Matt writes about Social Security:
What's at issue here is whether McCain wants to just cut Social Security benefits or combine cuts with a stab at privatization. Neither is, in my view, a good idea at all. It's conceivable that at some future point reductions in the benefits growth rate will be necessary, but then again that might not happen.
I've seen this meme frequently on liberal blogs, and it just isn't true. The claim originated, as far as I can tell, with Kevin Drum, and it seems to rest on two things:
1) The Social Security Administration originally misforecast revenue growth, resulting in fairly large fluctuations in its projections of insolvency in the late nineties; the date of trust fund exhaustion was repeatedly pushed back.
2) The fact that the Social Security Administration is allegedly projecting a lower-than-average rate of economic growth in the future.
The first is due to a number of idiosyncratic factors, including the fact that the decline of defined-benefit pensions has slightly boosted the labor force participation rate of older Americans. But the corrections that the SSA made to its modeling around the turn of the millenium have so far proven fairly good; estimates now fluctuate within a very narrow band centered roughly on 2040 or 2041. Liberal blogs report it every time the date is moved backwards, but they fail to note that the next year it's usually moved forward again.
The second is only good and right. Economic growth is attributable to two factors: labor force, and productivity. Labor force growth is going to shrink sharply unless something changes--and one of the factors pushing it downward is social security benefits. Demographics is not a fast-moving catastrophe; you can see it coming for decades. We already have pretty much all the workers we're going to have in 2040; they've been born either here or abroad. Something could change, like a much more generous immigration policy, or rocket-like acceleration of productivity growth. But this isn't at all likely, and in both cases the current trend is downward, not upward.
The supporters of the system are right that Social Security is not quite the catastrophe that conservatives claim--but they're wrong when they aver that the system doesn't have deep structural problems. It does, and those problems are going to become big political problems over the next decade.
Economic growth is attributable to two factors: labor force, and productivity.
The last time I brought this same point up around here, everyone told me I was insane. It's not SS that has structural problems, it's society at large. More retirees chasing the output of fewer workers is a problem with or without a state-run pension system.
I recall going over the productivity numbers following the 2004 election, when SS was a big issue. Productivity growth post-1996 (roughly) is far in excess than it ever was during the previous thirty years, the latter being the benchmark the SS uses for its projections. So, as it turns out, it does appear that SSA isn't sufficiently taking into account the countervailing effect of increased productivity on a smaller labor force.
I'm afraid you're right, and Rob is too. The "graying" of human society due to medical advances is a real problem for our economic system; how to accomodate people who live longer but no longer produce capital? I think it's going to be a larger problem than just Social Security.
How ironic that the socialists who want to preserve SS are the most set against policies encouraging productivity growth!
to Freddie,
I'm thinking coffin hotels with piped-in Matlock.
The social security crisis deniers would rather look for solutions to a longer term crisis, global warming. So if it is imperative we start dealing with global warming now, why not make some tweaks to social security even though we don't know the full extent of the problem in 2040? Raise the retirement age for those under 40 to 70. Raise the maximum on which taxes are based by 10%. Cap the annual benefits increase to 75% of the consumer price index. Then, if everything does come up roses, Congress can enhance the benefits.
I still don't understand why so many people are against privatization. It's as if they assume that privatization means that people will be able to do what they want, investmentwise, with their retirement savings. You can't do that now with 401K's or IRA's.
What's to say we can't make it a requirement of privatization that all investments have to meet the same standards as the Trust Departments at any bank? That is, investments have to not just meet the "prudent man" standard, but the stricter "prudent trustee" standard.
Converting to private accounts is the only way to get out of the whole Ponzi scheme that is SS.
Rex:
Did you hear the news today(Which I knew well before today)? Would you want to invest your retirement savings with Citigroup now?
A theoretical Social Security problem 32 years from now is not a deep structural problem, certainly not one that should be solved as a priority ahead of the real and pressing Federal budget problems with health care, the overall budget deficit, the immediate threat of global warming, or the disastrous war in Iraq. It's a problem we should keep our eyes on but don't need to move immediately to address for at least another decade or two. Those other issues are far more important and urgent. When it gets close enough to 2040 or whenever that we can feel certain the problem is real, we can then make trivial changes to tax policy, the growth rate of benefits, or immigration to address the problem. What's the hurry?
how to accomodate people who live longer but no longer produce capital?
My preferred solution is the same as it is for welfare recipients: make them get jobs. How did we come to assume that one should retire at 65, anyway? Is it tied to the SS system (I suspect it is)? So if we raise the full-benefits retirement age to 70 or even 75 (given the longer, healthier lives people are living), we can both cut the burden on the fisc and encourage a healthy cultural shift toward working longer.
I'm fine with privatization, but it doesn't solve the problem in the end. Who's going to produce the goods which generate dividends? Who are you going to sell your stock to when you retire?
Output: all our financial instruments, from federal reserve notes to fancy derivatives, are tied to it, and none of them are substitutes for it, although we sometimes forget that.
More retirees chasing the output of fewer workers is a problem with or without a state-run pension system.
If they're chasing the joint output of fewer workers and more capital-- which they themselves have been providing-- is it a problem then?
not one that should be solved as a priority ahead of the real and pressing Federal budget problems with health care, the overall budget deficit, the immediate threat of global warming, or the disastrous war in Iraq.
Ron, when the SS system starts cashing in the "trust fund" in what? 10 years? then SS becomes a general budget line item right alongside the ones you list. So the time horizon is a tad shorter than you are making it out to be.
If they're chasing the joint output of fewer workers and more capital-- which they themselves have been providing-- is it a problem then?
Not if productivity skyrockets, no. I'm not betting on it, though.
We don't have "a theoretical Social Security problem 32 years from now," we have one starting in under ten years. There is no Social Security trust fund. The supposed "fund" consists of U.S. government bonds, and when the government sells its own bonds to get cash, it is borrowing that cash, because it has to repay it, with interest. This is so whether it sells bonds that are sitting in a "trust fund" today or bonds that it issues just before selling them. So unless benefits are reduced, the government will have to start borrowing or raising taxes to pay benefits within ten years. This would be the case if the "trust fund" had never been created; the existence of that fund changes nothing.
Medicare's in even worse shape, though.
The supposed "fund" consists of U.S. government bonds, and when the government sells its own bonds to get cash, it is borrowing that cash, because it has to repay it, with interest.
Alan, I'm generally bearish when it comes to socail security, but the idea that because the trust is in bonds, it's not "real money" has been rather thoroughly debunked.
As for privatization, the first thing is that privatization doesn't actually solve the root problems; people ideologically predisposed to privatization in the first place use the looming problems to leverage privatization. But it doesn't change the basic dynamics. The second thing is to say that, if you're talking about actual individual investor control, the fact is that most individual investors are bad at it-- many staggeringly so. Certainly, the median individual investor underperforms the trust.
Rob Lyman:
And if you lose your job at age 60(or between then and 75), what then? You do realize the hard time you'll have finding a job, right? Ever talk to anyone that experienced age discrimination?
And if you lose your job at age 60(or between then and 75), what then?
Well, fine, we can have unemployment insurance or something. But the notion that we need to maintain an unnecessarily low retirement age and all the attendant costs just for the small number of people who lose their jobs at a bad time of life is overkill.
Freddie wrote: "the idea that because the trust is in bonds, it's not "real money" has been rather thoroughly debunked."
Nonsense upon stilts. What difference do you see between (1) the government printing a brand new bond and selling it ("borrowing") and (2) the government selling a bond that has been sitting in a box for a few years. In each case, the government gets money that it must repay, with interest.
Until then, I'm going to continue to believe that the government's need to pay off the bonds in the trust fund will be just as large a fiscal problem as the government's paying social security benefits out of general funds would have been. If, in about 10 years, social security benefits exceed social security taxes by $X, the Social Security Administration (SSA) will open the trust fund vault and deliver $X worth of bonds to the Treasury for payment. Treasury will either get the cash to pay for the bonds out of general tax revenues or by selling more bonds to the public. If the trust fund did not exist, the only thing that would change is that the SSA would not deliver $X worth of bonds to the Treasury for payment. Instead, the SSA would deliver a bill to the Treasury in the amount of $X for payment. Treasury would then pay that bill by taking money out of general tax revenues or by selling bonds to the public. The end result is the same with either approach.
And if you lose your job at age 60(or between then and 75), what then?
Presumably the same thing that would happen now if you lost your job between 50 and 65, except that you would have an additional 10 years of personal savings to fall back on.
They are claiming it it doesn't make a difference because the obligations run to and from arms of the same government. When Payroll witholdings no longer cover payouts, the bonds have to be refinanced. The deleterious effects on the government balance sheet and budget begin long before the depletion of the irrelevant trust fund.
If I borrow a billion dollars and give it to my wife, I certainly gave her "real money". I might even take back a "real" note (bond) from her. But if she spends the cash (and has no marketable asset to show for it), would you argue that our household still has a billion dollar 'reserve'?. What difference does it make to our ability to repay the loan? None. One of us will have to go borrow/earn/take/liquidate a billion dollars to repay it.
In this way, SS will seriously exacerbate domestic finances starting in 2018 or so, in amounts that will become orders of magnitude larger than this year's deficit but also orders of magnitude smaller than Medicare's looming costs.
Wikipedia used to cite my article on this. I'm glad to see they've now substituted text in the article body:
(I've emphasized the differences above with bold type)
I don't think there's much doubt about which of those scenarios is closer to the truth.
Can't we just immigrate our way out of the Social Security, Medicare, and Medicaid problems, once we have control of the borders, by just letting in whatever number of immigrants we need to make the numbers come out right? Of course this would just be putting the problem off, UNLESS we instituted new systems for retirement and medical care for all new entrants into the labor force (immigrants and native-born) after a certain date, which would be politically passable for present participants in those programs if we at the same time guaranteed their benefits. In other words, shut down the Social Security, Medicare and Medicaid systems as presently constituted, except for people now voting (who are guaranteed the same benefits as otherwise), and institute new systems (now we know how to make systems that are financially sustainable; before, Roosevelt, Johnson, etc, didn't know how).
We should implement a system like the one Charles Murray advocates in "In Our Hands." This is something that both conservatives and liberals can get on board with. The system is based on the idea of Milton Friedman's Negative Income Tax, but it is slightly different. It is also similar to the system that leftist political philosopher Philip van Parijs [sp?] advocates.
We should get rid of welfare for old people and start thinking about a more reasonable system.
I've looked at the assumptions going into the last projections by the SSA, just the mortality - and I don't think they're baking in enough mortality improvements.
In any case, Medicare is going to be a much more immediate problem. Social Security is relatively simple - it can be turned into a welfare program for needy elderly (as opposed to a retirement annuity). Or they can change the benefit formulas so it doesn't get indexed by average wages (which grows faster than inflation). There's a lot of short-term "fixes" that will help because it's just cash, as opposed to covered services, like Medicare.
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As for age discrimination, my near-70-year-old ma-in-law has had no problem getting employment as a lab tech. And she's had heart surgery. My uncles retired from IBM, and are now working as consultants in companies doing business with IBM.
It's true that many people are not in the physical shape, or have transferable skills in a changing marketplace, to be able to continue working through their 70s, but I'm seeing people do it right now.
Yes anecdotes aren't anecdata, but it seems to me there are plenty of employment opportunities for those willing to take a step down from previous positions, or to do something different. It also helps to have a job that isn't overly physical.
Joe Klein's conscience,
Read what I said. Investing in Citigroup stock does not meet the prudent trustee standard. Very few stocks do.
We're talking AAA and AA rated stocks and bonds here. Perhaps single-A might be allowed. No BBB, BB, B, or C investments permitted.
Re: The supposed "fund" consists of U.S. government bonds, and when the government sells its own bonds to get cash, it is borrowing that cash, because it has to repay it, with interest.
Which the government will have to repay no matter what. Even if Social Security folded tomorrow those bonds would still have to be repaid (unless you'd like to turn the US economy into a banana republic's). So nothing we do with Social Security changes the fact that in a few years the US government will have to stop running deficits and start funding its operations honestly. No big deal economically: America is abundantly rich enough to afford that. Politically of course it means that the era of tax cut demagoguery is going to come to a screeching halt. No wonder the GOP is preaching panic and hysteria.
Re: Trust Fund is an accounting fiction
Unless you actually stuff cash (or gold) in your mattress all savings are an accounting fiction. The money isn't really in the bank at all: the bank just sends you a regular statement saying it will pay you that amount on demand. The promise is only as good the the bank's word and contract law will supoport. Ditto for the Social Security trust fund: an accounting fiction backed up by the full faith and credit of the US government. Does anyone here think the US government is going to default on its obligations, with all the global economic fallout that would cause? Does anyone think any politician desiring reelection would allow that to happen? Come on folks, let's come back to reality on this.
Does anyone here think the US government is going to default on its obligations, with all the global economic fallout that would cause?
NO, alright, we don't think that. Show me one person on this thread who does. Christ, how many times to we have to repeat ourselves? The problem is not that the government will default on the bonds and refuse to pay old people. The problem is that the government will have no choice but to raise taxes significantly and consume an ever-increasing share of GDP to meet the promises it has made. That's a problem--a problem, moreover, which would exist if there were no trust fund, or if the trust fund were twice as large.
So can we please discuss that problem instead of these constant repeats of "the trust fund contains real bonds"?
Politically of course it means that the era of tax cut demagoguery is going to come to a screeching halt. No wonder the GOP is preaching panic and hysteria.
*yawn*. The only spending difference between Democrats and Republicans is that Republicans spend and don't tax, while Democrats tax and spend more. The only exception is if the Democrat in question walks in the door during an unexpected tax surplus from a bubble economy.
Come on folks, let's come back to reality on this.
Already there, please catch up. It works like this: if you have an obligation to pay pensions, and then you denominate those obligations in notes to yourself without explicitly isolating the money, it's an accounting fiction. It doesn't matter whether Enron does it, or whether the federal government does it.
Very few people (Ron Paul voters, maybe) will argue that the government will fail to repay the bonds. The fiscal position of the general fund, however, is identical regardless of whether the bonds existed or not. Either way, after 2018 plus or minus a couple, the general fund has to start contributing to the SS fund instead of the other way around, or else SS benefits have to be reduced.
To repeat myself from an earlier thread: It never ceases to amaze me how the words "trust fund" can invoke a rapid forty-point IQ degeneration in otherwise intelligent people. I mean, this weapon could have real uses, and yet our government wasted it on Social Security?
JonF wrote: "Which the government will have to repay no matter what."
No--the government owns these "bonds"--if its Social Security obligations were to vanish, there would be no reason to "pay" these. Who would get paid? The government itself.
Look--an debtor's obligation in the hands of the debtor is not an asset to the debtor. If I own a government bond--"backed up by the full faith and credit of the US government"--I have an asset because I can sell it and keep the money, end of story. When the government owns a government bond, which is the case with the Social Security trust fund, it can't sell it and keep the money without further obligation, because it must repay the principal, with interest.
This isn't hard, and it isn't a matter of political slant. It's fact. Having a "trust fund" full of its own bonds gives the government nothing that it wouldn't have if there were no trust fund.
JonF,
The problem is that people like yourself and Freddie think the trust fund is an asset from which the government can draw to pay a portion of future benefits. However, the obligation to pay is a liability of the government, not an asset. This is why claims that the problem will not manifest itself until the trust fund is depleted are nonsense- there are no assets in the trust fund, just notes detailing the liability. For the bonds to be an actual asset to the US government, they would have to be some other entity's liability- for example, if the surplus had been used to buy German government bonds.
Having a "trust fund" full of its own bonds gives the government nothing that it wouldn't have if there were no trust fund.
That is the key insight right there.
Ron said
The combination of demographics and time value of money guarantees postponing fixing the problem will make the problem worse.It would be a good idea to fix it before it does becomes a deep structural problem.
Obviously, we need to start sending the old to fight our wars.
Maybe McCain could campaign on that...
JonF says,
Before you get so adamant about the "have to" portion of your staement I suggest you review how well the US government honored all of those Indian treatys they also "had to" honor..
Because when it became inconvenient the "have to" portion of the US government's agreements with the Indians became "never mind", "not so much" and "screw you".
.
Facts that are well worth keeping in mind.
Joe Klein's conscience weighed in with one of the favorite strawman of social security reform opponents.
The link below explains why you would be far better off investing in the stock market instead of social security.
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Social security ripoff
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as Sean Corrigan rightly instructs in his essay:
"...As Mises, Hayek, et al. took great pains to explain, what this means is that the seemingly golden age — in reality, a thinly gilded one — during which the first, most favored issuers of cheap credit and artificially boosted equity prices enjoyed almost effortless success, has reached the limit of its ability to postpone the workings of fundamental economic law.
Even if financial capital once appeared so abundant as to provoke strange, Swiftian fantasies about the "saving glut" and the "asset shortage," real, physical capital was never called into being quite so readily, since its creation requires not the staccato keystroke of a fiat banker, but entrepreneurial vision, hard work, and genuine saving...."
"...Worse still, once the fever of the boom spreads from its initial promoters and their preferred clients to infect the populace at large, sobriety and forbearance tends to vanish in a kind of Gresham's Law of the spirit. A world awash with "liquidity" is not one where the steady flame of good husbandry can outshine the neon-lit promise of instant gain.
To recap, what then we find is that not only does the availability of financial capital become wholly divorced from the extent of the pool of physical capital goods; not only does much of that pool become misused (and, hence, ultimately, stripped of its original "capitalness"); but that the wellspring of capital maintenance and augmentation — namely, voluntary saving — is concreted over to provide a gaudy, Baroque fountain of greater exhaustive consumption."
http://www.mises.org/story/2898
Economic growth is attributable to two factors: labor force, and productivity.
No love for capital? And I assume by "productivity" you mean Total Factor Productivity, famously described as "the sum of our ignorance" (although I don't remember who actually coined that phrase).
A more accurate statement would be: "Economic growth is attributable to two factors: (1) inputs (labor and capital), and (2) everything else."
I'm not actually complaining, I'm just bored.
The problem is not that the government will default on the bonds and refuse to pay old people. The problem is that the government will have no choice but to raise taxes significantly and consume an ever-increasing share of GDP to meet the promises it has made. That's a problem
We've been over this ground many times before. Taxes were cut 7 year ago on the richest Americans. We couldn't afford those tax cuts, because we have upcoming entitlements obligations. We need to raise taxes. It would have been smarter NOT to cut taxes when the economy was in relatively good shape, but it's too late for that now. As soon as we get through the upcoming (or current) recession, we need to start raising the top marginal rate to keep the government solvent.
We are NOT, repeat not, going to pay for the wealthy's huge tax cuts of 2001 and 2003 by cutting retirement benefits for poorer Americans. We actually will need to make up for all the lost revenue from the past 7 years. That would require raising the top marginal rate well above its previous 39%. We ought to raise the top marginal rate in the US to 45% for 7 years to get our house in order. Then we can take another look at our finances and see whether the top rate can go back down to 39%.
brooksfoe,
If you want to get he US Government SOLVENT you would need to raise revenue somewhere in the neighborhood of $400 billion. In 2006, personal income tax was right at $1 trillion. In order to get solvent, you'll need to do much better than 45%, try closer to 70% since you'll need to double revenues from the top bracket to break even.
If you think 45% will "get our house in order," please explain to me what you mean other than solvency. Also, in your fantasy tax world, will be shift all of the rates back to their pre-Bush tax cut levels, you know because they were a mistake and the "economy was in relatively good shape."
Pre that last quote, can you show me a NYT, Wash Post, CNN or MSNBC article that said the "economy was in relatively good shape"? Because I seem to remember being told we were in the worst recovery every and Hooverville's were right around the corner, and that was during the '04 election!
If you want to get he US Government SOLVENT you would need to raise revenue somewhere in the neighborhood of $400 billion.
Says who? Deficits are bouncing around between about $120 billion and $3-400 billion. Looks to me like we need to raise more like $280 billion to get balanced. Okay, pulling out of Iraq saves $100 billion. A carbon tax will give us another $100 billion. Raise personal income taxes $80 billion and we're there.
This has been my Plan for America's Future, which I have just pulled out of my ass. Vote for me for the Asshat Party nomination! Thag you very buch.
Brooksfoe,
We know that if it weren't for the tax-cuts, every extra penny beyond what the government made would be put aside towards future liabilities. Because Congress is just like that.
Honestly now, do you doubt that any extra revenue will be sucked right into new entitlements, programs, empowerments and all the other great things the government does with our money?
The government is a bottomless pit, and it will spend itself (and us) into oblivion no matter what. The more they can shake out of us, the richer Congressmen, their friends and well-connected parties would become.
Good lord, people are still making the "do you think the government would default on those bonds?" argument? As Megan would say, I'm "stonkered!"
Hmm, let's try another way to point out the silliness of the "won't default" statement in isolation: The trust fund bonds are indeed a liability of the government. They are also an asset of that same government (the SSA). The U.S. will neither default on the liability nor fail to claim the asset. Once they are done with these two offsetting certainties, the government will still have to go about raising actual cash in the debt markets, via taxes or privatizing assets (highways, radio spectrum, etc) to honor the promise to SS and other entitlement recipients. Kapisch?
Last option, which will become more likely when the Medicare black hole becomes apparent, is they will revise benefits and reneg on 'promises' made for decades.
brooksfoe,
I don't know where to get any more current numbers, but the AP here says $400B is optimistic for FY 2009. Where do you get your $280B?
This has me interested, since I find that number extremely high. That number only makes sense if we pull out of Iraq AND Afghanistan, fire all of the soldiers, quit providing medical benefits to soldiers and stop any of our USAID programs in the Middle East, Africa and Asia. Can you show me where $100B comes back into the treasury by simply re-deploying troops back home?
Also, this assumes pulling out will have no long term consequences either security or economic, do you believe this?
Numbers again? Is this even a political winner in any environment before possibly 2009? And if so, phased in over how long? 5 years? 10 years?
That's still 20% above what the top brackets income tax are now, so I still don't see how 45% gets you there. Can you explain?
Finally, you still didn't answer my questions:
1) Should we undo the Bush tax cuts with respect to eliminating the 10% bracket and raising the 25, 28 and 33% tax brackets?
2) Can you show me anywhere that reported our economy being in "relatively good shape" from the time frame of the 2003 tax cuts?
Mindles H. Dreck observes,
"The U.S. will neither default on the liability nor fail to claim the asset. Once they are done with these two offsetting certainties, the government will still have to go about raising actual cash in the debt markets, via taxes or privatizing assets (highways, radio spectrum, etc) to honor the promise to SS and other entitlement recipients. Kapisch?"
Exactly. The argument for the "trust fund" is that the government has some 32 years' worth of assets to fall back on because it has a claim against itself for trillions. People capable of believing that this gives it wealth shouldn't be allowed to vote.
Smart Guy: Hey, you haven't saved for retirement! What's the deal?
Democrat Guy: Not true. Not true! I have, in fact, saved for retirement. See this under my matress? A check I wrote to myself for $1 million. When it's time to retire? I cash it. Problem solved.
SG: Um ... that doesn't solve anything. You still have to actually earn the million dollars to be able to cash the check, which you haven't done, nor contributed any assets toward, which was the problem to begin with.
DG: Whoa whoa whoa, time out! Are you saying that if a legal, valid check comes to my bank, that I'm going to somehow intervene and say, NO!!! NEVER! I *refuse* to pay you, as if I were some deadbeat?
SG: No, I'm not disputing your intent to honor checks you write, it's just that you won't be able to honor them because you'll have no assets with which to do so.
DG: Shut up! SHUT UP, you ****ing terrorist! You *hate* when people retire. You just want us to all go eat catfood and make room for your little sports car that you bought with the interest on your damn little private account. You want corporations to basically take over the middle class's lives!
SG: ??? Remind me why I toss you these pearls?
"Can you show me where $100B comes back into the treasury by simply re-deploying troops back home?"
The pentagon's projected burn rate is $6.8 billion per month excluding equipment costs. I think it's safe to say that $100B/year is not an unreasonable figure.
However, we will likely need to change SS/Medicare at some point. I think that an increase in retirement age is the most reasonable because how is 65 too old to be working anymore?
Huh? Maybe I'm missing something, but 6.8 * 12 ~ $84B. If that's paying salaries, running the VA and USAID, then explain how much of that we actually get back by simply re-locating the soldiers.
JonF -
No. The government can repay them, or it could default on them (your "banana republic scenario), but those aren't the only two options. Since the government is not only the debtor but also the creditor, it could, as the creditor, cancel the debt. Or it could (since its both the creditor and the debtor) arbitrarily decide that the trust fund and the associated debt where 10000 times larger (hey now the trust fund will never run out). It could change the rate of interest or the level of debt/fund to any point it wanted to. None of these changes would be meaningful in the real world because both the SSA and the rest of the government are part of one entity, the US government. Debt to yourself, is almost never a very meaningful concept, esp. when there either are no laws that keep you from canceling it, or you have the power to change the law (which the US government does).
BTW - I don't actually think the government will cancel the debt to itself, I'm just pointing out how the assertion that the government has to repay this debt to itself, or default on it, is false.
If you don't like the idea that "the debt isn't real debt" combined with "their is no trust fund", you can switch things around and say both exist but that they are equal and opposite and cancel each other out. The practical distinction between these two ways of looking at things is basically non-existent.
brooksfoe wrote: This has been my Plan for America's Future, which I have just pulled out of my ass. Vote for me for the Asshat Party nomination! Thag you very buch.
Signed, sealed, and committed, party brother! When do I get my membership pin? Can I have the one where a charicature of Nixon is mooning the electorate with his jowls?
Re: Debt to yourself, is almost never a very meaningful concept, esp. when there either are no laws that keep you from canceling it, or you have the power to change the law
This is not "debt to onesself". It is more like debt to a family member-- where the debt is a matter of public record and any default would show up on one's credit record, and probably result in a lawsuit as the stiffed relative demands to be paid. I don't know why this is so hard to understand, but any US government that renegued (sp?) on Social Security would instantly have the credit rating and financial reputation of a failed state, and would probably face the fate of a failed state's regime: it would not even be voted out of office by an outraged electiorate; most likley it would be deposed by force.
JonF:
"any US government that renegued (sp?) on Social Security would instantly have the credit rating and financial reputation of a failed state, and would probably face the fate of a failed state's regime: it would not even be voted out of office by an outraged electiorate; most likley it would be deposed by force."
Yes. Nobody disagrees with this. Several commenters have pointed this out already. The point is that this "trust fund" gives the government no assets that it can use to satisfy its promises, not that the government will renege. So why bring this up?
This is not "debt to onesself". It is more like debt to a family member
Actually, it's more like debt from Glenn Greenwald to Rick Ellensburg; the question of the government reneging on bonds held by the SSA only comes up at all if the SSA presents them for payment, which it will do only when directed to under laws set by... the government.
As one of those old retired guys (with a fully-indexed federal pension), I find it fascinating that you do not realize that the rules are made by 535 old guys in Washington, who only think about what it will take to KEEP them in Washington.
They will figure out what is necessary to keep the checks flowing to us old guys, because they have the same pension system. The SS system will probably be tweeked a bit more, to raise the retirement age (you young-uns are probably going to have to work till you are 75 to support me in the manner to which I have become accustomed), and increases in the future payments will be tweeked a bit down.
The old guys can change the rules however they want to, any time they want to, to keep the govt running, to keep the checks flowing, and to keep themselves in office. As a former gumint worker who saw it happening, I can assure you that it WILL continue. Politics is probably the third oldest profession, after prostitution and religion...
I disagree - Social Security is not broken, and I disagree with the lie in some of these Comments that too many beneficiaries are supported by too few workers.
Social Security is not broken. It can support the Baby Boomers. The cost of Social Security retirement payments isn't rising uncontrollably. On the other hand Medicare and Medicaid - health expenses for the elderly, disabled, and the poor/welfare loafers - are rising and do pose a serious present and future challenge. Social Security has nothing to do with rising health care costs. Don't combine or confuse those 2 issues.
The elderly earned their retirement benefits. And there are enough workers to "support" them. Actually the US has too many workers. We have unemployment that will continue to rise and we have waves of new workers continuing to come in through the Southwest US border states.