Social Security & the Debt Limit
{Crossposted from dKos Social Security Defenders Group}
Social Security has been off the radar this week for obvious reasons, progressives being more focused on efforts of Republicans to win the War on Women via the Continuing Resolution. Plus while Paul Ryan’s original Roadmap proposed privatization of Social Security his Budget proposal for next year left it mostly aside (except for an obscure ‘trigger’ mechanism for future cuts) in favor of a trillion dollar assault on Medicaid and a proposal to voucherize Medicare. Which only leaves one current assault vehicle, the pending bill to raise the Debt Limit which under current estimates needs to happen by mid May, and sure enough there are rumblings to this effect, no changes to Social Security, no votes to raise the Debt Limit from the Republicans.
So this seems an opportune time to explain the actual relation between Social Security and Public Debt and the paradoxical effects on debt from cuts to future benefits. Because all else held even all this does is increase real debt over the medium term (25 years) while reducing purely theoretical debt over the God help us Infinite Future Horizon. Conceptual unpacking in Extended.As usual a good starting point for the serious student is the Budget Concepts and Budge Process (pdf) section of the Analytical Perspectives of the Budget (html index) released each year by OMB to illustrate the President’s budget both conceptually and historically.
But even beofre citing definitions I would like to direct Kossacks (and any visitors-welcome!) to a very handy web tool maintained by Treasury called Debt to the Penny which true to its name will give you total federal debt to the penny at the end of any specified business day or over date ranges. For example as of close of business Thursday total ‘Public Debt’ was $14,264,245,526,311.58. This figure is the sum of ‘Debt Held by the Public’ at $9,652,195,544,012.12 and ‘Intragovernmental Holdings’ at $4,612,049,982,299.46 (‘debt to the penny’ meaning what it says).
Now ‘Intragovernmental Holdings’ is what OMB calls ‘Debt held by Government accounts’ which in turn “means the debt the Treasury Department owes to accounts within the Federal Government. Most of it results from the surpluses of the Social Security and other trust funds, which are required by law to be invested in Federal securities.” So the commonly expressed opinion that Social Security Trust Funds are not counted in that total $14 trillion of debt cited in the MSM is dead wrong, they constitute $2.6 tn of that $4.6 tn of ‘Intragovernmental Holdings’ or 18% of the total $14.3 tn in Public Debt. In fact Social Security is by far the biggest creditor the U.S. has, with Treasury holdings double those of the Fed and two and a half times that of our largest foreign lender the Chinese.
‘Public Debt’ is not precisely the same as ‘Debt Subject to the Limit’ but for all practical purposes it is the same $14 tn plus, for those interested Treasury supplies the following in their FAQ
What’s the difference between the Public Debt Outstanding and the Public Debt Subject to Limit?
The Public Debt Outstanding represents the face amount or principal amount of marketable and non-marketable securities currently outstanding. The Public Debt Subject to Limit is the maximum amount of money the Government is allowed to borrow without receiving additional authority from Congress. Furthermore, the Public Debt Subject to Limit is the Public Debt Outstanding adjusted for Unamortized Discount on Treasury Bills and Zero Coupon Treasury Bonds, Miscellaneous debt (very old debt), Debt held by the Federal Financing Bank and Guaranteed Debt
.
With the conceptual background set, lets see how Social Security Trust Fund Operations interact with the Debt Limit.
And the answer is simple, though a little counter-intuitive. If Trust Fund principal balances go up in any given year due to a surplus of income over cost adding new offsetting Special Treasuries then so does ‘Intragovernmental Holdings’ and so in turn ‘Public Debt’. On the other hand if in any year total cost exceeds total income including interest, the flow of offsetting Special Treasuries is reversed, then Trust Fund principal goes down and in turn so does Public Debt. In between those two outcomes is a series of years where income EXCLUDING interest trails cost, but the accruing interest covers the gap, in which case the rate of principal increase is slowed and so the rate of growth of total Public Debt due to increased amounts of Intragovernmental Holdings.
Put all of that together and what do you get? Short term cuts in Social Security benefits absent any changes in revenue INCREASE the rate of principal accumulations of Intragovernmental Holdings and so ADD TO DEBT SUBJECT TO THE LIMIT. And the same is true for any benefit change starting before the projected date the Trust Funds hit their maximum, which right now is about $4.2 tn in 2023.
Which is why holding Social Security hostage to this year’s Debt Limit is simple bullshit. one has nothing to do with the other, and any attempts to start phasing in benefit changes via changes in the index (as B-S would starting in 2012) makes total Debt Subject to the Limit HIGHER and not lower. In fact far from giving our children and grandchildren a break it would absent other changes just time shift debt repayment forward in time while making the principal balances and hence ultimate payment amounts larger. It is all more Bait and Switch, just sophistry using ideas about seeming fiscal rectitude to screw over worker-retirees starting ten years out.
(But such a move would reduce ‘Unfunded Liabilities’, which opponents of SS wrongly equate to ‘Debt’. They aren’t but that will be the subject of a later post.)
Bruce,
Short term cuts in Social Security benefits absent any changes in revenue INCREASE the rate of principal accumulations of Intragovernmental Holdings and so ADD TO DEBT SUBJECT TO THE LIMIT.
I don’t think this is true. While a surplus in SS WOULD increase the intergovernmental debt, that amount would be offset by equivalent reduced borrowing needs for the Treasury as a whole. No?
In other words, the SS surplus is already accounted for in the federal debt and spending the surplus reduces the debt? Or does it simply transfer it from Intragovernmental Holdings to Debt Held by the Public?
No.
There is no real world evidence that borrowing would drop. Instead the Gingrich people showed that they would just sop up those reduced costs in the forms of increased tax cuts while keeping overall borrowing as high as would not absolutely spook the markets.
The one to one offsets look better in textbook illustrations and on lines drawn on whiteboards than they do in three dimensional political reality. The instant combined budget deficits went to surpluses in 1996 and while the general fund was still in deficit Republicans started pushing for tax cuts, leaving Clinton to argue for botrrowing reductions via ‘Save Social Security First’ which in practice meant reducing borrowing by paying down debt held by the public. The effect you insist would necessarily happen automatically. Well not in the real world, at least when R’s are in charge of the House. They instead rely on the older principle of ‘what the (political) market will bear’
Sammy
Jerry Critter
Bruce is very brave trying to explain “the budget” which has been deliberately finagled to make it hard to understand.
Putting it all very simply — and accurately — and avoiding the convoluted language that experts like because it confuses the “layman”:
Social Security lent money to the government. The government must… by law… repay that money.
Repaying borrowed money reduces you debt. Repaying the money borrowed from Social Security will reduce the Debt.
Unless you play games by saying… “we have to borrow the money in order to repay the money we borrowed, therefore paying the money we owe Social Security will increase the debt because if we didn’t repay Social Security we could ignore the money we owe Social Security.”
The latter is the doubletalk attempted by the Big LIars on Social Security, and often repeated here by little liars, who may not know they are lying because they are only saying what they have heard… from people lying to them.
sammy and jerry
i didn’t really answer your questions, because your questions depend upon a very confused understanding of Social Security that would take me a week to explain. If you still need an answer, I’ll try… but it won’t be easy.
The textbook answer is that it nets to zero, as any principal redemption is simply financed by borrowing. But there is no reason in practical reality why redemption could not be financed by increasing tax rates in proportion to the amount they were lowered when surpluses were running.
The working assumption is that tax cut only ratchet one way, and IMHO the attempt to bring this claimed identity in is just an attempt to supply some academic cover for a one-way theft.
If the taxpayer saw the kind of country club work done by the defense contractors it would be like the end of a Farnkenstein movie, pitchforks and torches.
If you are worried about debt limit why not worry about cutting the debt created for the waste fraud and abuse in Defense’s Major Weapon System Acquisition programs? GAO reports on this each spring in to places one on the top 100 programs’ overruns and underperforming and in the High Risk of waste fraud and abuse report.
Not to change the subject but the extra cash from payrolls taxes went to this waste, and not better uses to build the economy.
Why tax future Americans for military ineptitude and waste?
Bruce,
There is no real world evidence that borrowing would drop
You don’t need evidence. It’s just math. If social security spends less money, overall borrowing drops. If social security takes in more money than it spends, overall borrowing drops.
While it is true that due to the Trust Fund acoounting system which accrues any surplus as additional debt, the net effect is a wash. Therefore you can cut out the middle portion of this equation, and come up with a direct link between SS spending —-> borrowing/debt.
Shorter Sammy: “Screw the historical record, I got an Econ 101 textbook that says different.”
Sammy there is just no evidence at the personal or national levels that overall borrowing will drop rather than just being replaced by substitution effects. Paying off your house or car just giving you that much more room to finance a vacation cabin or boat. Same with governments, experience shows they will continue to borrow up to their equivalent of a credit limit, which are acceptable interest rates on long-term bonds.
Not everything reduces to simple X to Y two dimensional math, that is why they have multi-variate calculus.
For the simple minded (like me), if I understand you correctly, you are saying that SS redemption either has zero effect on the debt or reduces the debt somewhere between 0 and the amount of redemption depending on the amount of offsetting tax increases.
Bruce, why are you putting SS on the budget table? At this writing it is off in Ryan’s Resolution, and the only reasonable comments from Republicans is to adjust it to make it solvent.
There are many options available to Congress, if the Debt Ceiling is NOT raised, but few include cutting SS.
The only option including SS that makes fiscal and political sense to this conservative is to fix SS long term solvency with the needed minor tweaks, then redefine public debt removing the SSTF from calculations. The argument used could be that since the SSTF bonds are now safe forf XXX years it is no longer necessary to track them as part of the Debt Ceiling. A no harm no foul solution.
If the Debt Ceiling is not raised, OMB will immediately issue spending direction to all Executive components, while Congress rewrites laws affected by the decision.
There will be much legislative posturing coming in preparations for hard negotiations. We’ve already seen a submission to protect/mandate payment of treasury interest and principle.
More posturing from all sides coming!
Sammy’s post:”You don’t need evidence. It’s just math. If social security spends less money, overall borrowing drops. If social security takes in more money than it spends, overall borrowing drops.”
Since SS does not borrow any money now, nor can it ever by statute; it either spends FICA dollars, or it is drawing down on its Trust Fund, the amount SS spends has nothing to do with “borrowing”. Borrowing is done by the Federal Government’s budget (the on budget numbers – what a obscuring label!). Therefore, whatever borrowing is done is determined by Congress for that year. If SS spends less, then the share of borrowing done by the Feds that comes from SS would increase and the share coming from non SS would decrease . But the overall borrowing done by the Feds would be determined by Congress and Bruce is right, that amount has hugely increased during 2 periods of Republican White House and Congressional dominance, the Reagan years and the Bush-2 years. The only exception to the prior sentence is the first two years of the Obama administration, in part due to 2 inherited wars and the crash of the economy.
if you are going to analyze the effect of Social Security on the debt, then analyze the the effect of Social Security on the debt. To do this you have to hold everything else constant.
I am not sure, let me restate. Because it doesn’t reduce quite that simply.
Scenario one. Current benefits are cut to precisely the level affordable by current tax revenue (this is ultimately at the heart of the new Ryan Plan). Result all accrued interest is retained by the Trust Funds in the forms of new Special Treasuries and so increase Trust Fund principal and so Intragovernmental Holdings. This adds to total Public Debt and given compounding effects ultimately in stratospheric fashion. But since it would require zero cash flow from the General Fund would be in some sense ‘free’ even as it is still counted as Debt Subject to the Limit. Taken to its logical extremes the rest of government could be in strong surplus even as exploding Trust Fund balances required official increases in the Debt Ceiling on a continuous basis. Since cutting benefits to this extent in effect is a practical abrogation of the Trust Fund there will be increasing pressure to accept the ‘no economic value’ being advanced by Sloan, Samuelson and Krauthammer and simply convert this fait accompli into reality via legislation and then completing the theft.
Scenario two. Nothing is done. OASDI on a combined basis goes permanently cash-flow negative in 2017, taking an increasing part of interest in cash. The remaining interest continues to grow principal at a slowing rate thus adding to Public Debt via increases in Intragovernmental Holdings. If we assume that the interest taken in cash was financed dollar for dollar via borrowing from the public then Debt Held by the Public goes up as well making total Public Debt go up at around the same rate as scenario one, with the exception that interest taken in cash adds to debt service on the Debt Held by the Public and by not contributing to principal to that degree loses its compounding effect.
Which should mean that total Public Debt goes up faster under the ‘free’ no-pay down scenario one that it would on the cash-flow negative pay down scenario.
If we extend scenario 2 out in time then ultimately all interest has to be taken in cash and principal starts being tapped, this event is currently projected for 2023. As a result Intragovernmental Holdings start to drop in absolute terms as does the accrued interest. Once again if all of the cash flow to SS is financed out of borrowing from the public then total Public Debt grows slightly less than under scenario one until in 2038 the portion of Intragovernmental Holdings derived from the Trust Funds go to zero and so too further debt service. That is under scenario 2 the contribution to Public Debt in 2038 due to Social Security is zero even as it would probably be around $10 trillion under ‘free’ scenario 1.
Intermediate scenarios between 1 & 2 should result in intermediate outcomes in terms of total Public Debt at the end of the process, but I am reasonably confident that you can’t cut total Public Debt simply by cutting benefits while leaving the revue stream constant.
So I think I am agreeing with your conclusion generally (though the introduction of tax increases confuses the issue)
Un-funded liability = money due from an entity that DOES NOT HAVE the money needed. How can it be so difficult to wrap one’s head around that ?
Meeting the expense as these un-funded liabilities come due, is a current expense, for an entity $15T in debt, and running a $1.7T deficit.
We are borrowing to meet current expenses, and any addition to current expenses ADDS to that borrowing. You can isolate an expense catogory when it comes to spending cuts.. but that does not isolate the deficit spending that category brings.. By definition, it’s UN-funded…
CoRev they have things called ‘newspapers’. You might try them.
Republicans have openly been calling for cuts to Social Security as a pre-condition for any deal on the Debt Limit Bill.
Which is why I called this post “Social Security & the Debt Limit” and not “Social Security & the Ryan Budget proposal.
And there are no Republican proposals that would make it ‘solvent’ that don’t cause higher ultimate cuts in benefits than ‘Nothing’.
So please go away until you can learn to respond to the argument actually being put forth and not strawmen of your own invention. Or show that no Republican is calling for such a condition. Including Kantor on Fox News this morning
I don’t know where I get these crazy ideas:
http://thinkprogress.org/2011/01/03/graham-security-hostage/
Lindsey Graham Threatens To Hold Debt Ceiling Vote Hostage For Regressive Social Security Cuts
“GRAHAM: This is an opportunity to make sure the government is changing its spending ways. I will not vote for the debt ceiling increase until I see a plan in place that will deal with our long-term debt obligations starting with Social Security, a real bipartisan effort to make sure that Social Security stays solvent, adjusting the age, looking at means-tests for benefits. […]”
If you see anything in that that produces a better result than ‘Nothing’ then get back to us.
Bruce, I was aware of Graham’s comment: “a real bipartisan effort to make sure that Social Security stays solvent…” and I said: “makes fiscal and political sense to this conservative is to fix SS long term solvency with the needed minor tweaks…”
So, you just confirmed the core of my understanding which led to my hypothetical. Are you arguing against making SS solvent for the long term?
SS is the simplest of out fiscal problems. Let’s fix it, and take it off the table.
I’m curious as to how an entity running a $1.7T defict can repay anything, without having to borrow. That idea would confuse the CBO, and the SS Adm, as even they’ve noted that it can’t be done..
(take a week if you need.. I’ll be here)
Not if “hold constant” requires “holding wholly theoretical textbook equivalences” as being in play.
“Assume the Earth is flat and Biblical irrerancy. Prove the Heliocentric Theory”
Sorry Homey don’t play that game.
Well it doesn’t actually confuse either CBO or SSA given that that debt ridden entity has been repaying the DI Trust Fund since 2005 with no particular strains from that singular factor.
Current year deficits have little to zero impact on Treasury’s ability to finance debt. Maybe you could take that week reviewing my past posts here and at dKos
CoRev solvency debates that start with the full range of options would be fine. But since Graham and his have ruled the NW Plan out of order a priori and all plans along similar lines then I am not willing to enter the debate.
I have a plan, in fact two. Graham refuses to enter in a numerically based debate on either OR present his alternative in numerically scoreable terms. Instead the strategy sinc 2000 has been to come to consensus on ‘unaffordable’ and work backwards towards ‘solutions’ exclusively starting with worker give backs.
There is no good faith on the other side of this and your ‘can’t we all just agree?” line of argumentation cuts no ice. I got numbers, Lindsay has talking points, not a lot of common ground there.
‘Unfunded liability’ is a purely theoretical construct and is not equivalent to ‘debt’.
You could take any category of spending from personal to federal, extend it over the Infinite Future Horizon and calculate how many current dollars you would need in the bank to finance that. But that is not how we calculate family food budgets or federal military budgets nor do we conclude that future adjustments in expenditures might alter this infinite future calculations. The demand that this be a metric for Social Security and Medicare and not any other category of spending is just special pleading of the highest order, particularly when revenue fixes are ruled out of order a priori.
When funds are drawn by the Treasury from the SS Trust Fund in order to meet benefit needs that are not met by FICA the government can either find revenue to pay the draw by raising taxes (a very unlikely scenario) or the Treasury can borrow from the public to pay the draw. This second scenario is far lore likely because it has an almost benign effect on the total debt. Special Treasury notes are retired and replaced by public Treasury notes. No effect on total debt. One debt is replacing another. In layman’s terms, the Treasury is refinancing its intergovernmental debt via public debt. No effect on the debt amount. No negative effect on the deficit in any year such a refinancing occurs. The rest is bullshit, to use a technical term.
And CoRev, I’m too lazy to go back through the many previous AB posts and comments, but you know very well that in such past discussions of the budget deficit and the total debt Social Security was a favored target of all good right of center ideologues here and in the general media. Has someone changed your script of talking points?
Sorry Bruce, Graham has a seat at the table, and you have a blog article. Whatever you think you have is weaker than his.
There’s nothing theoretical about un-funded.
Of course it’s not a debt, until you have to borrow to FUND it.
As for your analogy.. there’s a big difference between budget planning into the future, and liabilities that are due no matter HOW you plan.
The household equivelant for an unfunded mandate; would be the IRA you borrowed against. No way to plan around it, you KNOW the bill is coming due.
This whole argument is silly. There will be iron-clad proof in the form of a specific budget items; this year, and into the next lord knows how many years, to the tune of hundreds of billions, as we FUND these unfunded liabilities. Ever penyy can be traced, right into the total, Federal debt.
Now you’re getting incoherent… Stating a fact that I never disputed, as some sort of support for you argument..
“Current year deficits have little to zero impact on Treasury’s ability to finance debt. Maybe you could take that week reviewing my past posts here and at dKos”
What in heaven’s name does that have to do with this discussion ?
Good one!
So why do you bother responding? Get jealous that a Google search on my name and ‘Social Security’ gets relevant hits? Lots of them?
(BTW it took literally minutes for Business Insider to pick up this post this morning, are you actually getting picked up on Climate Denial sites at the same rate? I am thinking your High Horse more resembles a stunted Shetland Pony here)
There are plans to fund it. One is the plan of ‘Nothing’ that allows benefits to re-set at a level 25% better in real terms than today and another that delivers 100% of promised benefits at an initial cost in reduction of take home of 40 cents a week.
In the former case the ‘liability’ is eliminated in the latter the ‘unfunded’. You are just in a verbal trap with no numeric meaning.
HuH?!
So many arguments.
Why should the US G default only on SS and other intragovernmental debt?
Would the US Supreme court become a bankruptcy court?
Show some documentation on the 40 cent/week plan.. I wanna see how that parlays into hundreds of billions.. Or, just for this year (.40 X 52 X 150,000,000 workers) = just over 3 billion.. less than 10% of this years unfunded liabilities..
And humor me.. define: re-set at a level 25% better in real terms than today
“How can a debt ridden entity repay anything” which is a fair summary of your claim with the fact that the Treasury has been repaying DI since 2005 shows the incoherence is on your side. Why are Disability checks cashing?
Another good one!
Granted your unlimited supply of Good Will on this site and the strength of th CoRev brand I am sure “HuH?” will be sufficient to rescue your argument.
Why not bold “federal revenues”? I.e. Tax increases.
Your argument is so crooked it could hide behind a spiral staircase
Oh for crying out loud.. if you’re gonna para-phrase quote me.. use the whole quote..
I asked.. How can a debt ridden entity repay anything,,, without having to borrow ?
I never said they CAN’T borrow. this whole debate centers around them HAVING to borrow..
Because YOU even stated that tax increases are not feasible..
But sure.. consider it highlighted.. A tax increase will solve the problem.. theoretical tax increases can balance the budget too.. this where you always end up.. proposing a solution to a problem you’ve been arguing doesn’t exist.
Jack is entirely correct because additional borrowing does not become additional debt when the borrowed funds are used to pay down debt. The debt only shifts. Surely this is understandable: if I borrow money from Peter to pay back debt to Paul, the amount of my debt hasn’t changed, it has shifted from Paul to Peter. (The process of shifting debt in this manner would increase annual deficits, but the topic here is debt, not deficits.)
“..the balances of trust funds are not a measure of resources available to pay future obligations for the respective programs;” CBO via TWTY
Of course the Trust Fund is not a resource. It is an accounting of debt which had resulted from the Treasury utilizing FICA revenues to pay for general budget expenses.
“..those resources will need to come from federal revenues or additional borrowing in the years those obligations are due. “ ibid
So how else does one pay debt? The Trust Fund has always been recognized as an accounting mechanism whereby any excess FICA revenue can be used by the Treasury to support the general budget with the legislated mandate that such revenues would at a future date be restored to the Trust Fund as required to support the benefits program. The CBO statement you quote only clarifies that the Trust Fund revenues spent by the Treasury to support the general budget represent a debt to the Trust Fund that will, at some future date, become an expense. That expense is either covered by tax revenues or roll over debt. Restating the CBO position doesn’t change the reality of the debt relationship, and especially doesn’t change the intent of the Social Security legislation. And your attempt to suggest otherwise is only one more indication of either your own failure to comprehend the details of the Trust Fund mechanism or you are being extremely disingenuous regarding the facts of that mechanism.
Can you identify a particular component of borrowing directly related to the redemption of DI Special Treasuries since 2009 that would support the explicit crowding out argument you argue would be attendant on cashing out combined OASDI redemptions come 2017? Or should you just admit you are blowing talking points out of your ass?
Christ it is hard to understand why Dan and I have been in discussions about how difficult it is to maintain a presence here when critics are intent on coloring everything in a close shade of maroon. Give or take a vowel. And a transposition.
“This year’s budget will have to account for the spending needed to cover the SS un-funded liabilities.. and the foresee-able budgets (to the tune of hundreds of billions), will also have to account for funding the unfunded liabilites… with BORROWED money.” RWTY
And how is that any different from the spending that will be required to pay down any of the public debt? While Social Security may be the biggest single debt holder of the Treasury, the total public debt is nearly four times larger still.
What resources will be used by the Treasury to pay the interest and principal on all those T-Bills held by China, Japan, Citibank, etc? Or those E-Bonds we were all encouraged to buy for our future well being?
RWTY,
You are being totally disingenuous in your posturing and commentary. You make reference to official statements and then misinterpret those statements to fit your ideological bias. You’re not fooling any one, but you’re likely to cause the conversation to float from an excess of hot air.
Well you could do some due diligence starting with the first couple hundred posts I did on this topic here (by invitation) which posts are linked from the right sidebar and would deliver you to this index page on my site: http://bruceweb.blogspot.com/2008/08/angry-bear-social-security-series.html
In particular most of the posts supporting the 40 cent a week plan would be found on this sub-page from that link: http://bruceweb.blogspot.com/2009/05/angry-bear-social-security-blogging.html Angry Bear Social Security Blogging: Northwest Plan edition
And if you want validation of that 25% better in real terms you could start by looking at the numbers in this 2003 CBO Study http://www.cbo.gov/doc.cfm?index=4380&type=0 The Future Growth of Social Security:It’s Not Just Society’s Aging in conjunction with a dozen or so posts referencing what I call Rosser’s Equation including this one from last July which extracted the relevant tables from that CBO Report http://www.angrybearblog.com/2010/07/intergenerational-real-benefits-in.html Intergenerational Real Benefits in Social Security (Rosser Equation Illustrated)
And then if you like attempt a flying fuck at a rolling donut. It isn’t my fault that this is your first trip to the Angry Bear SS Rodeo. Humor yourself, I don’t figure I need to start over from scratch for the new kindergartners. You seem to have wondered into the wrong graduate seminar.
And I meant ‘wandered’ but considering your clue free demeanor maybe ‘wondered’ was the right word choice to start with.
“This year’s budget will have to account for the spending needed to cover the SS un-funded liabilities.”
You don’t even understand what the technical term ‘unfunded liabilities’ means. There are no ‘unfunded liabilities’ as defined by the Trustees until after Trust Fund depletion. You are under the common misperception that such terms as ‘deficit’, ‘debt’, ‘budget’ and ‘unfunded liability’ mean just what you think they do rather than being technical terms of art with exact meanings equivalent to ‘arc-sine’. If you were talking integration of trig functions and insisted that ‘arc-cosine’ just meant what you wanted it to mean Humpty-Dumpty style you couldn’t be more ridiculous here. Which is why my very first link in the post was to the ‘Budget Concepts’ section of the Analytical Perspectives, you literally don’t know how to communicate your point because you are deploying precise terms of art in impressionistic ways.
Stop flailing and start reading.
This should be interesting:
Obama’s new approach to deficit reduction to include spending on entitlements
Plouffe said Obama is committed to doing more to slash the fast-rising cost of Medicare and Medicaid, to roll back George W. Bush-era tax cuts for those earning more than $250,000 and to even discuss changes to Social Security.
http://www.washingtonpost.com/business/economy/obamas-new-approach-to-deficit-reduction-to-include-spending-on-entitlements/2011/04/04/AFpDoDHD_story.html
If an entity already running a deficit, borrows to make good on an outstanding treasury.. where do you suppose that borrowing gets credited ? I’ve never used the term, “crowiding out”, but I will, if it helps you justify the vulagarity and insults..
ANYway.. these aren’t talking points. SS is now paying out more than it takes in.. and the general fund has to make up that difference. That’s no smoke-screen.. it’s simple fact that has to be dealt with.
If you find that letting that inconvenient fact be stated makes it hard to be herre.. I’ll happily step away. You’all can comfort yourselves in an echo-chamber.. “My” talking points are self-documenting.. in the real world, we have to decide on where hundreds of billions will come from.
No surprise, that those links are dead .. No matter though.. I’ve read enough of your postings to know that there’s likely references to the interest being “earned” (from one entity, to itself), on the treasuries,, and other such nonsense…
THis might be my first forray into AB, but I’ve been debating this topic from the day I was old enough to understand the problem with spending tax-dollars collected in the name of SS, on things other than SS.
THAT’s where your ire and efforts should have been aimed.
Pay attention to the real-world goings on.. step out of the liberal blogging world (and its self-appointed graduatre seminar status) that enables this type of denial. The SS unfunded liabilities are a real phenom. In the times as long past as your dead links, there was enough “can kicking” to keep evading the reality of the looming problems with SS. The day of reckoning is here… my “talking points’ are front-n-center reality. Documentable, no less.
What did I mis-represent, and what ideooigical bias are you talking about. All I’m doing is acknowledging that SS obligations are now outpacing its revenue.. and making good on that, is real spending today ?
You’ve just typed three paragraphs I’d agree with, as though you’re dis-proving my point. You’re becoming as incoherent as Bruce.
Ah.. so we won’t have to borrow (or raise taxes) to cover the difference between thee SS revenue, and it obligations ?
And you won’t have to add a disclaimer to your blogging crusade ? (Social Security will not add to the deficit.. so long as we can raise taxes proportionate the the unfuinded liabilitie it now faces)
Phew… I was worried about nothing.. thanks for puting my worries to rest.
I think I’ll start a blogging crusade named: ‘Governmet spending will not add to the deficit’ …
Yeah, right..
OK.. let’s see if ANOTHER CBO quote (from a working link) matches my understanding of SS unfunded liabilities:
The term “unfunded liability” is most often used in relation to trust funds and trust fund balances. That linkage may create the impression that, because those funds report positive balances, future federal commitments are already “paid for,” or funded. And certain taxes–especially payroll taxes for Social Security and Medicare, which are credited to those trust funds–may lead taxpayers to believe that they have paid for future benefits. Trust funds can be useful mechanisms for monitoring the balance between earmarked receipts and a program’s spending, but they are basically an accounting device, and their balances, even if “invested” in Treasury securities, provide no resources to the government for meeting future funding commitments.(7) When those payments come due, the government must finance them in the same way that it finances other commitments–through taxes or borrowing from the public. Thus, assessing the state of the federal government’s future finances requires measuring such commitments independently of their trust fund status or the balance recorded in the funds.
OOps.. seems as though I’ve got it right.. Now what ?
Sorry.. forgot the link.. here it is:
http://www.cbo.gov/doc.cfm?index=5771&type=0&sequence=1
Bruce, I have not been arguing with you. I asked a question, why this article, SS is off the budget table? Then asked you if you want to make SS solvent for the long term? In between I provided a hypothetical whereby SS could be used to raise the debt ceiling.
None of these have you actually addressed. Instead, you claimed Republicans want to cut SS, when in fact your own quote was to make SS solvent. None of us know what that will eventually include. Which I was trying to point out with my seat at the table comment.
Maybe your remarks made sense to you, but as often happens it appears you are arguing with some concepts you hold in your own head, but have either not said, or are arguing side issues to what others actually said.
So please explain your motives, bcause it appears you came back to AB with a poorly written article that ill defines the relationship of SS to the debt ceiling just to pick a fight.
Sammy, it appears we are about to start a race to the bottom. Who can lower the deficit the most.
I’m curious about the motives, too..
Before you come stomping back with insults, and references to sex with pastry… can I please ask what it is you’re trying to accomplish ?
You cannot hide this problem, as though it were a credit-card statement that you don’t want your spouse to see. Some combination of these three things, WILL happen:
1) Reductions in benifits (ala raising retirement age)
2) Increased taxes (problematic, in that selling it to fix SS is a de-facto re-tax)
3) Increased borrowing.
That’s all I’ve tried to say, way back to when our paths first crossed at KOS.
What are you hoping to gain, by trying to convince people otherwise ?
“Which is why holding Social Security hostage to this year’s Debt Limit is simple bullshit.”
Also, Too.
If the debt ceiling is not raised the top 1%ers stand to take it in the wallet so it’s hard to see them allowing the political party that they own outright the leeway to throw sand in the gears of the bond & equity markets?
Besides, didn’t Cleavon Little and Mel Brooks do this joke already?
http://www.youtube.com/v/Z_JOGmXpe5I” type=”application/x-shockwave-flash” width=”170″ height=”140
“2) Increased taxes (problematic, in that selling it to fix SS is a de-facto re-tax)” RWTY
Only half right, therefore, all wrong. Raising general taxes to repay debt, either publicly held or inter-governmental debt, is not a double taxation. It is taxation to pay for an inadequate tax policy during the past dozen years. Try to get this point through your head. Excess FICA revenues were used to supplement total government income and Bush and now Obama have been spending on wars and tax relief for the rich for that dozen years. Now it is time to put the money back where it came from, the Social Security Trust Fund. Not all of it is needed immediately so a modest top marginal rate increase shold sufice, especially if we stop pissing away the wealth of the nation on a ruinous foreign olicy focused on war and empire.
Well.. if it’s not a tax labeled to address SS.. than SS remains insolvent… still adding to the debt, even if the deficit is reduced by a generic tax raise… unless of course that tax raise balanced the budget (get that through YOUR head)
We can argue about a horse well past the barn door.. what spending had/has merit.. and probably agree more than we disagree.. doesn’t matter if you can justify a big screen TV bill on your credit card.. that spending is still there.
And it’s curious (not really), how gov spending that you disagree with, is directly responsible for the squandering of taxes collected in the name of SS..
If I would make that inane comparison, I’d pick a few elements out of the “stimulus” spending..
But, of course I will not.. **wink**
Digby has been very good on exactly this point:
“Cantor just said that they will have to raise the debt ceiling. He said it out loud and on the record. Therefore, we now know that any capitulation made by the President and the Democrats in the negotiations will be made because they wanted to make them. There can be no doubt about that.”
Bold emphasis mine. http://digbysblog.blogspot.com/2011/04/leverage-by-digby-speaking-of-cantor.html
See also Yglesias today for a strategy to handle debt limit threats that will be ignored by the white house http://yglesias.thinkprogress.org/2011/04/a-debt-ceiling-hostage-rescue-strategy/
You don’t understand what you are reading. Plus CBOs usage here is inconsistent with actual current law interactions with the Trustees’ numeric calculation of unfunded liability. But obviously you are not willing to learn.
And my links worked when I put them up, I always copy link URLs from the source, I’ll have to see why they dont work now.
By the way why were you compelled to follow me here?
http://bruceweb.blogspot.com/2008/08/angry-bear-social-security-series.html
I understand the CBO’s own descrition of “unfunded liability” for a trust fund just fine. For Pete’s sake, I might as well have written that quote.. in fact, if you read it carefully.. you’ll see that the non-partisan CBO even puts the word “invest” in quotes when referencing the treasuries .. as in “it’s not in any way an investment”, when the government buys its own paper..
There’s no margin for ideological interpretation there.. it’s straight-forward, and easily comprehended.
I’m happy and eager to learn.. please explain the inconsitencies in the CBO usage, relative to the trustee’s calculations ? I’ll read what you post with an honest, open mind.. but will not cut you any slack for these tangents you keep venturing on to. Make it good.. ’cause if it’s as easily disputed.. I’ll do it.
CoRev read what you said:
“Bruce, why are you putting SS on the budget table? At this writing it is off in Ryan’s Resolution, and the only reasonable comments from Republicans is to adjust it to make it solvent. “
You accused me of putting this on the budget table when Ryan didn’t include it, thus accusing me of setting up a strawman, then followed by claiming R’s were only interested in ‘solvency’ while not specifying what they mean.
I answered by pointing out that the post wasn’t about the budget at all. And rather than addressing the actual argument advanced you were off and running with your standard thread hijack further accusing me of not caring about solvency at all. Well the post wasn’t about solvency either. Which not for the first time leads me to believe you didn’t read it at all and instead are just reacting to key words ‘webb social security’ to refight old battles. I don”t find you honest, you think I an foolish, maybe we should follow the advice of the old song “lets call the whole thing off”
Thanks for the link.. I’ll read through what’s there.. promise..
And.. I wasn’t compelled.. you told me about it, and I came to see what it was all about.
By the time I return.. I’m sure you’ll have a solid argument for how the CBO usage is inconsistent..
What’s the problem with borrowing? As explained in detail in this post, taking money out of the Trust Fund does not increase the debt.
Jerry, it raises the deficit if redeemed via borrowing or takes from other spending categories if redeemed from tax revenues. Today, that just means the other spending is borrowed. Raising the deficit means it never goes away. The last time we had zero deficit was before the Civil War, so, in essence, we are paying off that war.
Finally, in the very near future, some predict July, interest rates will jump and climb, which means rolling over our existing debt further raises the deficit. Paying back that interest further depletes available revenue for any spending, as it is paid first. To do otherwise is default on debt.
There are no good things resulting from additional borrowing, just some less bad things.
Jerry,
“As explained in detail in this post, taking money out of the Trust Fund does not increase the debt.”
If you want to consider using one Treasury Note to pay back another Treasury Note ” which does not Increase Debt,”…..Fine…Do so!, but what in the hell do you think it does to the value of the dollar.
The money has to come from somewhere?
Jack,
“So how else does one pay debt?”
I’ll answer that question if answer this question:
“Why call it a surplus when you have to have to generate alternative revenue just to meet the trend line obligation for which the surplus was designated?”
Are we there.
Hmm your question is OT which explains much of the exchanges below. This post wasn’t about your topic at all. Hijacking. Just like CoRev always does. Along with accusations that I am not taking your OT comments seriously.
This got old when Brooks did it in 2008 and the Multi-headed He Who Can Not Be Named (due to spam filters installed by Dan) did it in the months after. This post was about something specific. Your posts biffed the specificity test.
“Who can lower the deficit the most”
This is a “Race to the bottom” how? Isn’t that your policy goal?
Bruce, we’ll see after Wed. when Obama unveils his new revised plan to lower the deficit. Soon, we should see the Senate Budget Resolution, if the Dems actually submit one. Their record on budget actions is not too consistent, regardless of which budget act they wish to ignore.
Reducing the deficit is the goal of fiscal conservatives/Tea party members, yes. What is fascinating is the Charlie Sheen-like train wreck we are watching from the Dem leadership.
Bruce, I was going to take your advice and just drop the issue, but thought better as I went back and reviewed your article. It starts: “Social Security has been off the radar this week for obvious reasons, progressives being more focused on efforts of Republicans to win the War on Women via the Continuing Resolution.“
and the penultimate paragraph starts with: “Which is why holding Social Security hostage to this year’s Debt Limit is simple bullshit.” No one is holding SS hostage. You even had to do a search to find a reference after being challenged on SS solvency being the goal. Any claims to knowing what solvency means is absurd, as it is not being discussed/negotiated.
But his claim of yours: “I answered by pointing out that the post wasn’t about the budget at all.” So let me point out again your opening sentence: “…via the Continuing Resolution.” let me point out a Continuing Resolution is a change to a BUDGET.
Again, what was the purpose of this article? From your responses here, it appears just to be argumentative, and/or put SS back on the blog front page.
HSRP
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