Rep Marsha Blackburn’s snow job. Explains how Social Security money flows
I was watching C span Washington Journal this morning. Rep Marsha Blackburn was the guest. I got to listen to her explanation of how the Social Security funds flow and just had to post the clip. Copied from the transcript of the clip:
THEIRS MONEY THAT GOES TO MEDICARE AND SOCIAL SECURITY AND I THINK IT IS JUST IS SO INAPPROPRIATE THAT THE FEDERAL GOVERNMENT DOES NOT USE THAT AS A TRUST FUND BUT THEY MOVE IMMEDIATELY TO THE GENERAL FUND AND STACK UP IOU’S THAT ARE SITTING IN A CABINET IN WEST VIRGINIA.
What she says should not be allowed to stand and if C-span were half of what it used to be, she would not have had the following go uncorrected. Thus I leave it to the Angry Bears to correct her here and thus document her ignorance of the subject.
I have not watched this lady before. I could not help but think she is just a more polished version of Sarah Palin. She is totally capable of pulling off what we used to call a “snow job” when writing their essay.
Is she dyslexic? It seriously could be an organic brain disorder.
Elliptico; ‘Marsha Blackburn: Image Consultant’; No, really
No Elliptico, not dyslectic and not a brain disorder. Image consultant by any other name would be as deceitful. Some who lie for pay call themselves publicists or public relations professionals. In general we usually understand that they are propagandists pushing one revision of reality or another.
Marsha, if you’re out there, how would you define the assets of a Trust Fund? Would they be Federal Reserve Notes hidden in a blanket? Would they be gold coins buried beneath the base of a sycamore tree? Most of the wealthy have trust funds for their heirs. They might have assets in stocks and bonds and almost certainly Treasury Notes. The last for stability and security of the asset value. Small return, but safe. Guess what. The Social Security Trust Fund takes the safest route to long term financial stability. It holds its assets in Treasury Notes. Yes, the SS Trust Fund lends the money to the general fund via the Treasury, which in turn issues those Treasury Notes. Just like JP Morgan Chase Bank or Goldman Sachs might do with a fund of assets.
Why have the Trust Fund at all? To provide assets for the payment of benefits when the FICA totals are below benefit needs in a given year. Some years more FICA and the Trust Fund grows. Some years less FICA so the Treasury dips into the “cookie jar” we call the Trust Fund. Oh, that vault in Virginia. It’s full of Treasury Notes held by the Trust Fund. I wonder where JP, Goldman and Warren Buffet keep their Treasury Notes? What about your own? Do you keep the money you earned selling image under your mattress? Or, do you keep it safe in Treasuries? You are slick. You might have been able to sell Mitt as a working stiff just trying to help out his fellow Americans. Just like you’re trying to sell the lies you tell about Social Security asset flows.
Yes Jack,
All the host had to do was ask a simple question: So Rep Blackburn where would you park $3 to $4 trillion dollars if not in US Treasuries?
Of course that could be followed up with: By implying that these treasuries of the SS fund are worthless, are you not stating that the US government is unworthy of investors trust?
RJS, as I watched her I could not figure out her smile. I knew it was a learned facial expression, not a coverup, but not sincere. Now I know. Actress.
The debate about SS-issues simply does not attract smart people (and I’m not just referring to the Reps).
I know that previous sentence sounds flippant, but I really mean it, and here’s why:
No truly smart person is going to waste their smarts on such a boring topic. No way. Instead, they’ll devote their energies to something that might actually get them laid or paid. [And for those whom sex and money hold no attraction, they’ll find other outlets for their smarts…outlets that I assure you do NOT involve Social Security and CBO actuaries.]
Now don’t get me wrong, I KNOW SS is very important. Also, I know that most “important” things tend to not be so f*ing boring. But not SS. SS is one of those very important but very f*ing boring topics.
As a result, we’re stuck dicks and dullards to get us out of this mess.
The Dick-Dullard is the guy who’s “knowledge” comes from attrition more than anything else. As a result, nobody is left to challenge him….But, of course, the Dick-Dullard knew this all along, which is why he chose such an arcane subject to begin with. It allows him to work off all his frustrations at being marginalized in the rest of his life. And you can see this by the caustic, inflammatory way that the Dick-Dullard goes about imparting his “knowledge”.
But we need intelligent people discussing SS, not the Dick-Dullard. In the hands of the Dick-Dullard, SS is a perverse opportunity to achieve relevance, rather than being an important social issue. These are the morons, unfortunately, we’re relying on to distill the tedium. No wonder why we never get anywhere on SS.
What society needs is to get a bunch of Asperger-ee types to really wade into SS…not the assholes.
Then, have them lay out the facts in a non-partisan manner…and let all peoples vote it out.
And send the Dick-Dullards back to where they belong: Reading and interpreting VCR Manuals.
I live in GA now but did own a 2nd home in TN due to no State income tax and work opportunities. Rep. Blackburn as someone said in an earlier post does come off as a Sarah Palin but she is smarter. I lived in her District which covers one of the higher per capita income areas of TN, Williamson County, and she is safe, has no one who can beat her, and they love her there. I agree this can’t be allowed to stand but it shows you the fight we have to protect a critical program like SS. It distresses me that people do not see the major crisis coming in the lack of retirement income I believe mainly to the killing off of defined benefit pensions and the fact that it takes 2 people working full time to make 43% of what 1 person made in 1978 (inflation adjusted).
Bitfu Jones
I may be the Dick Dullard you are talking about, but I like to believe I have explained Social Security very clearly in a non partisan manner. If it isn’t as exciting as sex… well, to borrow a phrase from Peter Peterson… hopefully they will grow up before…
well, Peterson said “before we grow old”, but Peterson is a liar.
I don’t think the problem is that I am dull, or even caustic and inflammatory. I think the problem is that I can’t get a hearing from the “people who matter.”
And those who, like you and me don’t matter, are unable to get together to force “them” to listen.
here is the un partisan truth, very simple: Social Security is not broke, it is not welfare, it has nothing to do with the debt. The Trust Fund has not been stolen.
There is a good chance that in order to pay enough benefits in the future when we… you… will be living longer, we… the workers who pay for social security and always have… will need to raise our own “tax” about eighty cents per week per year until the books balance again. No one would even feel such a “tax” increase.
Now, why haven’t you heard about that before?
I think she is a liar. But being stupid is not inconsistent with being a liar.
I did get to talk to my Senator briefly. I asked him why we did not hear about “fixing” Social Security by raising the tax eighty cents per week.
He said … after a long ramble… that Social Security is Insurance (it is) which seemed to mean in his mind that we need to means test it, so that only those who “really need it” will get it.
I repeated, “but eighty cents per week?” He was not able to see the point.
I am completely convinced my Senator is just stupid. I think most people live in a world (mind) where quantities mean nothing to them… it’s as if in a dream… things loom up at them, or recede according to the scare-value. They can’t tell the difference between eighty cents and “Eight Trillion Dollar Unfunded Deficit!”
Jack
minor error
Treasury does not dip into the Trust Fund when outgo exceeds FICA income. When that happens, Social Security “dips into the Trust Fund” and cashes some bonds to pay benefits. That would mean that Treasury has to come up with the cash… probably by borrowing it from someone else.
None of that is a big deal. Happens all the time. Will happen more and more as the Trust Fund is drawn down to pay for the boomers… and the present banker-caused recession.
same thing happens when CALPERS or the tennessee public employees pension fund pays benefits, coberly…they just cash some of their stack of those worthles IOUs from the Treasury…
rjs
i think there is a difference though.
calpers depends on interest from investments to provide a decent return. SS gets its “interest” from the growth in wages (of all of us) over time.
also, with all the state governments downsizing, it’s hard to see how workers’ contributions are going to help pay for future benefits the way SS does.
on the other hand, your point here is well taken.
the liars like to pretend that it is some kind of economic oxymoron that the government should have to go out and find the money to pay back what it borrowed. and the voting public are so completely without financial or economic knowledge that they believe that nonsense.
Coberly,
I came across this site, having recently entered it into BITFU.com–our political search engine. It being a slow time, SS and minimum wage were a couple of “nuts and bolts” search possibilities that are in the news. I saw The Angry Bear’s post on SS,and with cup of coffee in hand, I figured I would throw down some “noise” to stir the pot.
My point in telling you this is that I really didn’t have you in mind as I’ve never read any or your work. I do appreciate, however, your measured response when you thought I was perhaps referring to you. It was hardly “Dick-Dullardish”…far from it.
And let me just conclude: .80 cents a week ’till the books balance? If true, that really is an amazing fact. It cuts through all the B.S, doesn’t it? It’s probably the first SS response I’ve ever heard that gives a falsifiable claim…as opposed to the typical “proof by intimidation” deluge I typically see. I’m gonna check it out…in the meantime, sorry if you thought I was referring to you personally in my prior comment.
Welcome Bitfu,
Angry Bear has been on the SS issue for years now. Colberly and Bruce Webb actually read the reports and crunch the numbers. Just search this site with their names and Social Security and many posting will come up with graphs and spread sheet. You can also google Northwest plan for Social Security.
“What society needs is to get a bunch of Asperger-ee types to really wade into SS…not the assholes.”
Well I see that Dale has laid claim to Dick Dullard so I guess I get “Asperger-ee”. Though I manage to combine it with ‘asshole’ on occassion.
Back in around 2001 I used to describe myself as the oddest duck in the world: a Social Security Hobbyist. After all I read the Annual Reports of the Trustees of Social Security FOR FUN. And on those rare occassions before 2005 that the topic came up in the blogosphere rushed to have my say in comments.
I have to say my proudest moment in those pre-Bush Social Security days was when Max Sawicky of the much missed and seminal economics blog MaxSpeak (YouListen) told his readers something to the effect: “Whoah boys, this guy really HAS read the Report”. From that moment I was not just some anal crank akin to re-enactors of obscure Civil War battles but a potential participant in policy debates. Hurrah for me!
Of course I was the same odd duck and asperger-ee lite guy I always was.
And since I have no shame I will point you and everyone to the index of my first couple of years of Social Security posts on Angry Bear in turn maintained at my more or less static blog. The first two sets are designed as kind of a mini-course but really one can just skip around and skim the pieces in any order.
http://bruceweb.blogspot.com/2008/08/angry-bear-social-security-series.html
And there is a whole section on the 2009 version of the Northwest Plan (each link leading to a dozen or more posts back on Angry Bear)
http://www.angrybearblog.com/2009/05/nw-plan-combined-oas-and-di-triggers.html
‘Just the spreadsheet maam’
This is the 2009 version of the NW Plan. It’s main advantage over the 2012 version I just posted is that the labeling is a lot clearer, and really the principles are the same.
Under either version Trust Fund balances never decline in nominal terms, Trust Fund ratios stay comfortably over the 100 official target and 100% of current scheduled benefits are payable.
As to cost per worker, you just take the difference between column four and column three and apply it to whatever household income history you care to posit. 80 cents a week is just for a worker making roughly $40k in 2009 dollars, the initial bite for a minimum wage worker being much less while that for the worker lucky enough to work at or over the payroll cap his entire career being correspondingly more.
The key point to the NW Plan is that all the economic assumptions are taken directly from the Trustees. That is Dale is responsible for the calculations and not the underlying model. That is people who quarrel with payroll assumptions and interest rates can take it up with the SSA Office of the Chief Actuary, the 80 cents just flows from an application of new proposed rates on that existing model.
Bitfu
you need to be careful in “researching.” there are places where a person who has a headful of “non partisan expert” “facts” will say, “yes but..” and lead himself back down the primrose path to some scary number far in the future.
i am pretty sure I can “explain” all that is not clear from the spreadsheet. but you might want to check NASI (National Academy of Social Insurance) 2009 publication “Fixing Social Security” by Reno and Lavery.
Also the 2010 CBO Report “Options for Social Security.” This has been “dated” a bit by the recent recession, but the ultimate numbers are still the same.
And both of these ought to at least give you the idea that “eighty cents per week per year” is not “unbelievable.”
What is unbelievable is that you have never heard about it.
And don’t worry, I didn’t take it personally. Wouldn’t have cared if you did mean it that way. What I care about is saving SS from the Liars.
Thank-you guys for the back and forth which is one of many reasons I read AB every day along with the comments. Dale, I appreciate the “help’ you gave me with several letter to editor and have expanded my network to get many more letters in small town newspapers where they do not limit you to 350 words or less. It amazes me though that we are losing the information battle.
Yes, there is no logic behind these dweebs’ anti-SS tirades. Mish Shedlock, whose blog continues to descend into a bad Three Stooges parody, exclaimed recently that the Trust Fund was gone and that the money had been spent. Investors in corporate bonds and US Treasuries were likely alarmed by this revelation, no doubt.
you have to understand where theyre coming from…what they see as an eventuality is an increase in the payroll tax cap…that means all their earnings north of $113,700 will see a 6.2% tax increase…businesses imagine they’ll have to cough up funds to match that for their high paid employees…so they are scared shitless of social security and how much they think it will cost them…everything that follows from that and what we’re fighting against is no more than obfuscation in an attempt to kill or privatize the program…
rjs
that’s what i keep telling the “defenders of Social Security” who call for “scrapping the cap.” That is the way to make sure even the non-crazy rich want to kill Social Security.
If they would take the time to teach the people that they can pay for their own Social Security with an extra eighty cents per week, they would be able to reassure the “rich” that they will not have to pay thousands of dollars in payroll tax they will never see benefits from.
But either the “defenders of Social Security” are on Peterson’s payroll, or they are just too dumb to understand, or they are neurotically committed to “justice” which in their mind means “tax the rich” to pay for everything the poor poor need.
even when the poor poor say, “i’d rather pay for it myself.” as in fact they have recently done in a poll taken by NASI.
But between the liars paid by Peterson, and the fools who think they are being “progressive” when they say “scrap the cap” no one even hears about how totally cheap the “fix” is IF WE PAY FOR IT OURSELVES.
sky,
thanks.
we are losing the information battle because Peter Peterson is spending a billion dollars to feed disinformation to the public, and the press, and the politicians.
he appears as their wise old rich uncle giving them good advice… which they always knew… “debt is bad.” and of course takes the fact that today’s prices (tax) won’t pay for Social Security a hundred years from now, or “over the infinite horizon” and pretends that is a “debt.”
and everyone just nods wisely and sadly and says “we love Social Security but we can’t afford it. it’s just arithmetic.”
And the progressives say, SS isn’t broke, we can fix it. You can’t take it away from the workers because the workers paid for it themselves, so we have to make the rich pay for it.
And they all have PhD’s and get very offended when I say, “but that’s stupid.”
thats a good idea, coberly, save the rich…
rjs:
It is a side issue when one looks at the other arguments such as:
– whether the TF is real or not,
– should we be looking at an actuary SS 75 years from now or 10 years from now,
– can we raise SS Withholding 1 tenth of 1% yearly for 10 years to bring it back into line and never touch all of the TF,
– what happens when the TF is exhausted
– if more people come back into the Civilian Labor Force, what happens
– etc.
Raising the cap could solve quite a few problems; but, why would we give Congress more SS Withholding only to lower and substitute it for other taxes? Maybe keep holding the increases to inflation and resolve the jobs problem which would have a far better result and more to our liking.
bill, i wasnt advocating raising the cap (although i’m enough of a pinko commie that i’d have no problem with that solution)…i was just pointing out why there’s so much hysteria over social security, a program with few problems…& despite the fact that i often pick on coberly, it’s been his thinking that ive cited when i’ve written about social security on my own blog & in comments elsewhere…
rjs
i guess i am enough of a pinko commie to have no trouble with raising taxes on the rich to pay for the deficit or whatever else the rich get out of government. heck, i’d even raise their taxes to pay for NEEDED welfare.
but raising their taxes to pay for Social Security is not pinko communism, it is stupidity. well… maybe it is pinko communism and stupidity.
i was just going to write a comment in another thread about the failure of Holz-Eakin to understand why a projected future “actuarial deficit” (NOT A DEBT) that amounts to eighty cents per week is not a good reason to cut Social Security.
But what am I to do when my “friends” think that “eighty cents per week” is a good reason to destroy Social Security by turning it into welfare.
people don’t like me because i say “stupid.” well, gimme another word for it, then.
dense
rjs,
I think you’re missing Coberly’s point regarding the increase in the FICA income cap. Unless future benefits are going to increase sufficiently for those who have higher levels of income and pay FICA on that increased cap, raising the cap only serves to create a welfare-like character to the benefits paid to those at lower levels of income.
Where the increase in taxation of the wealthier Americans needs to take place is on the income tax side of the ledger. That will help to lower the general budget deficit and possibly reduce that debt. In the face of all the obfuscation between the two forms of deductions from payroll it is all the more necessary to distinguish Social Security FICA deductions from the income tax. There needs to be a clear distinction between general budget spending and Social Security program benefits. The two do not over lap and that needs to be clearly delineated for the public given the intentions of the VIP to obscure the difference. Raising the Social Security income cap only enables those who seek to obscure the discussion by making FICA seem more so like a tax rather than a contribution to a retirement plan.
Liberals need to be smarter than those who, like Blackburn, are paid to deceive and obfuscate.
rjs:
Ok, I understand.
jack, i didnt miss coberly’s point…i was just obfuscating because i’d rather screw the rich at every turn…
rjs
hate to keep boring in like this
but raising the cap will not screw the rich.
calling for raising the cap will screw the poor.
i didnt really call for raising the cap, coberly…i was just expressing gut feelings…
my original point was that it makes no difference what we propose or how solid our arguments are, until a long term fix is in place, the krastings & mishes & their ilk are gonna advocate screwing the poor anyway, and those that feel threatened will follow in lockstep…
rjs
long term fix:
agree to raise the payroll tax one tenth of one percent whenever the Trustees Report “short term actuarial insolvency.” or cut it whenever the TFR goes over 300.
or, if this is too hard, raise the payroll tax one tenth of one percent per year starting now until the 75 year actuarial window is in balance.
or just for ten years. then do it again if needed.
or raise the tax one percent today. and do it again in ten years if needed.
or, just for laughs, you could ask those making over the cap if they would like to see the cap raised to about 150k in return for increasing their SS benefits to about 30k per year (given the times, this might be a wise strategy for them. but a very hard sell. like all wise strategies.)
or some combination of the above.
but cutting benefits ANY amount now is simply killing Social Security… benefits will be too low to be meaningful insurance for old age. and scrapping the cap is simply a way of killing Social Security by the left hand.
raising the retirement age or means testing SS are ways to kill SS in the nastiest, most evil ways possible.
as is cutting Medicare instead of raising the Medicare tax. young people can easily afford to pay twice what they are paying for Medicare now. They won’t think it is so easy to make up the difference between Medicare benefits and their needs when they are old if the benefits are cut.
So you guys see no difference between a) Saving real capital and converting it to another form of productive capital good which will increase future productivity from which to draw ones retirement, and b) Having the government spend the saved goods on consumption with no actual investment in future productivity while depending on future tax revenue of someone else’s productivity to live off? You think anyone who understands the difference and long term ramifications is dyslexic or deceitful? Interesting.
Brian Macker
maybe just stupid.
I believe I see the difference you point out. I also see that there is no shortage of “productive capital,: AND that the government “invests” capital in productivity; AND protected savings like Social Security does not detract from productive capital in any way whatsoever.
The people who collect SS benefits contributed their “productivity” when they were working. SS provides them a way to “save” their productive capital, or “invest” it… in almost exactly the same way you invest in a bond. At the end of the day the interest you collect on a bond is you living off someone else’s productivity.
As long as you eat, as long as old people eat, a certain amount of “productive capital” is going to get diverted to “consumption.” All Social Security does is provide a way to avoid starving in the street so some asshole can pretend to himself that he has invested wisely and it would be a violation of the holy law of capital investment to let people eat when they have reached an age where they are no longer “productive.”
Crap!! Let’s cut to the chase. listen Brian Macker, did you not read the ddetailed descriptions of how SS works. Is that system any different from any other retirment annuity plan? Where is all of that private annuity money going to? Well what goes into the SS Trust Fund is not different. It gets put into productive use by being invested by the Trust Fund in Treasury Notes and the govenrment spends that additional borrowing on all forms of products. Did you not read what is being written repeatedly? Or, are you just a dumb ass?
It’s not as though this hasn’t been explained repeatedly until a 3rd grader could recite chapter and verse. Those like the Blackburn creep confuse the issue because that is how they earn their daily bread and fund their own fat nest eggs. What is your excuse for not comprehending what is a relatively simple concept? Retirement annuity investment with a disability aspect built into it and administered more inexpensivley than any other and guaranteed by the “full faith and creidt of the USofA.” That guarantee will only be violated if dumb asses are allowed to continue to obfuscate and lie their asses off.
Coberly,
I guess it is easy to come to rash conclusions when you don’t know the difference between a shortage and scarcity. How would you tell there was a “shortage” of productive capital since you claim you don’t see one. What metrics would you use?
The government invests in productivity? You mean like ethanol, A123, Solyndra, the Post Office, etc? Sure but incentives are not directed towards returns. The USSR shows how skillful governments are a organizing productivity.
Your claim about SS not “detracting from productive capital” is ill formed, but if you mean forced diversion of income for government spending does not reduce the pool of capital available for true savings then you are just plain wrong. It does so in two ways. First by actually confiscating the savings for consumption, and second by deceiving the victim that savings has actually been set aside for him. Much of what is collected is just paid out to others. It is mostly a pay as you go system with some funds diverted for consumption.
Reading further your writing becomes even more sloppy. I have no clue what you mean by people who collect SS contributed to their productivity when they were working? That’s a total misuse of the terms indicating you do not even understand their usage. SS contributions don’t contribute to productivity. They are consumed by current retirees (in the early stages of more than they ever put in) and the excess lent to the government, not for investment, but consumption.
No SS is not a savings system at all. None of the funds are actually saved in the true sense of the word. It is not the same as a private bond. That’s the whole point. You are apparently incompetent to tell the difference. The private bond is used to increase the true capital production structure, as in building factories, machines, paying to feed workers, etc.
No, at the end of the day living off a bond is me reaping the rewards of the increase capital I created. Those rewards are increased productivity I caused. Simple example, If I were a fisherman and saved enough of my catch to live off while I build a bunch of nets, then later in my old age I can rent the nets increasing the productivity of some young worker to the point he can afford to rent it.
If the government instead taxes my fish to place in SS, and the fish is all consumed there will be no addition net available for me to live off of. I then have to live off taxing the young worker, and his catch is much smaller without the net.
Your last paragraph was an ignorant rant. Savings is excess over consumption, silly. It has already been accounted for when I say that I have saved.
SS is actually a regressive tax married to a redistribution system. No savings involved, what so ever.
I’m the stupid one? Seems like you are just ignorant. You guys are not aware of the nature of capital and savings from what I read here.
Jack,
Do you feel your position so weak that you always have to be abusive? Maybe you need to use your real name to give yourself an incentive to behave.
If you see no difference then why even have one or the other. Heck, just outlaw private savings altogether and force everyone to give it to the government. Then the government can spend on what you mistakenly think of as productive, sorta like the Greek government has done.
Of course there are many differences between SS system and private savings with many consequences. One is compulsory and one is not. The compulsory one is run by government bureaucrats and no matter how it performs I cannot shift my funds. The “investments” that are purchased are in fact solely from the government providing it with a gigantic set of captive “investors”. This naturally tends to drive down returns by simple law of supply and demand, and lack of competition.
Often, too often, the government decides that it needs to pay off political friends so it will further artificially put a price ceiling on these artificial investments. Not something I would be forced to experience in a free market.
I can continue for a long time with other differences. I think a good video for you to watch would be “Milton Freedman: The Social Security Myth” on you tube. This way I don’t have to waste my time explaining more differences from a private annuity.
You strike me as the kind of guy who’d ask who stupid someone is for thinking the forced labor of the USSR was any different than holding a job anywhere else. After all they both get paid, make things, have holidays, etc.
Brian Macker
if you are still around, here is a thinking exercise for you.
1) assume that I might be at least half as smart as you think you are.
2) assume that I might have thought about this oh maybe ten thousand times as much as you have.
3) try to think carefully about what “investment” means, and then what I, in my clumsy way, might have meant when I said the “government invests”…
hint: i was not thinking about Solyandra.
4) try to think carefully about what it might mean that people “invest” in Social Security.
hint: the model might be closer to a law firm, or an insurance company, than to an industrial plant.
5) the world is far bigger, more complex, and more interesting than you have any idea of. try to learn something, for god’s sake, from something a little deeper and more honest than a Milton Freedman video, or the first chapter in your Econ 101 text.
Mercker, what some people call a diversion of productive capital is something I call food, clothing, and shelter for seniors. Whether or not the diversion occurs through the government, I support it. I will assume that you don’t really oppose this diversion, but maybe you think that this diversion could somehow be more efficiently effected. Given the low administrative costs of Social Security, I doubt it.
according to the Federal Reserve, as of the third quarter of 2012 nonfinancial corporations in the United States held $1.7 trillion of cash and equivalent securities that could easily be converted to cash…Apple alone is holding $137 billion in cash, the subject of a recent shareholder lawsuit…if the corporations and banks are stuffing their savings under the mattess of Treasury securities, how is what they’re doing a better allocation of capital than the $2.7 in Treasuries in the Social Security Trust Fund?
PJR, It called consumption. I know it’s hard to understand but old people consumed before SS existed. Consumption is not investment.
rjs that $2.7 trillion represents $2.7 trillion that we otherwise would have borrowed from corporations and private investors (and China . . . ). In other words, it would have been loaned to the government anyway and it would be part of debt held by the public instead of debt held by the Social Security Trust Fund.
Macker
you really are an idiot.
the reason people invest is so that they might consume.
did you read the comment about the cash being sat on by the corporations? why do they not “invest” it?
old people starved in the streets before Social Security.
i doubt if you have the actual brain power to understand how and why pay as you go works, try to think for once in your life.
Rjs,
Money serves multiple purposes. It is a medium of exchange and a store of value. It’s store of value function allows market participants to coordinate temporally separated transactions. For example, I might specialize in egg production and may wish to save up enough money to buy a car for cash. If I save eggs the ones I saved first would rot before I had enough to buy the car. Money fixes that problem. I sell the eggs and “mattress stuff” the money until I have enough. Mattress stuffing allows trades not otherwise possible. I could always borrow that money from some other mattress stuffer and pay him interest. That however is no different than me “hoarding” the money myself. It only makes sense to borrow his hoard under certain circumstances I won’t get into.
Both are examples of saving. In one case I saved and in the other the person I borrowed from did.
Why wouldn’t I lend that money out as I saved? Plenty of reasons, and there is no downside if I decide not to lend it out. I might be in a deflationary environment for example. My holding of the cash does NOT prevent anyone else form making whatever trades they wish. I haven’t locked up any resources. If lots of people do what I do it would lower prices and cause their money to be worth.
Production involves the bringing together of many goods to make products, and one needs cash holdings to coordinate ones plans. Nothing wrong with that. You can run into cash flow problems otherwise.
A store of value also allows one to deal with unexpected trouble and opportunity. So cash holdings can be beneficial to have when the next big idea hits you.
These saving aren’t being invested to increase production, but so what? Funds serve many purposes in a company. They haven’t consumed it either. In fact lots of this supposed cash is lent out to the government for consumption, or other companies for production.
The company is fabulously profitable for those savings it has invested in production. A deflationary period with a risky business environment is exactly when you’d expect a desire to hold more cash.
The cash they’ve lent to the government is not saved by the government. It is consumed, and will be repaid, later out of higher taxes on others. Not a bad deal if you want to hold cash. The money lent to the government doesn’t increase productivity however. The extra interest has to come from either a depreciated currency, higher taxes, or Ponzi like additional borrowing by the government.
Seems
Colberty,
Your latest comment was content free, and unresponsive.
Macker put your money into your 401(k) and I take it out of my 401(k) to eat and there’s no change in money available for investing in, say, widget research. Doing this through Social Security does not change the result. Or if it does, it’s not obvious to me.
Macker
i don’t enjoy calling you an idiot. in the first place it is against my religion, and it makes me no friends. but you are an idiot, and there is no point in obscuring the fact.
“PJR, It called consumption. I know it’s hard to understand but old people consumed before SS existed. Consumption is not investment” B.M.
Macker,
No, but consumption precedes production which is the purpose for investment. You see the economy is like a three legged stool otherwise it stumbles around and may eventually fall apart. Consumption by any other name is still demand and production without demand has no purpose. And investment is the result of the need for production.
And in case your reading of history is not too clear on the issue, the entire impetuous for Social Security was the failure of the economy to provide older people with the ability to afford to consume. Old England had an name for it, the poor house. Here we had inconsistent welfare. Now workers are required to participate for their own personal gain in a retirement system that does not rely upon stealth and whimsy and doesn’t evaporate with the last or next stock market collapse.
“The money lent to the government doesn’t increase productivity however. The extra interest has to come from either a depreciated currency, higher taxes, or Ponzi like additional borrowing by the government” B.M.
This statement from Macker is superficial in the extreme. What any government spends is money right back into the economic stream. Governments spend on what some entity produces after having invested sufficiently to engender some kind of production. That spending is dependent on taxation or borrowing and both take place in a cyclical fashion. Throughout history goverfnments have borrowed when it was deemed appropriate to do so rather than tax its citizens. Some governments are able to print more money, but this is only another form of borrowing. Have you ever read the face of all the cash that you harbor and hoard so dearly. In the USofA it clearly says Federal Reserve Note. That’s small borrowing via the Federal Reserve system. For bigger borrowing the Treasury issues Notes, Notes = borrowing in the big world of finance. Though the Treasury pays inrterest on its Notes, and that’s why the SS Trust Fund prefers Treasury Notes rather than a hoard of Federal Reserve Notes. They’re also easier to store and account for.
BTW, Jack is my real name and most of the other commenters here know that and many even know my full name.
Jack
and the fact is that government spending IS investment.. even if it is only investment in keeping the workers alive from one business cycle to the next.
our young idiot cannot imagine “investment” can mean anything other than building a factory.
“investment” is spending money or labor or resources to do something that will increase “productivity” at some future time.