Forget Jumping the Shark? The WaPo is Doing the Tango with It
UPDATE: Jason Linkins at one of the non-Breast-Enhanced sites of the Huffington Post did a burlesque of which I can only dream on the same piece.
Via Chris Hayes’s Twitter feed (and he got it from David Sirota), the following is from “No more ‘me first’ mentality on entitlements“:
While it does not happen often, our political system is capable of making unpopular decisions that are in our collective best interest. In 2008, during the most severe financial crisis in 80 years, Republican and Democratic leaders in Washington came together to do something deeply unpopular: bail out the financial system via the Troubled Assets Relief Program. These leaders understood the consequence of inaction was economic devastation for Americans. Passing TARP was the right thing to do.
[B]ailing out the financial system went directly against our shared beliefs in free markets and fair play. While the vast majority of Americans did not cause the financial crisis, we all had to sacrifice to stop it. Such a cultural violation has angered people nationwide, which makes cutting entitlements more difficult because it will again betray our sense of fairness.
The challenge of entitlements is more difficult than the financial crisis: First, we must reach consensus to make cuts before the fiscal crisis is upon us….If we wait until the bond market shuns Treasurys, the economic consequences could be dire. Virtually overnight, we could have far less money to spend on priorities such as defense, education and research.
Cutting entitlement spending requires us to think beyond what is in our own immediate self-interest. But it also runs against our sense of fairness: We have, after all, paid for entitlements for earlier generations. Is it now fair to cut my benefits? No, it isn’t. But if we don’t focus on our collective good, all of us will suffer.
I’ve resequenced the above paragraphs a bit, but remained faithful to the argument as presented.
The author: Neel Kashkari, who is described as “a managing director of the investment management firm PIMCO, served as an assistant Treasury secretary during the George W. Bush administration. He led the Office of Financial Stability and ran the Troubled Assets Relief Program until May 2009.”
His sacrifices for the sake of TARP are well known; indeed, documented in the paragraph above. And, gosh, isn’t it nice that he pushes an argument that would make fixed-rate securities—you know, the thing PIMCO is famous for trading—more valuable?
It’s good to know that “Me First” needs to change, and nice to see the Post presenting a prime example of why.
I understand the public’s attitude that we paid for Social Security and Medicare, and we are entitled to it.
And, when Social Security was introduced, it was designed to be self sustaining, paid for from revenues earmarked for the program.
However, these revenues are taxes, and taxes are to be used for the general welfare. They cannot be designated for specific benefits.
Thus, the public is no more entiltled to Social Security and Medicare than we are to defense or education. According to the House Ways and Means Committee, 2003 “Along with many other forms of revenues, the FICA and SECA taxes become part of the Government’s operating cash pool, or what is commonly referred to as the U.S. Treasury. In effect, once these taxes are received they become indistinguishable from other moneys the government takes in.”
And, what about the excess moneys, the trust funds?
“The trust funds themselves do not hold money. Building up federal securities in federal trust funds is not a way for the Government to accumulate assets. The trust funds only provide authority for the Treasury to use (out of general funds), whatever momey it has on hand to pay benefits.”
Go to: http://waysandmeans.house.gov/media /pdf/greenbook2003/Section1.pdf.
WaPo :”While the vast majority of Americans did not cause the financial crisis, we all had to sacrifice to stop it. Such a cultural violation has angered people nationwide, which makes cutting entitlements more difficult because it will again betray our sense of fairness.”
Well, first, we all did not have to sacrifice. The gov’t had to pay for it, that’s all. But that is not the main issue here.
As for cutting entitlements, yes, that is difficult. But the corporations will just have to do their part by giving up their subsidies. (Those were the entitlements you had in mind, right? ;))
Don calling Social Security FICA ‘taxes’ rather than ‘premiums’ is just an exercise in semantics, the government has all kinds of insurance programs from GI Life to FDIC where premiums are practically and legally separated out from the General Fund. Pretending that SS Trust Funds are existentially different from funds available to the Fed Pension Guarantee Board or the FDIC is just an exercise in special pleading. (Though good to know those barriers to your posting comments at AB have been cleared up)
The contributuons are taxes, not premiums.
I’ll take the Supreme Court’s word over your opinion.
U.S. Supreme Ct.
Flemming v Nestor, 363 U.S. 603 (1960)
“Each worker’s benefits, though flowing from the contributions he made to the national economy while actively employed, are not dependent on the degree tro which he was called upon to support the system by taxation. It is apparent that the noncontractual interest of am employee covered by the Act cannot be soundly analogized to that of the holder of an annuity, whose right to benefits is bottomed on his contractual preemium payments.
Go to: http://caselaw.lp.findlaw.com/scripts/printer_friendly.pl?page=us/363/603.html.
this is sophistry. the Social Security tax is a dedicated tax. it can’t be used for any purpose but paying benefits and costs of administration (less than 1% of benefits). The “surplus” is lent to the government and Social Security receives a ‘bond,” which is payable on demand.
As it happens all of the money in the Trust Fund could be taken away on a flying saucer and it would have no important effect on Social Security. SS would just return to full pay as you go. With either a small benefit cut, or an tiny, tax raise.
The story you are telling is part of the Big LIe. This does not mean that you have said any single sentence that is contrary to fact. But it does mean that the aggragate of sentences is designed to mislead people into standing by and watching your friends steal their money. And worse, steal their right to save for their own retirement in a system that protects them from inflation and market losses, but does NOT rely on ANY funds from anyone put the worker/insuree/retiree themselves.
what you are doing is proposing stealing the money under color of law. it’s been done before. but it’s not Bruce’s “opinion” that this is wrong. it’s a fact. as sure as any other fact under the sun.
i don’t know what the court was thinking, probaby not what you think. but they sure went to a hell of a lot of trouble to firewall the Trust Fund if it was all the same pot of money.
What sources can you prove this fact?
I have many others, primarily from government agencies, that confirm this Supreme Court opinion.
If you cite your opinion, it would be beneficial to back it up with a good third party fact.
don pt 2
the trust fund is not a way for the government to accumulate assets. it is a way for Social Security to hold a reserve against hard times. (pace Bruce. short hand for all the things the Trust Fund is and does that you know about that don’t matter in this context.)
it is a debt OF the government TO social security. it would help if you knew what you were talking about.
can you explain to me your purpose here? why are you saying what you are saying. what are you trying to accomplish?
I am reasonably sure the Supreme Court opinion that you cite doesn’t mean what you imply. Of course the Congress can alter Social Security. that’s the whole point. we are here trying to stop Congress from altering it in a way that would harm the people who rely on it as the only way they have to save their own money for their own retirement safe from inflation, market losses, and other evils cash is heir to. I think, but don’t know, that the decision you cite was made in response to some citizen attempt to claim ownership of “his” money and “get it back” outside of the way social security is designed to work. but i don’t know that.
as for backing up my opinion, i guess i’d have to ask you what “fact” it is you want me to cite a third party reference to. there is a large body of work about Social Security. you’d about have to read it all to understand what it means. citing an out of context “fact” doesn’t prove a damn thing except to idiots who need another jingle to say over and over to themselves.
again, what is it you are trying to accomplish here? my reading of your last comment leaves me thinking you don’t know anything about what you are talking about. you picked up a citation from some lie factory and think it means what they told you it means, and you have never thought for ten seconds about anything in your life.
i need to thank you for providing the citation.
i suggest anyone who is interested read the whole decision. it does not mean what levit and his minders think it means.
The case also says:
Section 202 (n) of the Social Security Act, as amended, provides for the termination of old-age benefits payable to an alien who, after the date of its enactment (September 1, 1954), is deported under 241 (a) of the Immigration and Nationality Act on any one of certain grounds specified in 202 (n). Appellee, an alien who had become eligible for old-age benefits in 1955, was deported in 1956, pursuant to 241 (a) of the Immigration and Nationality Act, for having been a member of the Communist Party from 1933 to 1939. Since this was one of the grounds specified in 202 (n), his old-age benefits were terminated shortly thereafter. He commenced this action in a single-judge District Court, under 205 (g) of the Social Security Act, to secure judicial review of that administrative decision. The District Court held that 202 (n) deprived appellee of an accrued property right and, therefore, violated the Due Process Clause of the Fifth Amendment
I could ask two lawyers to glance at the ruling…it looks pretty narrow to me. Also, the usual Supreme Court case cited by some readers establishes that people paying into SS are not guaranteed particular levels of benefits…another narrow ruling.
As a practical matter the record for pensions and annuities in the aggregate is and will be quite spotty.
t is a way for Social Security to hold a reserve against hard times.”
Wow you are even dumber than I thought. I think I could teach a first-grader how social security will sometimes collect more cash than it pays out and sometimes will payout more cash than it collects. If you do not accumulate assets in times when you collect more than you payout, then the time will come when you are unable to payout more cash than you collect. It has nothing to do with “hard times”, unless you define “hard times” as a demographic composition such that S.S. outlays exceed S.S. receipts.
The reason the assets are held in government debt securities is because the excess cash collected was spent.
For S.S. to completely work, either someone in the private sector will have to be willing to buy the debt securities from the S.S. Trust Fund, or the government is going to have to raise taxes to pay the principal in cash. Giving senior citizen’s Shwarzenager IOUs instead of cash will lead to lots of old people with pitchforks marching on Washington.
The U.S. government is not compelled by any law to pay out S.S. benefits. That is why the U.S. government technically is not in violation of GAAP for not accounting for S.S. like a pension fund.
Hayek is rolling over in his grave. I meant to say “The U.S. government is not compelled by any legistlation to pay out S.S. benefits.”.
Of course the two words mean the same thing to most people here. The potential for social unrest is sufficient to say the the U.S. government is compelled by law to pay out S.S. benefits.
no. you are the dumb one here. it is generaly impossible to qualify every statement intended to make a point with all of the other details not relevant to the point. i alluded to that in a parenthetical to Bruce who I knew would object to my simplification. What I did not anticipate was that an ignoramus like you would jump on it. i would define, for the purposes of my lesson to Don, “hard times” to be anything from simple monthly fluctuations in intake/outgo, to recessions like today, to the retirement of the baby boom. Meanwhile I’d have to ask you what is the substance of your objection. You have called me dumber than you thought for what purpose? what is your point?
Excess cash held in reserve is always “held in securities” so the “money” can be lent and spent. unless you are either very small or very dumb.
SS could work fine if the trust fund were burned. but meanwhile the only danger to the trust fund is that the congress will moot it if they can convince enough idiots like you that it has “already been spent.”
I was getting all set to point that out. How a subsequent court would hold is anybody’s guess. Depends on what the medium with the crystal ball tells Roberts was the Founders Original Intent.
The fact is that the Congress makes the law, and Congress can change the law. The issue is that we need to inform people what Social Security is and does and can do for them, as the law is currently written.
The purpose of Jay and Don is to obscure the Truth.
You have two people who appear to have tiny little minds repeating the distortions thought up in think tanks by the real Liars, who are not dumb. They can take any sentence and argue that it disproves the whole weight of 75 years of what Social Security has been for the people. And can continue to be, if the Liars don’t fool them into letting the Congress change the law.
Think of the “social contract”.
Maybe that is too Enlightenment” or Thomas Jefferson. Won’t be in Texas texts next year.
Here it is: I paid SS taxes since 1966.
In 1983 the rates went up b/c I am in a large cohort which is retiring in the ‘ought teens’, and needs to build up “reserves”. I have a contract. I don’t care if the neoCONs’ [for neoCON propaganda] master pissed it away on phony wars and plundering the US economy!
Mess with the SS contract and I no longer care for the broader “social contract”.
That may be moral thinking rather than neoCON [propaganda] pandering to the owners’ thinking.
But I have an expectation that I see if broken ends a lot of deals.
So drag out a wild statement about some supreme pandering court decision and make me think I should leave my gun in the closet.
Social contract Not!
Don and coberly – you guys are talking past each other.
Ignoring ilsm’s bluster, you are correct that Congress can change the rules for SS on a whim. Congress can pass legislation to eliminate SS, erase the trust fund, and go about its merry way. It could double the payroll tax or halve it. Change any of the rules to get it – like it already did with the age requirment. And your also correct that the many Supreme Court cases have all ruled that SS is not something you ‘own’ like a bank account. Its insurance, with very specific pay-out provisions, but if you die at age 64, your estate gets nothing. Just like I get no refund from the insurance company if my house doesn’t burn down this year. In this case the insurance company is the Feds.
Coberly’s point is he wants to stop Congress from changing the rules on SS. Except for very small payroll tax increase to make the books balance better. He beleives your points, though accurate, help people to gut the “social contract” between generations that SS represents and make it easier for the Democratic Congress to gut SS.
Don is correct that the coming (existing?) point that SS will start to cash in the trust fund T-Bills(the same as if China or Merryl Lynch cashed theirs). This will cause the general fund to either raise taxes to cover those T-bills or increase the deficit. What you and I (I think) oppose is Don’s making this two-step process into one-step. This tends to place the blame on SS and not the general fund which is where the real problem lies. SS is actuarily sound and will get the money its owed. But it will cause the general fund, which has been using the SS trust fund to mask the deficit, to have to find money to pay out those IOUs.
coberly I beleive Don is pointing out there is really nothing that legally holds Congress from changing the rules at a whim – and he is right – if Congress beleives it needs the SS revenue stream for some other purpose (or at least to avoid SS needing to cash in T-bills causing a negative revenue stream from the general fund.)
Note that all of this is happening with a Democrat controlled legislation and President. A Nixon goes to China moment for Obama? Only a Dem can gut FDR’s signature legislation?
If McCaine had won we would not even be having this conversation…
Islam will change
The US Govt is NEVER “ unable to payout more cash than you collect.”
you are right. and i appreciate the sanity. but i don’t think don is as honest as you give him credit for. he is taking the fact that Congress CAN change the law as reason to say Congress SHOULD change the law. or that the last 75 years of Social Security has all been smoke and mirrors. You see the Law Congress passed has been used AS IF Social Security were an insurance policy for workers paid for by the workers, and the only reason they have done this is to lure the poor unsuspecting innocent Amurricans into a SOCIALIST TRAP.
Fortunately the SAME congress that set up this trap can be counted on to change the law today and cut Social Security below the point where it allows people to guarantee their ability to retire at a decent age. This will restore their virtue as they manfully work for reduced wages until they no longer have enough juice for “the economy” to suck out of them.
I’m still in the “don’t fix something that isn’t broke” category. Congress and Obama have more pressing fish to fry than SS problems. 9-10% U3 for one thing.
And I still can’t wrap my head around the idea that a Dem Congress and a Dem President are after FDR’s signature legislation. Bush Jr got whacked hard for even bringing it up and I couldn’t imagine MCCaine even bothering given that history. Yet here we are with Obama’s handpicked committee leading the charge. Maybe we find out where the entrance to he!! is by finding out where its really cold this summer? Something must be freezing over…and its hot down here in Texas…
Islam will change
I am not against Social Security. I know that for over half of our seniors, Social Security provides over half of their income.
We need to save Social Security, but we cannot do so by the adjustments we made in 1983.
People focus too much on the trust fund’s balance, and when it will expire.
The key statistic, if there is one, is when outgo exceeds income, excluding interrest. That happened this year, and the deficit was made up by borrowing from the public, public debt. This is when intragovernmental debt ( the government borrowing from itself, the Treasury borrowing from the trust fund,), turns into public debt.
And, public debt is what concerns economists more than intragovernmental debt.
Intragovernmental debt has no effect on the present economy. Even the interest paid to the trust fund is not a cash expense, but is done by issuing more Treasury securities.
A few excerpts and links, to back my points:
From a paper entitled “Social Security and the Federal Budget: The Necessity of Maintaining a Comprehensive Long-Range Perspective:”Social Security is a federal program, and all of its taxes are received by and its outlays dispensed from the U.S.Treasury.
While the accounting for such federal programs is distinct, their cash flow is not segregated.
Go to: http://www.cbo.gov/ftpdocs/36xx/doc3650/No3August.pdf.
When the Treasury borrows the surplus from the trust funds, it creates a liability for the Treasury and an asset for the trust fund. This is because the Treasury dollars borrowed are spent on current programs. The asset portion remains in the trust fund until it is spent. Thus, in governmental accounting, it is a wash.
That is why the trust funds don’t represent the government’s future ability to pay benefits, for every asset dollar in the trust fund is offset by a liability dollar of the Treasury.
The liability represents intragovernmental debt, but “transforms” into public debt, once outgo exceeds income, excluding interest, which happened this year.
Why do I saw we place too much emphasis on the balance of the trust fund?
Because the trust fund is merely an accouynting device – it represents an asset, but it has an offsetting liability in the Treasury’s general fund.. Thus, it is merely numbers.
From a paper entitled “Social Security and Medicare Trust Funds and the Federal Budget”
“These interest credits increase trust fund income exactly as much as they increase credits in the Treasury’s general fund. So, from the standpoint of the federal government as a wjhole, these interest credits are a wash.”
The Treasury’s general fund has the obligation of repaying the principal of the loans with interest when trust fund income falls below expenses.”
i am having the same problem with O bama,
maybe you are just wrong and not of evil intent. but
the borrowing by the government from the public to repay what it has borrowed from Social Security is a mere detail of accounting. the fact is that the government owes the money to Social Security, and Social Security is the people who paid their “taxes” and expect their benefits.
i don’t want to argue the law, or what economists say, i just want you to acknowledge the “fact” of what social security IS. if you lend money to someone, and he comes back with his lawyer and proves that “technically” he doesn’t owe you the money, are you just going to meekly accept that?
what is even more important, are you going to let him use his “argument” as an excuse for not letting you save your own money in the future for your own retirement [and the metaphor is shaky here, so just try to go with the real situation] in a system you and your neighbors set up that would insure your savings agaist inflation? because he wants you to put your money in his freind’s “bank” where you don’t have any legal claim to being repaid whatsoever?
The issue is not “the present economy.” The issue is that the people created a system to protect their savings, and you are arguing a [incorrect] interpretation of the legal and economic “facts” as a justification for taking away the people’s savings and their right to save in such a system.
Of course the Trust Fund does not represent an asset to the government. It is a liability. But the problem is not Social Security. Social Security did not borrow the money. The government borrowed it FROM Social Security. If it had not borrowed it from Social Security it would have bottowed it from somewhere else.
You are completely confused about the trust fund because in your head you are already calling it the government’s money. It doesn’t matter that the government has to tax or borrow from somewhere else to pay back the money it borrowed from Social Security. That is simple honesty.
So I have to say again
just what the hell is your point? why are you telling us this?
i think you are confused, but assume you are right, WHY does it matter?
And you just made coberly and my point. The problem is with the general fund, NOT SS. So if you want to solve the general fund problem (of which outlays to cover SS shortfalls – i.e. redeem the Trust Fund T-Bills with interest – are a MINOR issue) you either raise general fund taxes or create more debt. Since there seems to be no stomach in Congress to raising taxes this will just increase the national debt as Obama has proposed all along for every year of his presidency.
I will repeat, the problem is with the general fund NOT SS. Tackling the general fund problem though is very difficult for congress to do since they really hate picking losers…
And letting the Bush tax cuts continue with/without the cuts on the rich surviving will not help this picture at all. And if only the rich cuts expire we are talking noise-level changes.
By putting SS changes on the table the Obama administration is trying to grasp any possible revenue stream they can without raising taxes or cutting programs. I would not have a problem with this, IF they acknowledged upfront that SS was not ‘in crises’ or needing to be fixed. What needs to be fixed is the general fund.
BUt I expect this entire issue to just go away with the report not coming in until after the elections. Its DOA.
Islam will change
I beleive he’s right. But you focus on why, I think I can anwser the ‘why’. This is exactly how the Congressmen see SS. As just another revenue stream to the general fund, but with some accounting gimmicks.
They see payroll taxes roll in, pay out the SS benefits, the general fund spends the remaining whereever, and then put some T-bills in an SS Trust fund so the books balance (for SS). Now we see that there is no extra and the equation looks different. The payroll taxes roll in, benefits go out, but now there is a shortfall that the general fund PAYS to vs. spends. So now grannies food money is a net drain on the Governments balance sheet vs. a net plus that it was earlier. What Don points out that this is how, legally, SS is seen. That is the point of his quote here:
“The Treasury’s general fund has the obligation of repaying the principal of the loans with interest when trust fund income falls below expenses.”
The bigger point is simple. Congress sees SS as just another revenue stream. Add to the fact that the Feds can change the rules at anytime, well only under Obama, and you are where we are….
BTW, in your analogy the Fed doesn’t come back with a lawyer, he comes back with guys armed with guns AND the lawyer.
Islam will change
I agree with everyone that the problem is not with Social Security. If the payroll taxes had been transferred to the trust funds directly instead of the Treasury’s general fund, if the trust funds were not loaned to the Treasury’s general fund, and if the interest accrued stayed in the trust fund, we would be in great shape.
The problem is with how Congress has abused the Social Security program.
But, the fact remains here we are; trust fund surpluses have lowered the size of the budget deficit, so there is a direct relation between the trust fund and the amount of public debt.
If intragovernmental debt was not utilized (the Treasury borrowing from the Social Security trust fund), then presumably public debt would have increased.
Now, we are at a point in which some of the trust funds outgo exceed their income, and intragovernmental debt is slowly, but methodically becoming public debt.
If we make internal adjustments to lengthen the “solvency” of the trust funds, without changing Congress’ ability to borrow from the trust funds, the problem will continue and worsen.
Basically, the government has 2 perspectives that define these transactions: The Trust Fund Perspective and the Budget perspective.
From a paper entitled “Social Security and Medicare Trust Funds and the Federal Budget:
Page 13 “From the Trust Fund Perspective, SMI (Parts B and D of Medicare) is always fully funded. From the Budget Perspective, SMI draws huge transfers (because 75% of the expenses are paid from general revenues , which is a current budget expense).
Page 17 “Net results for Budget Perspective – Revenues from public less expenses to puiblic.
Net results for Trust Fund Perspective – Revenues from public less expenses to public plus general fund transfers plus trust fund assets.”Go to: http://www.treas.gov/offices/economic-policy/reports/budget_trust_fund_perspectives_2009.pdf.
It’s nice that “sacrifice” and his self-interest dove-tailed so nicely. “Me first for me, not for thee…”
i agree that that’s the way Congress wants to see it. But another Congress went to a lot of trouble to create Social Security separate from general revenues. They wouldn’t bother with those “phony iou’s” if they didn’t mean that the congress has an obligation to repay the money they borrowed from Social Security. The argument that they don’t would be a little like your father borrowing money from you, when you were a kid, and then telling you he didn’t have to pay it back because “we are all the same family.”
OF course if congress steals granny’s savings, then paying for her groceries would be a net drain on their balance sheet. Right across from the item in the income column: “stole granny’s money by promising to keep it safe for her retirement.”
the money is “in” the Trust Fund. That’s what the bonds are. You seem to think that the money collected in surplus to what is needed can just be kept in a locked box. Money does not work that way.
is continuing to mush in his head the distinction between money collected for Social Security and money collected for general government. This confusion is aided by the “unitary budget” accounting. But that accounting has explicitly, by law, been distinguished from the actual money owed TO Social Security.
You can’t get very far by assuming a false premise to start with.
I would like to believe Don is trying to be honest, but I would have to know what his POINT is. Why is he telling us this? I have graded too many papers in my life not to recognize confused thinking when I see it. But back in the days no one had any reason to present confused thinking on purpose, and Don is presenting the confused thinking straight out of Petersons playbook.
They are bonds, but they are not paid for bonds, accrued from previous contributiuons.
Money to honor these bonds must come from new money – taxes, spending cuts, or borrowing from the public.
The old money was spent throughout the years on other governmental expenses.
That’s why the amounts in the trust funds are bookkeeping entries, rather than assets as we know them.
An asset, like a bond could be liquidated for old cash, cash that has accrued over the years.
These bonds can only be liquidated for new cash.
your distinction between old and new cash is wrong to the point of financial illiteracy.
try to think of the United States of America as a going concern. It has an income stream. They are called taxes. And in theory people pay them because they think they get something from having a government that is worth their money. At times they prefer to borrow the money now as opposed to raising taxes now. There are a number of reasons they might do this. But the usual one is that they expect to be in a better position to pay back the borrowed money later than they are to pay the desired government expenses out of taxes “now.” They borrow the money from people who have money to lend, “rich folks,” ordinary folks who give their grandkids “savings bonds,” foreign governments, and Social Security which needs a place to park excess cash to meet mothly variations in cash flow, or periodic recessions, or the occasional baby boom. In all those cases the people expect to have to pay back the money they borrowed.
Peterson and gang and all the silly people they can persuade are convinced that the Social Security money is no different from income taxes, ignoring the elaborate lengths the Congress went to to make sure they were kept separate. Somehow in this case “borrowing” means “hitting up the old folks cause we don’t have to pay them back.” This is dishonest. And, for now, it is in fact against the law.
And yes, paying it back does have to come from new money. Just like when you borrow from the bank you have to go out and earn some new money to pay it back.
Social Security interest on its trust fund is NOT money that accrues to the government. It is money that accrues to Social Security, a legally distinct entity.
The “bookkeeping entries” that keep track of the Trust Fund are notations that the Trust Fund is holding assets called government bonds. As long as you think that Social Security is no different from “the government” you will keep making this mistake.
You are trying to get something for nothing. It’s one thing if you are a Peterson telling this lie to fool the people. It is quite pathetic if you are one of the people fooled.
seems to think that interest on “old money” comes from leaving it in a dark place where it can have babies.
or he has got “government bond” backwards. he seems to think the government bought the bonds… that is lent the money to some other enterprise which is going to pay the government interest.
no, don, the government SOLD the bonds for money that it uses for its expenses, and has to pay back, with interest.
somehow discovering that you have to pay back what you borrowed is not usually considered a reason to cancel the debt.. unless you are the Mafia.
do you really think The United States of America is too poor to pay back the money it borrowed from people?
well, give your friends another couple of years of tax cuts and deregulation and you could be right, but it won’t be the fault of Social Security.
Coberly is being too nice. This discussion regarding the sanctity of Social Security funds has been had over again and then some more. To be succinct, you’re an ass.
Social Security deductions, that’s FICA (Federal Insurance Contribution Act) is legislatively ear marked to pay on going benefits and the original legisaltion was modified to provide for the Trust Fund as a supplement to those Insurance Contributions. What part of legislation do you not understand? What part of agreement with the people do you not understand? Should the Treasury Dept decide tomorrow that your T-Bills are just so many IOUs and that the inteterst and principal payments are a drag on the budget and that should they be considered null and void? As noted above, you’re an ass. It’s that straight forward. If you’re a professional economist, you are a well educated ass, but still an ass.
How does one justify reneging on a long standing contract? A contract sanctified by specific legislation ratified by the Congress and in place for nearly eight decades and at least three generation of workers. We’re not talking about road repairs, nor even the quality of the air we breath. We’re talking about an entire work forces’ deferred compensation accumulated by they’re having given up a part of their income throughout their working lives. Coberly, now you can better understand the frustration of the Jacobins when faced with the avaricious greed of the elite classes. Trillions for wars of adventure. Billions for a financial industry gone wild. And the work force is asked to give it up. That’s worse than a bad joke.
You inadvertantly I beleive just pointed out the issue here. Don’s points not withstanding. They are:
“Social Security interest on its trust fund is NOT money that accrues to the government. It is money that accrues to Social Security, a legally distinct entity.”
SS may be a legally distinct entity but it IS part of the government. This is a big part of the issue. The guys (Congress and President) who control the general fund also run SS. They are on both sides of the transaction with the ability to change the rules at will. They have before and I’m sure will do so again.
This goes back to my point about Congress not wanting to pay back the Trust Fund. While SS was running surpluses everything was fine and dandy. The extra cash flowed into the general fund and helped lower the deficit. Now that Congress has to cough up money TO SS we suddenly find a ‘crises’ in SS. That’s the crux. The crises is the general fund. And Don is correct in pointing out that they only way to pay that is more national debt or raising taxes. What Don misses is that the money going from the general fund to SS is basically chump change.
Which brings us to you next point:
“…do you really think The United States of America is too poor to pay back the money it borrowed from people?”
Obama and the Dems, under their own optimistic numbers, plan to run deficits larger than any Bush Jr ever saw out as far as they project. We are not there yet, but you can find blogs recommended/linked to by AB who would answer that question with a ‘yes’. I think the answer is still a ‘no’ and will be even after we go into the second dip of this recession.
The argument still stands, that SS is fiscally sound and that the people worried about the deficit and government spending need to go look at the general fund. When that’s fixed then we can talk about some minor adjustments to SS. Keep the focus on the target.
Lastly two minor points. 1) Current Congresses cannot be constrained by past Congresses. The fact that 70 years ago SS was carefully set-up seperately from the general fund has no relevancy on todays congress. The Dems can fold it all into the general fund tomorrow and you would have no legal recourse to stop them. 2) “your friends” are the Democrat Congress and President Obama – never forget that. No Rep in the country has the remotest ability to gut SS. Only the Dems.
Islam will change
Y’all–Congress can certainly abolish the SS program, enlarge or change it in any regard. No question. Now, suppose that the government wants to default on its TF treasuries. They can just say, hey, folks, we don’t have the money to satisfy this obligation because we have to pay for it from general revenues. That’s income taxes, folks. We don’t want to raise income taxes Because.
We should raise income taxes on upper tier incomes, but we don’t want to make those folks mad. So, we’re gonna stick it, ummmm noooo. Ummmm. OK! We need to lower your SS benefits by say 15 or 20% depending on your earnings level so that rich people won’t have to pay taxes and we won’t have to print any more money! And this is for your own good because we all have to sacrifice to pay the Debt Thing. Ok, now move along folks, there’s nothing to see here!
One of the main things that the Tea Persons have against the federal government is that it cheats them, steals from them and lies about it. So, I suppose those people and everyone else are just gonna sit there and say, Oh, now that I understand it’s bad to raise taxes on upper income people and good to reduce our retirement benefits, I’ll just agree to my future impoverishment because my sacrifice is for the Good of the Country.
People in this country sometimes take too many dumb pills and believe that they can buy a 4K square foot house for pennies a month. (Lots of pennies, it turns out, but with an innovative financial product, who’s counting?) But, nobody can be dumb enough to believe this stuff.
The people pitching this shinola don’t believe it; many people here don’t believe it; and the Tea Person’s sure as the wind blows, and the grass grows and sun shines don’t believe it. In sum: What’s good for Peter G. Peterson ain’t Good for the USA. Nancy Ortiz
Hmm, I’d say that self interest and me first is better defined as the wealthiest Americans enjoying a decade of Bush tax cuts. Self interest and me first is analogous to untaxed inherited income. Self interest and me first is exemplified by the executive corps of our biggest companies lining up for multi-million dollar compensation pkgs. There are many examples of self interest and me first in the many forms of corporate welfare that is enjoyed by a small sector of the economy. But some how in some minds, small minds I’d suggest, it is only the deferred compensation, the basic retirement of the work force that is here presented as an example of me first and self interest.
And Don that is a pretty interesting way to describe what has been done with the FICA paid into Social Security all these years. You make it seem to be just a supplement to the general budget with no intention of using the funds for their legislated purpose. There is no legal “unified budget.” By law Social Security funds are to be accounted independently of the general budget. For “ease of public understanding” and for ease of public obfuscation, the two budgets are unified and the funds blended as though one was intended to cover the losses of the other.
Social Security is not a separate part of the Government.
This is why it can loan trust fund surpluses to the Treasury, for it is one government department loaning to another government department.
This is why it is known as intragovernmental debt, not public debt.
Public debt is loans to outside entities.
The Treasury and the trust fund are 2 internal entities, like a husband and a wife.
And, the trust fund is merely an accounting device.
It holds no cash, and is not a way to fund future benefits.
I can provide good government citations for all these statements, some of which i have already provided.
As I explained before, the cash goes into the Treasury; the trust funds get bookkeeping credits, not cash.
The cash can’t be both in the Treasury and the trust funds.
And, as i noted before, FICA contributions are taxes, and go into the Treasury like all other revenue collections, to be used for whatever purpose arises.
One more Supreme Court case:
Carmichael v. Southern Coal & Coke Company
“The taxation of employees not a prerequisite to the enjoyment of Social Security benefits. We find nothing in the language of the statute or its application to suggest that the tax on employees is so essential to the operation of the statute.
But if the tax be good, and the purpose specified be one whixh would sustain a subsequuent and separate appropriation from the General Funds of the Treasury, neither is made invalid by being bound to the other in the same act of legislation.
A tax is not an assessment of benefits. It is a means of distributing the burden of the cost of government.”
So are deposits in my bank…they don’t keep it in the vault.
Your still talking past each other. And from what I can tell your all correct. Just talking about different parts of the SS issue.
Nancy hit the bottom line:
“Y’all–Congress can certainly abolish the SS program, enlarge or change it in any regard. No question.”
If that is smart or bad or whatever (I think bad) is not teh question. The question here is simple. Will a Democratic Congress and a Democratic President gut FDR’s signature program?
Peterson and the committee are just a smoke screen. In the end Obama will have to sign the legislation if it makes it to his desk. Do you really think he will?
Islam will change
I can well understand the Jacobins. most of the time i feel that way myself. but i need to tell liberals that if they go around talking like that they will scare the very people whose help they need in fighting the real enemy.
the court finds that the congress did not violate the constitution by writing a law that took SS benefits away from a person deported for being a memeber ot the communist party. the court went so far as to say it was not commenting on the fairness of the law, but merely the power of congress to write such a law.
we are under no illusions that congress can change the law. we are arguing here against congress changing the law. as currently written Social Security acts as insurance, with each persons contribution forming the basis of his benefit. Social Security funds are not mixed with general funds. The general fund has formally borrowed money from Social Security. That is a very different thing.
you are mostly right. but i need to point out that “past Congress” wrote the law it did. present congress is bound by past congress to the extent it has to change the law if it wants the law to be different than it is.
you are simply wrong. let us leave it at that. your citations would no doubt agree with you. but you are not understanding the point here.
“The purpose of Jay and Don is to obscure the Truth”
Coberly: Keep spreading the Good News that some man in the sky told you whil you were tripping on acid last Friday night.
The U.S. government is an institution just like GE. Either GE should be able to account for its pension fund like S.S. or S.S. should have to run its accounting like GE. Something about equal protection under the law, something you have proven time and time again you do not believe in.
Buff puts the issue clearly. To change or abolish the SS program as it presently exists is a revolutionary act. It is nothing less than a repudiation of everything the New Deal meant and accomplished. It doesn’t really matter what all the court cases have said about the nature of the government’s obligation to pay SS or other federal program benefits. Most of the cases contain a large amount of dictum and not a lot of real, substantive black-letter law.
Rdan is right that the case Mr. Levitt cited is a very narrow ruling on substantive due process issues. SS is the subject but the holding is that the guy got his benefits terminated because he was a Commie. Perfectly legal, you know. The judge can maunder on forever, but no checks is no checks and that’s all she wrote.
Whether you call FICA a tax, a contribution or a donation to a worthy cause doesn’t matter. What matters is how much people now paying taxes in to SS are going to get when they retire. And that is a matter of law. Coberly and I among many others oppose changing the benefit formula as it now exists. One way or another, any changes to SS will be made as a result of a political decision, not economic necessity. I don’t know if this President would sign such a bill. The fact that I don’t know is very troubling to me. Social contracts are very real things. SS has existed for 75 years. It has done nothing but good things for the people of this country. To change it now is monumentally stupid.
Will they do it? Sure as hell hope not. Nancy Ortiz
that is something you prove you don’t understand every time you open your mouth.
I hate to tell you this, but General Electric is not a sovereign nation.
One more thing. This administration has smart people in the Fed, Treasury and the WH. They are overthinking the Debt and deficit issues. All they have to do is the right thing. They have no real hope of reducing the annual deficits significant any time in the near future. Fuhgeddaboudit. But they can do good things to rebuild the economy while leaving SS alone for the time being. Why not do the right thing? I’d like to hear their answer. My answer is 2012. Not the third rail of politics? Oh, yeah? NO
Maybe we are being too hard on Kash-nn-kari. After all he admits it would be unfair to cut social security.
now we just need to get him to explain why not cutting it would be such a disaster.
it looks to me like a tax raise of less than 1% would pay back the trust fund over the next 26 years or so. That should not break the economy, or even anyone’s heart.
and we already know that if the payroll tax is raised about one half a tenth of a percent (combined) per year over this same time it will take care of the infinite future of Social Security. So what, exactly, is the problem?
It’s a good thing then that I am not a liberal, what ever the devil that may be. I think of it as a made up term, made up by the reactionary sector of our political class. It’s a label with derogatory value. A liberal makes excuses for the inexcusable behavior of the leaders of the political class and the sycophants that fill the media and grovel at the feet of the political and economic elites. I’ll accept being labeled a populist. Progressive won’t do given that I hardly expect our political/economic system to make any progress toward improving the lives of the populace.
The problem does not lie with the trust fund. Extending it to perpetuity would be great, but the real problem lies in the non Social Security (and Medicare ) part of the buudget.
According to a Treasury Department Brief entitled “Issue Brief No. 4 Social Security Reform: Mechanics for Achieving True Pre-Funding:”
“The present Social Security system has its surpluses accumulate in the trust fund. These surpluses increase the government’s capacity to pay future benefits, only if they result in smaller amounts of public debt issuance that would occur if there were no surpluses. This is because reducing near-term debt increases the government’s capacity to issue future debt to pay benefits when the trust fund bonds are redeemed.
In order for Social Security surpluses to be saved, taxes and spending in the non Social Security portion of the budget must be set recognizing that special-issue government bonds held by the trust fund are liabilities that are every bit as real and inportant as debt held by the public. Only when the trust fund bonds are equal to publicly held debt, then the non Social Security budget will plan in advance for redeeming them by using Social Security surpluses to reduce public debt issuance.”
I don’t believe that the Amerivcan public recognize that special issue government bonds held by the trust fund are liabilities that are every bit as real and important as debt held by the public.
As I stated previously, most economoists tend to dismiss intragovernmental debt.
Certainly those who claim we had 3 years of surplus in the Clinton administration dismiss intagovernmental debt, for it was only the surpluses in the trust funds (which increased intragovernmental debt) that allowedcfor the public debt to be reduced.
Total debt (the surplus plus intragovernmental debt) increased every year during the Clinton administration.
For the Treasury brief, go to:
Mr. Levitt–The is obviously a matter of great concern to you. I would say however that we should worry more about what we’re spending the money on than how much we owe. The US government sucks in and shoots out more money every minute than any other enterprise in the world. If it were half as big, it would still be the biggest show on earth. It doesn’t seem possible to me to come up with a percentage of GDP that is the perfect amount to be spending under all circumstances. You know, if you are throwing all the money you spend into colonial wars when you should be developing your domestic economy, it doesn’t matter that the amount you spend is a small fraction of GDP. The money is wasted–flat out thrown away. If you are spending money with an eye to permanently increasing the domestic economy, educating the young people who invent our way into future enterprises and keeping the population healthy, it costs a lot of money but increases our ability to pay for it.
I am just full of homely expressions today it seems. Cutting SS cuts the domestic economy by an equal dollar amount. Cut it and you cut GDP. Now, you may be thinking that a purely financial economy will somehow, through the magic of compound interest, make up the difference “the right way.” You know, unless you think we should just sell the USA and move to Mars, I suggest that’s a really, truly, horribly bad, awful idea. Nancy Ortiz
it is frustrating “arguing” with you because you keep returning to your point like a dog to its vomit.
The Trust Fund DOES NOT increase the governments ability to pay its debt. The trust fund is debt that the government owes to Social Security. If you keep thinking that there is no difference between social security and “the government” you make a fundamental error and there is no way you can ever understand what is at issue here.
The “government”, in an act of congress, went to elaborate lengths to create a Social Security Trust Fund separate from the general fund. That is a legal distinction. It does not matter that the government that created the fund is the same government that taxes for general public purposes. It created a separate trust fund, and until and unless it changes the law, the Fund remains legally a separate entity. Thats why the government has to formally borrow from the Trust Fund and not just dip its hand in and say “its all good.”
Social Security budget does NOT “plan in advance to redeem Trust Fund bonds by using Social Security surpluses to reduce public debt issuance.” That is exacty backwards. The Trust Fund bonds are an asset to Social Security and a liability to the general government. It is the general government that has to plan to redeem the bonds in order to repay the money it borrowed from social security (surpluses) in order to provide cash when social security is in cash flow deficit.
i do not know what you know about “most economists.” but if they think as you do, they are wrong.
seriously, Don, you have this thing so mushed up in your head it is not worth continuing.
you might at least have noticed that the title of the article you are citing is “toward Social Security REFORM… mechanics for PRE FUNDING.” Social Security was designed carefully to avoid “pre funding.” the current enlarged Trust Fund is an anomaly allowed to grow in anticipation of the baby boom, of no real importance to social security, either fundamentally, or even financially to the taxpayers. but it is useless to cite an article about “pre funding” as if it described current SS financing.
and generally, it is useless to provide endless citations to articles you don’t understand and i don’t agree with. life is too short to spend arguing with someone who doesn’t know what he is talking about.
Coberly wrote “It is the general government that has to plan to redeem the bonds in order to repay the money it borrowed from Social Security (surpluses) in order to provide cash when Social Security is in cash flow deficit.”
I agree with you. And, in order to do so, it must incerase the public debt, unless the budget runs a surplus. That is why the surpluses tend to mask what is really going on – the trust funds are spending more than they are receiving.
According to the CBO in a paper entitled “The Impact of Trust Fund Programs on Federal Budget Surpluses and Deficits,” written in 2002, it states “Their apparent surplus relies on both actual receipts and the government’s promise to pay money to itself. In fact, more money is going out of the Treasury for trust fund programs than is coming in, and this imbalance only grows larger as one looks out into the future.”
And, you are right, the Social Security Trust Fund is separate from the Treasury’s general fund, in an accounting sense only.
As it states in this same paper, “The receipts themselves are deposited in the Treasury, and program expenditures are made from the Treasury. So while trust fund programs’ sources of spending authority and accounting may differ from those of other federal activities, the programs affect the overall financial condition of the government in the same manner as all other programs – through the income and expenditures of the Treasury.”
“Even Social Security, largely supported by taxes on employees and employers, is credited with substantial amounts of intragovernmental income, the largest being ‘interest’ accrued on its holdings of federal securities. But no public or outside entity pays that interrest; it is a credit from the government’s general fund to the Social Security trust funds.”
“For the next 10 years, trust fund programs overall are projected to run a cumulative surplus of $3.4 trillion. However, with intragovernmental transfers excluded, the funds’ activities are expected to generate deficits that grow from $114 billion in fiscal year 2003 to $170 billion in fiscal year 2012 – resulting in a cumulative 10-year deficit of $1.2 trillion.’
“Indeed, although trust fund programs may appear to be running a surplus when viewed in isolation, once one considers the intragovernmental transfers to those funds, they are already running a deficit – and they will do so to an even greater extent in the coming decades.”
Go to: http://www.cbo.gov/doc.cfm?index=3974&type=0.
What’s the big mystery? The Treasury over sees for the government multiple accounts, some iof which have unique and dedicated funding streams. The Social Security program would be an example of one of those unique accounts. It isn’t directly funded by general tax revenues.
We all know that. By act of Congress there is no legal unified budget. So confusing these accounts and attempting to blur the lines is contrary to that legislation. All well run businesses have multiple accounts and mulitple streams of revenue. One of those revenue streams into the SS Trust Fund is the accruing interest on the T-Bills issued by the Treasury as funds from the Trust Fund were used to supplement the general budget. Again, a system legislated by the Congress with the intention of making good use of the Fund assets when they were nto needed to pay out SS benefits. That’s what good accountants recommend be done with unutilized assets.
The Trust Fund T-Bills are one part of the Treasury’s over all debt. Interest is paid to all holders of T-Bills. Why hold out the Trust Fund T-Bills as unique only because they are intra-governmental debt? The budgets are distinct, not unified. Again I’ll point out that that is by legislative action. General fund expenses are paid for by either the issuance of additional debt or by identifying a specific new revenue stream. Or an enhanced old revenue stream, like raising taxes. There are no T-Bills that have any more legal claim on Treasury funds than those held by the Trust Fund. If the interest and pricipal owed on one T-Bill is subject to revision or renege then all T-Bills may be seen in the same manner. How do the holderss of the public debt feel about that possibility?
There are no unique funding streams for Social Security.
As I have pointed out with the proper governmental link, all Social Secirurty taxes go into the general fund, from which they are appropriated for general expenses, just like all other taxes, such as income and excise taxes.
The only entity that is distinct is the Social Security trust fund, but only in an accounting sense. By loaning out all the excess moneys, we are placing our faith in the trust fund on bookkeeping principles and the full faith and credit of the U.S. government.
I can see wjhre simply holding the trust funds until peoiple need the money at age 65 would be a difficult thing to do. It is so tempting to loan out the trust reserves to other agencies, so that people can benefit from thise reserves today.
It is tempting for employers to do the same thing, and some have done so!
This cncern was expressed by Congressman Wadsworth in the deliberations on Social Security before the House.
On page 6061 “Heretofore, the government has financed its undertakings primarily and fundamentally as a result of the confidence of the indivudual citizen in the soundness of the Government’s undertaking, but from this point on we are apparently going to abandon that philosophy of public confidence and resort to a very different practice. The Government is to impose a payroll tax through one of its agencies, collect the money into the Treasury Department, then the Treasury Department with its left hand on the proceeds of these taxes is to turn around and buy bonds of the U.S. Government issued by the right hand of the Treasury Department. Thus the government of the U.S., after this thing gets going, is no longer to be financed directly by its citizens, confident in the soundness of the Government, but is to be financed instead by arrangements made within the bureaucracy – an undemocratic and dangerous proceeding.”
Go to: http://www.ssa.gov/history/pdf/h419.pdf.
We get bonds in return for income taxes??