are worsening. In truth, as the report itself notes, it means nothing of the sort. The problem, of course, is that in this case (and in most others) TV reporters seldom read “the report itself.” But the fact remains, if those reporters leave the viewer with the impression that the report unconditionally supports the president’s assertion that the Social Security system’s finances are worsening, they’re deluding their viewers.
Turns out Social Security’s outlays exceeded revenue not I 2018, or 2017, but in 2010 … whoopsee-doodle.
This interest is real cash and is legitimate income to the program, just as would be true of income on bonds held by you or me, China, a large bank, or any other entity.
Its not real cash or income Trudy, and this has been explained to you many a time before. You see, if it were just like any other bond, the bondholder could trade it or sell to anyone on earth or redeem it to the issuer for it matured value … fact is they cant, that’s why they are “special” treasury bonds. The cant be sold to anyone except to the treasury and the treasury can only purchase them if congress specifically authorizes them to.
Talk about misleading.
#4 Posted by Mike H, CJR on Tue 8 Nov 2011 at 02:38 PM
Three questions for those who claim the bonds held by the Social Security Trust Fund are unenforceable IOUs.
1. If the bonds held by the Social Security Trust fund are not assets, that is, they represent an unenforceable claim against the government, then why are the bonds included in the outstanding debt figure that was subject to the recent debt-ceiling vote?
2. If the bonds are unenforceable obligations, then why would S&P include the bonds in their analysis and reasoning for the recent downgrade of U.S. debt?
3. If the bonds are unenforceable obligations of the government, then how can the Social Security Trust Fund receive cash interest from the same bonds to cover the current period’s cash shortfall? In other words, why would the government pay interest, let alone repay the principal, on an unenforceable obligation?
It would be appreciated if responses did not include the words commie, socialist or similar forms of name calling.
#5 Posted by Bob Canuck, CJR on Tue 8 Nov 2011 at 03:06 PM
Bob wrote: If the bonds held by the Social Security Trust fund are not assets, that is, they represent an unenforceable claim against the government, then why are the bonds included in the outstanding debt figure that was subject to the recent debt-ceiling vote?
padikiller responds: Because they are indeed debts - though they are unsecured and unenforceable. There is a difference between an enforceable debt and an unenforceable debt. There is no recourse in the event of default - and we need only go to August to read our President's plain statement that default was a real possibility.
Bob continues: If the bonds are unenforceable obligations, then why would S&P include the bonds in their analysis and reasoning for the recent downgrade of U.S. debt?
padikiller wonders: Why wouldn't they? Creditworthiness depends on one's ability and readiness to repay all debts, especially unenforceable or unsecured credit obligations.
Bob concludes: If the bonds are unenforceable obligations of the government, then how can the Social Security Trust Fund receive cash interest from the same bonds to cover the current period’s cash shortfall? In other words, why would the government pay interest, let alone repay the principal, on an unenforceable obligation?
padikiller responds: The government is currently paying because of the political pressure it would face in a default. However, it is easy to envision a situation when a change in government (or a change in circumstances) would render a different government unwilling or unable to redeem these IOU's.
The question becomes... What happens then? What is the recourse of the Trust Fund in the face of default? What can it do with its IOU's? Can it sue? No. Can it foreclose, repossess or assume title to any valuable property? No. Can it sell or transfer these so-called "assets" to other investors? No.
All illegal.
In the event of default - which as noted above, President Obama threatened only a few months ago - these "assets" are worthless... Thus.. They are NOT "assets" by definintion, as they have no intrinsic value.
#6 Posted by padikiller, CJR on Tue 8 Nov 2011 at 03:31 PM
Oh look. A social security story from the Washington Post. And it's spreading the same old myths leading to the same old criticisms which forces the same old trolls making the same old arguements. Unlike others I could list, I ain't paid to do this dance over and over, so -just so you know readers- we've heard and countered all this stuff before.
#7 Posted by Thimbles, CJR on Tue 8 Nov 2011 at 04:59 PM
"same old criticisms which forces the same old trolls making the same old arguements..."
"...to come out from under their same old bridges."
See? The whole excercise is so repetitiously tedious that I can't even finish my own sentences about it.
Watch.
http://krugman.blogs.nytimes.com/2011/10/30/social-security-bait-and-switch-a-continuing-series/
Expect a series of comments about a former Enron advisor who's been a stinking member of the 1% and who owns an expensive house and therefore 99% of people shouldn't listen to him talk about the 1% who are taking all the money.
*yawn*
#8 Posted by Thimbles, CJR on Tue 8 Nov 2011 at 05:14 PM
Padikiller,
In your response, you used the words “unenforceable” and “creditworthiness” interchangeably; those two words have different meanings. Enforceability has to do with the legitimacy of a claim, that is, does one have a recognized legal claim against another party. Creditworthiness deals with the likelihood that the obligation will be discharged in full. For example, I can have a legally enforceable claim, as recognized by a court, against a company that has gone bankrupt; the fact that I will not receive 100 cents on the dollar does not mean that my claim was unenforceable. If my claim was unenforceable, the court would not list me as a creditor. Being secured or unsecured does not affect the legitimacy of my claim; it only affects the amount I may recover.
Take another example. Assume that Party A sues you for $100,000 and, after all legal proceedings (trial, appeals, etc.) are completed, it is determined that Party A’s claim is unenforceable. At that point, would your list of obligations include the $100,000?
In short, if the bonds are unenforceable obligations, as you claim, then why do they appear as government debt?
Therefore, in my previous post, I focused on your use of the word “unenforceable” and asked that you address my questions that dealt with enforceability. You have not answered my questions.
#9 Posted by Bob Canuck, CJR on Tue 8 Nov 2011 at 05:33 PM
Bob wrote: Being secured or unsecured does not affect the legitimacy of my claim; it only affects the amount I may recover.
padikiller notes: And THAT is huge distinction. A "security" that can be traded for goods, currency or services is an asset. An unsecured, nontransferrable IOU from Congress isn't an asset.
The employment taxes are real, bona fide, actual, honest-to-goodness assets. That's why Congress snatches them and spends the up.
What do you want from "unenforceable" besides its plain meaning?
If the government defaults on the Trust Fund IOU's, there is no way to enforce the debt. PERIOD. No legal remedy. No equitable remedy. Nada.
One simple change in the code and the entire trust "fund" would be worth it's weight in scrap paper.
Compare this to a deed. A deed confers legally cognizable rights. Ownership. Title. Inherent worth. In other words, a deed is an asset.
Compare the IOU's to common stock. A share of an ongoing concern. Again, title. Rights.
Compare to contracted promissory notes. Contract rights enforceable in court.
Compare the worthless IOU's to gold bars or silver bullion. Inherent value. Not constant value, to be sure, but inherent value.
The owner of this worthless (non)asset is screwed.
#10 Posted by padikiller, CJR on Tue 8 Nov 2011 at 07:10 PM
@Thimbles...
Just to be clear.... This would be the SAME 1% multimillionaire and former Enron advisor Paul Krugman who agreed with Rick Perry's contention that Social Security is a Ponzi scheme....
Right?
#11 Posted by padikiller, CJR on Tue 8 Nov 2011 at 07:14 PM
Padikiller,
Would you mind answering at least one of my questions? How about the lawsuit question? If Party A's claim in unenforceable, would you include it in your list of liabilities? Yes or no. No need to elaborate. Yes or no.
#12 Posted by Bob Canuck, CJR on Tue 8 Nov 2011 at 07:47 PM
"Just to be clear.... This would be the SAME 1% multimillionaire and former Enron advisor Paul Krugman who agreed with Rick Perry's contention that Social Security is a Ponzi scheme...."
You neglected to mention this would be the SAME STINKING 1% multimillionaire and former Enron advisor Paul Krugman who agreed with Rick Perry's contention that Social Security is a Ponzi scheme....
You also left out the word commie. I hope you aren't getting lazy because I Won't have it, I say.
#13 Posted by Thimbles, CJR on Tue 8 Nov 2011 at 08:05 PM
What "list of liabilities", Bob?
What are you talking about?
Party A sues Party B for $100,000 (which of course can't be done with the Trust Fund IOU's) and this claim is "determined" (how?) to be unenforceable (by whom?).
You seem to be describing some sort of hypothetical judicial process that is impertinent to our debate.
My POINT is that there is no legal remedy for the Trust Fund in event of default. Holders of the Trust Fund have no enforceable rights.
I can't tell if your hypothetical case is that:
1. A judge tosses out the $100,000 claim (which, assuming due process and a fair trial, means that the claim was never valid to begin with) or
2. A $100,000 judgment is entered, but can't be collected for some reason.
Assuming that you mean the second case... What is your point about a "list of liabilities"? You seem to be arguing semantics - I certainly never broached the subject of any "list of liabilities"..
If your question spins on the status of the uncollectable debt, well then of course the defaulting party is liable for the money, even if the judgment is unenforceable.
I get the feeling you're trying to make a point, and if so, I wish you would just state it.
#14 Posted by padikiller, CJR on Tue 8 Nov 2011 at 09:33 PM
Padikiller,
I bow to your expertise. You are truly without peer on the subject of Social Security.
#15 Posted by Bob Canuck, CJR on Tue 8 Nov 2011 at 09:58 PM
The Washington Post story was misleading and malicious. It left out the most important part of the story. That part was summarized by Senator Tom Coburn of Oklahoma during a Senate speech on March 16 of this year. Senator Coburn said, “Congresses under both Republican and Democrat control, both Republican and Democrat presidents, have stolen money from social security and spent it. The money’s gone. It’s been used for another purpose.” Senator Coburn told it exactly like it is. As an economist who has been trying to expose "the great Social Security theft" for more than a decade I was pleased that a member of Congress had openly admitted that he and his colleagues have stolen $2.6 trillion of the Social Security contributions of working Americans.
I have devoted the past ten years of my life to researching and writing about the Social Security fraud, so I decided to post four lengthy comments in response to the Washington Post article, in an effort to "tell the rest of the story." I thought the Post might be pleased that a professional economist, who has studied and written about Social Security for more than a decade, was pointing out the shortcomings of their article, but they were not. My comments remained as posted for a few hours, but then they were all four removed by the moderators. I was not surprised. The same thing has happened to me many times and I have been permanently banned from posting on some major sites. Not because I am rude or violate the rules. The looting of Social Security is a taboo subject that the mainstream media avoids like the plague. The government has been able to keep the stealing of the Social Security money from the people for the past 25 years primarily because the mainstream media honors the wishes of the government that the public not be allowed to find out about the crime.
Allen W. Smith, Ph.D.,Professor of Economics, Emeritus, Eastern Illinois University
ironwoodas@aol.com
www.thebiglie.net
1-800-840-6812
#16 Posted by Allen W. Smith, Ph.D., CJR on Wed 9 Nov 2011 at 12:14 AM
The Washington Post story was deliberately misleading. The article is well-intentioned, but it is also misleading. The government has never paid a dime's worth of cash interest on its debt to Social Security. It "pays interest" by issuing additional worthless, non-marketable IOUs just like the ones the trust fund already holds. These IOUs cannot be used to pay benefits. Consider the two big lies about Social Seurity.
THE TWO BIG LIES ABOUT SOCIAL SECURITY:
LIE 1. Social Security has no financial problems. With no government action of any kind, Social Security can pay full benefits until 2036.
LIE 2. Social Security, in its current form, is unsustainable. It is going broke, or it will go broke.
THE TRUTH: All of the $2.6 trillion in surplus Social Security revenue generated by the 1983 payroll tax hike has spent by the government, as it came in, for other government programs. The year 2009 was the last year in which the Social Security budget ran a surplus. Beginning in 2010, Social Security began running annual budget deficits. In 2011, and all future years, the cost of Social Security benefits will exceed the payroll tax revenue, and the government will have to dig into the general fund in order to pay full benefits
If the $2.6 trillion had not been spent on other things, Social Security could pay full benefits until 2036. Social Security could be made fully solvent for decades beyond 2036 with a single legislative act. If the cap on earnings subject to the payroll tax were removed, Social Security would be fully solvent for at least another 75 years.
Allen W. Smith, Ph.D. www.thebiglie.net
#17 Posted by Allen W. Smith, Ph.D., CJR on Wed 9 Nov 2011 at 12:24 AM
Hey Al. I've mentioned you once or twice. Fer instance:
http://www.cjr.org/campaign_desk/pinning_down_the_pols.php
You seem to be a good apple.
#18 Posted by Thimbles, CJR on Wed 9 Nov 2011 at 12:31 AM
Allen Smith wrote: Social Security could be made fully solvent for decades beyond 2036 with a single legislative act
padikiller replies: And conversely, Social Security could be rendered completely insolvent by either simple legislative inaction or by a single legislative act.
Which is precisely my point.
Because the Trust Fund has no money in it (nor any assets that can be converted into money independently of Congress).
#19 Posted by padikiller, CJR on Wed 9 Nov 2011 at 07:25 AM
Funny how nobody talks about the defense department going bankrupt.
Or when tax cuts and tax holidays are passed, how nobody says "OMG, if these go through, we'll be bankrupt!"
On paper, the defense department has NOTHING on its balance sheet. It still pays its bills. On paper, social security has 2 trillion on its balance sheet. The government can still pay its bills just as well as it can the defense department.
The only problem greedy elites have with the program is that they aren't able to use its surplus revenues to offset income and corporate tax cuts like they used to. So now they're trying to be cruel about it by trimming the benefits down and bumping the ages up until the program acts as an offset, and not as an expense, again.
The rest of the rhetoric is just blowing wind. The government can pay its bills, but only if it wants to; and now a days, there's a bipartisan consensus against doing that. And, in an unrelated issue, there's also a consensus on lowering taxes for the wealthy.
When a democracy makes attaining political office a capitial intensive process, don't be surprised when the people elected support policies beneficial to those who have captial. The representatives either are holders of huge capital reserves or are purchased by those holding huge capitial reserves.
In which case, they're not going to honor obligations made to you, 63.9% of elderly who will likely rely on social security for half their income, they're going to honor themselves.
And people like this, who honor their (and their benefactors) needs above the needs of the 9% unemployed, the elderly, and the sick? Charles Pierce but it best.
http://www.esquire.com/blogs/politics/jobs-bill-blocked-again-6541855
"I hope one of these guys is driving over one of these bridges and it collapses. I pray that no innocent people are injured when this happens. But these ... guys?
Into the river.
Maybe some insurance company will throw them a rope."
These scum honor themselves, we need not accord them any.
#20 Posted by Thimbles, CJR on Wed 9 Nov 2011 at 12:19 PM
Thimbles wrote: In which case, they're not going to honor obligations made to you, 63.9% of elderly who will likely rely on social security for half their income, they're going to honor themselves.
padikiller tolls the Reality Bell: According to latest census data, the typical U.S. household headed by a person age 65 or older has a net worth 47 TIMES GREATER than a household headed by someone under 35.. And that the typical person over age 65 is much less likely to be below the poverty line than a younger person...
So take the regurgitated commie "grandma eating cat food" meme with a ton or two of salt.
The REALITY is that a low-income mother of three who earns $30,000 a year, pays $2000 to fund retirement benefits for people with an average net worth of more than a MILLION DOLLARS (according to the census).
And the commies think this is fair. Commie justice is a fascinating thing to behold.
The problem with this country is a particularly simple one - we're paying people not to work.
The FACT of the matter is that average work week of the average adult in the bottom quintile of American income earners is 14 HOURS A WEEK while the average adult in the top quintile works more than 36 hours a week.
And the commies wonder why we have "income inequality"?... It's because we have sloth inequality. By policy.
#21 Posted by padikiller, CJR on Wed 9 Nov 2011 at 12:31 PM
"padi tolls the Reality Bell: According to latest census data, the typical U.S. household headed by a person age 65 or older has a net worth 47 TIMES GREATER than a household headed by someone under 35.. And that the typical person over age 65 is much less likely to be below the poverty line than a younger person..."
Padi, we went over your "average elderly millionaire" hypotheticals before:
http://www.cjr.org/campaign_desk/the_human_faces_behind_the_soc.php#comments
Wasn't that compelling then either. The fact fact fact is 34.2 percent of elderly relied on social security for 90% or more of their income and 63.9 percent relied on it for 50% or more.
In 2008.
Just as the asset crash and recession was getting into gear.
And last I checked it was democrats who were unwisely advocating for payroll tax holidays and republicans who were fighting for them, so your whole "low-income mother of three who earns $30,000 a year is getting shafted" argument isn't helpful to you. She's getting shafted by republicans. She's been getting shafted by republicans all her life. And you will have no problem shafting her again when she turns 75 and begins collecting social security, this time on the basis of the illiterate mother of seven who has to pay 80 year old moochers who spend their money on cat food since they're so rich.
Why is conservative polemic so lame?
#22 Posted by Thimbles, CJR on Wed 9 Nov 2011 at 01:02 PM
Senator Coburn said, “… The money’s gone. It’s been used for another purpose.”
Um, that’s how a bond works. The issuer of the bond needs money for a purpose specific to them. They spend the borrowed money. Indeed, it would be a surprise if the debtor did not spend the money raised. The bond holder is concerned about credit risk; will the debtor repay all interest and principal when due. Senator Coburn’s comment is just silly.
#23 Posted by Bob Canuck, CJR on Wed 9 Nov 2011 at 01:20 PM
Notice how Thimbles moves the goalposts...
From wealth to income...
Slick trick!
The FACT of the matter is that your average American household (including single indivuals) where the head of the household is over the age of 65 has a net worth of more than a MILLION DOLLARS.
Who needs income with a million dollars in the bank and a house that's paid for?
And let's use Thimbles' numbers... Nearly 40% of America's elderly earn more than their monthly Social Security benefits.. The average SS benefit is around $1200 per month.
So we have a situation where nearly half of America's elderly Social Security beneficiaries are sitting on a million dollar net worth (on average 47 times greater than the average net worth of people under 35) and earning just under $30,000 per year (half of it tax free in SS benefits)... And getting a COLA raise at the expense of the working mother of three who pays $2000 in payroll taxes on the $30,000 she earns by cleaning toilets.
Commie justice at work!
#24 Posted by padikiller, CJR on Wed 9 Nov 2011 at 03:24 PM
"The FACT of the matter is that your average American household (including single indivuals) where the head of the household is over the age of 65 has a net worth of more than a MILLION DOLLARS."
And when Bill Gates enters a pub, the average drinker is a billionaire.
The median from your own data showed the elderly frequently had 250 grand in assets in 2008, much of that, average 200 grand, locked in the value of their houses.
http://www.census.gov/compendia/statab/2012/tables/12s0721.pdf
Which means half the elderly will face poverty as medical and long term care bills go up and alternate sources of income dry up.
http://mobile.reuters.com/article/idUSTRE6BC4AR20101214
Not that this matters at ALL to the people who's sole motivation is to get themselves another bunch of tax cuts.
#25 Posted by Thimbles, CJR on Wed 9 Nov 2011 at 04:58 PM
Thimbles..
The plain R E A L I T Y is that, according to the most recent census data, the average 65 year-old is FORTY SEVEN times wealthier than the average 35 year-old.
You also ignore the plain R E A L I T Y regarding poverty - namely that a 65 year-old is MUCH, MUCH, MUCH less likely to be below the poverty line than a 35 year-old is.
Yet, the commies would have the 35 year-old pay taxes to fund a COLA increase for the 65 year-old.
This is just how it is.
Your claim that "half the elderly will face poverty as medical and long term care bills go up and alternate sources of income dry up" is a Chicken Little commie crack dream belied by the data - the census data that shows a HUGE increasing disparity in wealth between the elderly and the young.
#26 Posted by padikiller, CJR on Wed 9 Nov 2011 at 05:35 PM
"The plain R E A L I T Y is that, according to the most recent census data, the average 65 year-old is FORTY SEVEN times wealthier than the average 35 year-old."
Wow, can someone please wake me up when he gets a new argument? I can only debunk the same one, what is it, 9 times now?
63.9% of the elderly get over 50 percent of their income from social security. Over half of that rely on it for 90 percent or over. From that they have to budget their long term care, their drugs, and their food. Would it make you happy for them to sell their houses instead of collect from the fund they paid into for their working lives? Would their starvation and the addition of a new rent expense make room for a big enough tax cut to make you happy?
What does it take to make you happy, padi?
#27 Posted by Thimbles, CJR on Wed 9 Nov 2011 at 06:36 PM
Obviously, the only way to fairly deal with social security is to means test beneficiaries.
#28 Posted by padikiller, CJR on Wed 9 Nov 2011 at 08:14 PM
So you want to make Social Security insurance a welfare program? What are ya, a communist?
(plus by doing so you'll be lessening the incentive of people to seek private sources for retirement income to supplement social security)
If you're going to make it a welfare program, do it by raising payroll tax revenue. Raise the payroll tax ceiling to 300,000, problem solved.
#29 Posted by Thimbles, CJR on Wed 9 Nov 2011 at 09:10 PM
Thimbles wrote: So you want to make Social Security insurance a welfare program?... ...IIf you're going to make it a welfare program, do it by raising payroll tax revenue.
padikiller responds: The appropriate question to ask about Social Security is "which is it now?"... An insurance program? Or a welfare program?
If it is an insurance program, then it is an unjust one - the people who pay the most in premiums receive the least in benefits. Furthermore, if it is an insurance program than raising the tax ceiling should result in a increase in benefits for the wealthiest contributors.
If it is a welfare program, then it is an unjust one - the young people are taxed to pay benefits for the elderly, who are on average FORTY SEVEN TIMES WEALTHIER than the young. This despite the FACT that the average young person is MUCH more likely to be below the poverty line than the average older person. If social security is a welfare program (and if we choose to keep it) then in fairness there should be a means test.
Either way, Social Security is an unjust and unfunded boondoggle.
Commies want to have it both ways... When it comes to receiving benefits, the Social Security is an insurance program and beneficiaries are entitled to benefits... But when it comes to paying for Social Security, then it's a welfare program and the "working poor" are overburdened with taxation.
#30 Posted by padikiller, CJR on Thu 10 Nov 2011 at 12:55 PM
Lieberman doesn't understand the significance of the $118 billion in interest payments. Those payments come from the Treasury, which means that, while they add to Social Security's surplus, they contribute to the Government's overall deficit. That's why they're cash negative.
#31 Posted by Tom T., CJR on Thu 10 Nov 2011 at 10:56 PM
Tom T. wrote:
“Lieberman doesn't understand the significance of the $118 billion in interest payments. Those payments come from the Treasury, which means that, while they add to Social Security's surplus, they contribute to the Government's overall deficit. That's why they're cash negative”.
Ms. Lieberman was clearly referring to the The Social Security Trust Fund ("SSTF") and not the government's account when she challenged the view that the SSTF was cash negative. Based on Mr. Gregory’s statements (see CJR's article), the SSTF earned $118 billion in interest income in 2010, of which $49 billion was in the form of cash and the remaining $69 billion was invested in the Special Social Security Trust Bonds. With the $49 billion in cash and the other revenues of the fund, the SSTF paid all 2010 commitments (primarily benefits) in full. The SSTF was therefore not cash negative.
What is often overlooked in the discussion of the debt owed to Social Security by the government is the fact that, in terms of total debt, Social Security has no impact on the total amount of government debt.
As an example, if the government needed to finance a $500 deficit and it received $100 from the SSTF, it would have to borrow $400 elsewhere. If the government was unable to borrow the $100 from the SSTF, it would have to borrow $500 elsewhere. Under both scenarios, the total amount of new government debt is $500. When the SSTF redeems the $100, assuming the government issues new debt to the public to pay for the redeemed bond, the total debt outstanding remains the same: $100 less is owed to the SSTF and $100 more is owed to the public. With respect to interest, the interest that was previously due on the $100 bond held by the SSTF is now due on the $100 of new publicly-held debt. Assuming the same interest rate, the interest cost to the government is the same.
#32 Posted by Bob Canuck, CJR on Fri 11 Nov 2011 at 03:01 PM
Bob wrote: What is often overlooked in the discussion of the debt owed to Social Security by the government is the fact that, in terms of total debt, Social Security has no impact on the total amount of government debt.
padikiller responds: What you mean to say is that Social Security has the SAME impact on the total amount of government debt as any other borrowing.
The only difference is that I can trade a T-bill and sell for cash to an investor in the free market.
The same is not true of the so-called "assets" in the Trust Fund.
#33 Posted by padikiller, CJR on Fri 11 Nov 2011 at 04:02 PM
Padikiller,
I wrote the following:
"What is often overlooked in the discussion of the debt owed to Social Security by the government is the fact that, in terms of total debt, Social Security has no impact on the total amount of government debt".
I wrote what I meant to say and what I wrote is correct. In my example, the government needs to finance a $500 deficit. If all or none of the $500 is borrowed from the SSTF, the total amount of debt is unaffected.
I have a question for you and you can answer it with a simple yes or no. Are the bonds held by the SSTF, which you describe as the so-called "assets", backed by the full faith and credit of the U.S. Government?
#34 Posted by Bob Canuck, CJR on Fri 11 Nov 2011 at 07:49 PM
Of course the Trust Fund securities are backed by the full faith and (recently downgraded) credit of the U.S. government.
But nothing else.
Just a few months ago, our President told the American people that because of a political impasse, he couldn't guarantee that the Social Security checks would go out. And this was an impasse over an utterly predictable routine debt limit increase.
What's going to happen if there is unrest? Or utter political gridlock?
If the Social Security Trust Fund had some actual real money in it... There wouldn't be a problem. But it doesn't have any money in it. Congress took it all and spent it all and replaced it with IOU's.
By the way... The money that Congress borrows from the Trust Fund increases the national debt MORE than the money it borrows elsewhere because the interest rate paid on Social Security special issue bonds is much higher than the current interest rate on T-bills.
The Trust Fund IOU's have a variable rate pegged to the average return of Treasury notes with maturity terms of greater than four years, which right now have much higher interest rates than T-Bills do.
So Congress pays more interest when it borrows from the Trust Fund than it would if it sold T-Bills in the same amount on the market.
#35 Posted by padikiller, CJR on Fri 11 Nov 2011 at 09:22 PM
Padikiller,
Your point about higher interest costs for the Social Security special issue bonds (“Special Issue Bonds”), compared to that of T-Bills, is misleading.
The reason that the rate on a Federal government security with a four-year plus maturity will be higher than the rate on T-Bills is because of the current upward sloping yield curve.
Given that the government issues debt with maturities that range from less than a year up to 30 years, you cannot conclude definitively that the government would issue a T-Bill as the alternative to a Special Issue Bond. According to an August 3, 2011 Financial Times article, the average maturity of US Treasury debt is 62 months. Therefore, the maturity date of US government debt that is used to determine the interest rate on a Special Issue Bond (four plus years) is much closer to the average maturity of US government debt (five plus years) than the maturity date of a T-Bill (less than 12 months). With the 62-month average, one can make a case that the government would issue debt with a maturity closer to four plus years than a maturity of less than a year. In this scenario, the interest cost would be approximately the same for a Special Issue Bond and a Treasury note; the interest cost would be higher if the government issued a non-Special Issue Bond with a maturity longer than the maturity used to determine the interest rate on Special Issue Bonds.
In any event, you have no basis to state that the alternative to a Special Issue Bond is definitively a T-Bill. Accordingly, your statement regarding higher interest costs associated with Special Issue Bonds is misleading.
#36 Posted by Bob Canuck, CJR on Sat 12 Nov 2011 at 12:17 AM
No, Bob...
You're misleading here, not me.
Your claim that "Social Security has no impact on governmental debt" is patently false - every single IOU that Congress puts in the Trust Fund's file cabinet adds to the national debt. PERIOD. This is just an undeniable, irrefutable truism. There are currently $2.5 TRILLION worth of Trust Fund IOU's in the file cabinet that represent exactly the same amount of national debt as they would if issued in the same amount in the form of any other obligation.
Social Security has unquestionably "impacted the governmental debt" by $2.5 TRILLION in less than 30 years. Do the math.. That works out to more that $83 BILLION per year, on average, added to the national debt by Social security for the last 30 years.
Secondly, you are straining in vain to refute the plainly truth about the interest rate differences between Trust Fund IOU's and T-Bills by justifying what the Treasury IS doing (as directed by Congress) and by ignoring what it COULD be doing instead (if Congress acted differently).
The simple undeniable fact of the matter is that if the Treasury were to issue $200 billion in lower interest T-Bills today and use the cash to redeem higher interest Trust Fund IOU's... The government would save money and the debt would be reduced accordingly by the reduced interest cost (assuming Congress didn't spend it.) This is just the R E A L I T Y.
#37 Posted by padikiller, CJR on Sat 12 Nov 2011 at 08:44 AM
Padikiller,
According to the website of the U.S. Department of the Treasury:
- Treasury’s objective is to lower the cost of borrowing over time
- Lowest cost over time implies a diversified debt portfolio
- Treasury spreads debt across maturities to
o Reduce risk
o Diversify the investor base
o Improve cash management
o Facilitate regular and predictable issuance
Therefore, the decision regarding what maturity date to use for any government debt issue is much more complex than what maturity date currently has the lowest rate. Treasury takes many factors into consideration and therefore a comparison of a T-Bill rate and the rate used for the Special Issues Bond is simplistic. If Treasury acted the way you imply (go for the lowest rate), then why is the average maturity of US government debt 62 months? Obviously, Treasury does what it says it does. Treasury may do an issuance with a maturity less than, equal to, or more than 62 months. Therefore, it is misleading to categorically state that the government pays higher interest costs on the Special Issue Bonds because you do not know what the maturity date will be for the alternative security. You may want the Treasury to go for a short maturity and, if they did, then current interest costs in total will indeed go down. If Treasury went for a six year maturity, then your statement would be incorrect.However, your wishes and the reality of what would actually happen are not necessarily the same thing. Hence my point: it is misleading to make the categorical statement that it costs the government more to service Special Issue Bonds.
With respect to the SSTF adding to the debt, you are confusing the source of financing with the need of the government to finance its deficit. Go back to my numerical example. The government has a $500 deficit and needs $500 to finance it. If it borrows $500 from the SSTF or $500 from the public market, the increase in government debt is $500 under both scenarios. If the $500 was raised in the public market, are you saying that the public market increased the government's debt by $500?
#38 Posted by Bob Canuck, CJR on Sat 12 Nov 2011 at 11:15 AM
Once again, Bob, you're using Treasury policy to defend Treasury policy.
The simple FACT of the matter is that TODAY... RIGHT NOW... Every dollar the Treasury borrows from the Trust Fund costs more than every dollar borrowed in a T-Bill. PERIOD.
That's just the reality.
Thus your claim that "Social Security has no impact on governmental debt" is clearly and demonstrably false.
Not only does every single Trust Fund IOU add to the national debt in precisely the same way that the T-Bill does, it also costs more in interest to taxpayers than a T-Bill issued for the same amount does.
#39 Posted by padikiller, CJR on Sun 13 Nov 2011 at 08:32 AM
Padikiller,
Am I defending Treasury’s policy? Yes, because the reality is that is how a prudent Treasury and their peers in other OECD countries manage a government debt portfolio.
More importantly, why should the Special Issue Bonds earn interest at the T-Bill rate? Yes, the bonds are payable on demand, which would imply a lower rate than the rate that is currently used. However, the Special Issue Bonds will be redeemed over a long period of time (over the next 25 years based on current projections) and it would be justifiable to use a rate much higher than the rate that is currently used. In fact, if you weight the Special Issue Bonds by their expected redemption date, the weighted figure would be greater than the maturity used to set the current rate. It seems to me that the current rate is a reasonable compromise.
I did not say “Social Security has no impact on governmental debt”. I said that it has no effect on total debt, that is, the total amount that the government borrowed. Putting aside the interest rate that should be used for the Special Issue Bonds, which we obviously disagree, lets focus on the principal (the initial amount to be borrowed). Again, let’s go back to my numerical example, which you have ignored every time in your responses. The government has a $500 deficit, which means it must borrow $500. The deficit occurred because in its budget, which excludes the SSTF operations, expenses exceeded its revenues by $500. If it borrows $200 from SSTF and therefore $300 from the public, the total debt increased by $500. If the government borrows $100 from the SSTF, the government would borrow $400 from the public. In both cases, total debt increased by $500. In the two scenarios, the amount borrowed from SSTF is different but the total debt went up the same amount ($500).
You are arguing that, if the $2.5 trillion was not there, then government debt would be less. True and, if the other $12.0 trillion in debt was not there, there would be no debt! That is what you are arguing. You can’t make the $12.0 trillion or the $2.5 trillion go away. The government needed to borrow $14.5 trillion: it borrowed $2.5 from the SSTF and $12.0 trillion from other lenders. That is the REALITY.
#40 Posted by Bob Canuck, CJR on Sun 13 Nov 2011 at 12:45 PM