Social Security: Trust Fund Ratios, Solvency and the Reagan ‘Raid’
What does or would it mean to say that Social Security was ‘solvent’? Under the rules that govern the Trustees of Social Security the test for any given year is pretty simple: did or will the year end with all obligations/cost met while still retaining assets equal to the next year’s cost. To determine this you take the year end Trust Fund Balance and divide by Cost to get a Trust Fund Ratio where 100 = 1 year. If the TF Ratio is 100 or above Social Security is solvent for that year, 99 or under not. It is important to note that a TF Ratio under 100 doesn’t mean any change in benefits being paid out, instead benefits can and under current law must be paid in full as long as there are any assets to draw on, that is a TF Ratio greater than 0. Still any number between 0 and 100 is worrisome.
Is Social Security ‘solvent’ today? By this test certainly, at least for the Old Age/Retirement (OAS) Trust Fund, at years end 2012 OAS had a TF Ratio of 391. Has Social Security OAS always been ‘solvent’. Well no, and we can track its performance since 1937 in the following Table for the 2013 Report.
Table VI.A1.— Operations of the OASI Trust Fund, Calendar Years 1937-2012
By this simple TF Ratio test OAS was solvent every year from 1937 to 1965 and again from 1967 to 1970 only to fall under the 100 mark in 1971 enroute to its lowest year end point in 1982 at 14. At that point full payments of benefits were at serious risk, literally SOMETHING had to be done. And lo! the Greenspan Commission. More below.
Ignoring for our purposes the specific package that came out of the 1983 legislation that followed on that Commission and staying strictly to our metric, we can see that ‘solvency’ steadily improved with the full year of reform and the TF ratio was up to (the still dangerously low) level of 24. By the end of Reagan’s last full year it was 41 and then to 103 by the last year of Bush I. So if we reasonably consider the goal of the 1983 legislation to restore solvency to Social Security over the standard 10 year budget scoring window then the effort has to be seen as a success. On the other hand for the first nine years of that process Social Security was in fact ‘insolvent’ as defined here.
And this is where some standard narratives start coming off the tracks. But first a backtrack. What exactly are the assets whose value is numerator here? Well as mandated by the Social Security Amendments that formally established the OAS Trust Fund they are entirely financial instruments ‘fully guaranteed as to interest and principal by the Federal Government’ which is to say Treasury Bonds and Notes. And the key word is ‘mandated’, the Trustees of Social Security HAVE to exchange any revenues not needed for current cost for Treasuries. And importantly this would even be true if the General Fund was in surplus otherwise, it doesn’t matter if policy makers needed to extra funds at that point in time, the Trustees of Social Security would still be forced to ‘buy’ Treasuries and Treasury to ‘sell’ them and this was just as true in the days of Ike as in the days of the Gipper. The law mandates this buy/sell transaction.
Of course we could also cast that same transaction as lend/borrow. Because when anyone from PIMCO to the Chinese Central Bank or in our case the Social Security Trustees buy a bond direct from the issuer (Treasury) they are lending that money and in turn the issuer is borrowing it. But the point is whether the Treasury is at that point in time a reluctant seller or an eager borrower, the actual exchange of that Note or Bond for the excess revenue generated by Social Security is not a matter of choice but instead the simple operation of a law unchanged in that respect since 1939.
Returning to 1983 we can see that the legislative package had the result of boosting revenues at a rate that had them slowly growing faster than cost and so increasing the Trust Fund Ratio. And as just noted every dollar of that excess had by law to be exchanged for Treasuries. And as mentioned this can be cast as a case of the Reagan Administration borrowing the money. But in this case they literally had no choice, in effect FDR and Frances Perkins forced their hands here. But note that the end result was STILL a Trust Fund that was technically insolvent. But also note that the only way to make it more solvent would either to cut costs/benefits or contrawise increase revenues. And maybe some people would want to fault the deal makers of 1983 for not rebuilding the Trust Fund more quickly. On the other hand this would have FORCED REAGAN TO BORROW EVEN MORE. Because every extra dollar sent to Social Security is a dollar that has to be exchanged for a Treasury Note or Bond.
Seen in this light the whole ‘Reagan looted the Trust Fund to pay for guns and tax cuts’ story starts running thin. Because if that was really the intent the Administration would have insisted that the 2 point FICA increase that was part of the deal be phased in much faster than it in fact was. Instead they effectively starved themselves of their ‘loot’ by going slow. In fact given that the OAS Trust Fund was only at 41 in 1988 one could argue with a straight face that Reagan failed his fiduciary responsibility to Social Security by NOT BORROWING ENOUGH. At which point the whole ‘Great Reagan Raid’ narrative fades into myth.
Alongside of which we have to lay the myth of Boomer Prefunding. This will be the subject of a follow up post, but let me leave with this: in any year that Social Security has a Trust Fund Ratio below 100 then sending new revenues to its Trust Fund is not ‘prefunding’ anything. It is instead retroactively restoring that Trust Fund to the minimum level established by current law and policy. Moreover even after the Trust Fund is restored to solvency the ‘prefunding’ is limited to that amount of new assets in excess of that needed to maintain the TF Ratio above 100. And if there ever is a point when the Trust Fund projects to go back below that point than any such pre-funding has stopped. Even though the nominal balance in the TF may be in the trillions of dollars, after that point you have only prefunded a portion of the reserve and not the payouts at all.
Still however you come out on this second point, the first one still stands: Reagan didn’t loot the Trust Funds. His Administration’s ‘borrowing’ if you want to call it that was just in operation of pre-existing law. And if their goals had been that nefarious the solution would have been to rebuilt the Trust Fund even faster. Because you need to have assets in the pot before you can steal them.
Webb – What is the “right” ratio for the SSTF? Clearly 1 is no good and 4 is much better. What should we be be shooting for???
I ask because I have been following the Military Retirment Fund. As of 2012 MRF had a ratio of 8 to one. But the forcast from the Generals is that it will grow to 23 to 1 by 2032. The current MRF TF balance is $507B, it is projected to grow to $2.7T over the next 18 years.
To me, this is nuts. What do you think??
This info comes from the MRF 2012 annual report, page 20:
http://comptroller.defense.gov/cfs/fy2012/13_Military_Retirement_Fund/Fiscal_Year_2012_Military_Retirement_Fund_Financial_Statements_and_Notes.pdf
So the big “crisis” is for politicians — not the country. Politicians face the “crisis” of facing the electorate with a raise in the FICA tax of 2% over a couple of decades — while average income grows almost that much every year COMPOUNDED …
… problem being that as average income grows the average person’s income may shrink — due to de-unionization — as the compounded growth mostly all goes to the top 1%.
Until recently years the top 97-98, even 99% just about kept up with average income growth — and the top 50-90% kept up with growth at diminishing rates down to zero at around 50%. Now with the numbers you hear these days of how much is going to the top 1% it doesn’t sound like even that is happening anymore.
In the meantime — while politicians put off “facing up” — the bonds may be cashed with income tax funds which can running a deficit instead of raising the tax (keeping Republican politicians happy).
All of which, Bruce, points to my solution for everything: legally mandated sector-wide labor agreements (centralized bargaining) to rebuild and fair and balanced labor market.
Typo: “needed _to_ extra funds” — needed _no_ extra funds? (otherwise I think the meaning is lost).
Denis, et al,
The use of “average” income is very much misleading when the distribution of that income is so seriously skewed to the right side of the horizontal axis. Worse yet is the total lack of attention to the effect of any percentage increase when applied to such skewed distribution data. In effect, the income is all at the top, the average has little real meaning when discussing the population’s economic needs and all increases in income are continuing to skew to those who already have too much income for the good of the population and the economy.
I do agree that sector wide labor agreements would be a good thing. But first and foremost would be choosing a better representative group. It’s not just Republicans that are the problem. Dems aren’t that much better, just the lesser evil. The recently announced budget agreement resulting from the combination of Ryan and Murray is a pathetic example of government by the rich and for the rich which should be perished from this Earth. Why is there no increase in taxes? The working class is paying a shit load of taxes of varying kinds and the loss of income is no different than an increase in taxes.
Bruce K,
I looked at the report you linked. I conclude that the MRF has bizarre rules that make its comparison to SS impossible. The funds coming from the DoD budget for retirement are only 43 percent of what is needed to pay the costs. There is a second source that more than makes up the difference, but it will cease in 2026. That means that the required ratio needs to acount for the change from a regime of refunding to a regime where the incestments need to proviide about 50 percent of the costs.
If you look back to the text of the 1935 ACt and the 1939 ammendments, you will not find the current TF goal of 100 percent. You find 300 percent, with a trigger once it got the high. However, the economy grew do fast in 1939 to 1941 that it was over 300 before the first report was written.
Throught eh 1940s, Congress made it clear they did not really want the government to manage a large TF. They delayed the original tax increases that would have allowed more of SS funding to come from interest. We could have had a system designed around a TF of 300, but they did not.
I don’t know whether the current 100 percent came in 1983, but that is what we have now. Bruce Webb is fond of noting that the current 391 ratio does not come from an intent to “prefund”. I note that the demographics of the Baby Boom impose a need for a rising and then falling TF in order to create a 75 year solution starting in 1983.
There is nothing more “right” about 100 than about 300, but to get from here to there would require a consious transistion with increased revenues (from current workers). As long as we can collect about as much as is need for benefits, SS can stick with 100.
As long as DoD only sets aside half of what is needed for benefits, they will need a much larger fund.
I agree with you Arne…
Jack,
I believe I covered the “average income” part — you must have missed it somehow.
You wont get centralized bargaining — legally mandated unionization — until you get something else big done first; human nature has to be made to believe it’s possible — like getting the minimum wage doubled.
You wont get the minimum wage doubled until Obama and his rearrange-the-deckchair friends realize there is big political capital in renewing the American labor market.
Guys like JFK, Clinton(s) and Obama are usually good for rearranging the deck chairs to the best advantage, but not for the kind of culture change that remakes the country. The Republicans of course are good for steering the ship towards the nearest iceberg. Usually, it takes a Martin Luther King to do culture change. JFK did everything he could to steer clear of the civil rights movement — fearful, rightly, that he would lose the Southern Democrat votes for everything else he wanted to do. But, in today’s unique collapse of the middle class the votes are all there big time for culture change (and winning elections big!) — once these deck chair guys ever figure that out.
I think BK the implications of BK’s question are analytically intriguing.
As a Board member I was told to use a rule of thumb that we could spend 5 percent of our endowment (although it dropped to 4 percent during my tenure). That is consistant with a TF ratio of 20. With a TF ratio of 20, we would not need a payroll tax.
A TF of 20 would be assets of $15T; the same order as the federal debt or as the capitalization of the stock exchanges. Certainly that would create some logistical issues.
My personal holdings do follow that rule of thumb. I plan to save my way into being a capital holder. I expect to have 20 times what I need on an annual basis by the time I retire. What would happen if everyone did that? The median over working career (and retirement as well) would be about 10x. Can my capital produce 5 percent returns if everyone else is saving too? If the total consumption is less than 10 percent of capital holdings, can net return be half of consumption? I think it would be unsustainable.
Social Security CANNOT become insolvent. Social Security can NEVER be in a position where it cannot pay its bills, and since it cannot borrow money, it can never be in a position where it cannot pay its debts.
What CAN happen is that the cost of benefits can exceed the rate of income (from the payroll “tax”). In this case Social Security would either cut benefits or it would raise the tax. Since benefits are already set at just barely enough to survive, it would be insane to cut benefits. But since raising the tax enough to pay for the needed benefits would require a tax increase of less than one dollar per week per year, it would be insane not to just raise the tax enough to pay for the needed benefits. That one dollar per week does add up over time… but wages increase over the same time. So that when ultimately the tax has risen to an extra 16 dollars a week, after twenty years, the workers pay will have risen by about 160 dollars per week.
You’d think people would be intelligent enough to understand that taking 16 dollars out of a 160 dollar raise to ensure that they will have enough to eat when they are too old to work, is not a “burden.”
You would think that.
Even if wages did not rise, that sixteen dollars per week would come out of a wage that is about 800 dollars per week today. You would think that people who can live on 800 dollars per week wold be smart enough to figure out how to live on 784 dollars per week, if they needed to save the sixteen dollars so that they would have enough to eat when they are too old to work…. or can’t find a job in the low wage, high unemployment, future that the Trustees are projecting.
You would think.
One should note that the Greenspan commission raised the tax and the sky did not fall. Why was there any doubt about raising the tax… on the workers who will get the benefits that they will need…by an amount the workers never even noticed?
Because there are people who want Social Security to fail. Because they make more money out of people who can’t afford to retire and who are afraid of losing their job. They seem to all work for Peter Peterson… but that’s a lot of people. Peterson is spending a billion dollars to make sure you never hear that you can afford to pay for your own Social Security. And you can’t afford not to.
i am not sure why Bruce feels a need to defend Reagan.
The idea that Reagan stole the Trust Fund is one of those lefty myths that is mentally equivalent to The Death Date of Social Security that we hear every year from the righties.
On the other hand there has been about 3 Trillion dollars lent by Social Security TO the government, and that money was spend on something. Might as well say it was the Reagan arms buildup as anything.
And as Bruce knows, the money will never have to be paid back. So maybe someone… can’t say who… understood that at the time.
On the other hand, raising the tax at that time and creating the large Trust Fund… in anticipation of the Boomer retirement… whatever some members of the Commission might have said later on some occasion… was a good idea. That way the Boomers paid for their own retirement in a way that was more fair than leaving it to the post boomers to “pay as you go”. And the remarkable thing is it works out fair for everyone, whether the Trust Fund is ever paid back or not.
But the smart money has always understood that ordinary people don’t understand money at all. It’s what makes them rich.
Bruce
seems to think that if the TFR is below 100 the money in the Trust Fund can’t be borrowed.
Arne seems to be saying… seems….
that we should turn Social Security from “worker pays,” pay as you go, to some kind of “your rich uncle left you a trust fund so you just live on the interest” scheme.
Nice idea. but it won’t work.
As the bad guys never tire of pointing out, it would take 9.6 trillion dollars in the bank today just to keep up with the expected GROWTH in SS needed benefits.
I don’t have 9.6 Trillion, but i think i can come up with an extra 80 cents per week every year.
Arne first thanks so much for this, it was data I was missing:
“If you look back to the text of the 1935 ACt and the 1939 ammendments, you will not find the current TF goal of 100 percent. You find 300 percent, with a trigger once it got the high. However, the economy grew do fast in 1939 to 1941 that it was over 300 before the first report was written.”
But second you have (inadvertently?) dropped two zeros here:
“That is consistant with a TF ratio of 20. With a TF ratio of 20, we would not need a payroll tax.
A TF of 20 would be assets of $15T; the same order as the federal debt or as the capitalization of the stock exchanges. Certainly that would create some logistical issues.”
It would take a TF ratio of 2000 or 20X of Cost to not need a payroll tax (assuming a nominal interest rate of 5%).
But as always thanks for helping us keeping our eyes on the numbers.
Dale it would be helpful if you didn’t try to intrpret for me. Because try as you might it comes off like strawman erection.
“Bruce seems to think that if the TFR is below 100 the money in the Trust Fund can’t be borrowed.”
I don’t think that and nothing in the piece supports such a ridiculously simplified and if I might say so self-serving suggestion that I do.
The point is that whether the TF ratio is 14 or 1400 and whether the GF is desperate for funds or overflowing with cash (as if) the ‘borrowing’ is mandated by law. As such going right to motive on either me or Ronald Reagan is shooting at the wrong mark.
And I am not ‘defending Reagan’. I am objecting to stupid and ill-informed attacks on Reagan based on shitty arithmetic and misunderstanding of the nature of Trust Fund financing. Faults which by the way you don’t even share.
Nobody could read the totality of my work and think that I was somehow a closet supporter of Reagan economic policy via Supply Side fantasies. And if you were anyone else than one of my few actual friends I would call this out as a troll trick.
In 1988 total Social Security assets equalled only 41% of actual 1989 cost. The tax increases imposed in 1983 were phased in (much like the NW Plan I must say) and so didn’t produce the flood of income that would have resulted from an immediate 2% boost in FICA. Which would have allowed for a significantly greater amount of ‘borrowing’ than that which actually took place.
You cannot look at the actual dollar numbers raised via the 1983 legislation for Social Security and compare them to the cost of EITHER his unwarrented defense increases or his tax cuts on the wealthy and see that they had any covering effect at all. You might as well try to hide an elephant behind a coconut tree.
What is worse the whole ‘Reagan stole the Trust Fund’ is a false flag attack launched by the Right in support of their ‘Phony IOU’ argument (“hey the money is already stolen Chump”) and for Social Security supporters to fall in with it is just to lend actual aid to the enemy.
That is you can think there was some hanky panky going on or you can believe that the Trust Fund is real money. But you can’t have your Trust Fund Cake and claim that Reagan ate it Too. At base the argument is incoherent and self-defeating.
Good Lord, Bruce
I have no idea what your motive, or Ronald Reagan’s, or even mine, is, was, or will be.
But as far as I can tell from reading your words, you “seem” to think that while the TF was being built back up to TFR 100, the money in it was not available for lending. And as far as poor Mr Reagan being “forced” do borrow it by “the law,” I think Mr Reagan’s advisors knew the law pretty well when they agreed to the 1983 “reform.” Also, I am not aware of any time in the history of the United States or Great Britain when the government did not borrow money.
not counting Andrew Jackson.
and if you are counting Clinton, money borrowed is money borrowed, even if you didn’t have to top up “from the public” in some given year.
self serving?
Dear Bruce
I didn’t think I was attacking you. or even accusing you of being a closet Reaganaut.
I just didn’t think it was worth the bother of answering the “Reagan stole…” meme, or that if you were going to, it was a good idea to present it all in terms of the TFR and the law forcing him to borrow the money.
I did think… in my “seeing the other guy’s point of view” personality defect, that a case could be made that Reagan’s advisors, who might have seen further than Reagan’s term, could have seen the advantages to their class of a “solution” to the then Social Security Problem, that would create a pile of money they could borrow from without ever having to pay back.
Since I am obviously not one of the “smart money” people, I doubt I could defend that proposition from someone who was.
For the record, as I think you were saying, I am NOT one of those who runs around claiming that Reagan stole the Trust Fund. Though I did try to point out once to some befuddled Republican that he, his class, and Reagan defense build up, had gotten some benefit from that Trust Fund.
as for the buildup… money was borrowed, only a small amount at that time from SS, to pay for Reagan’s deficit… in part due to the arms buildup… or to all the other things the Democrat (sic) Congress forced Ronnie to buy, except the arms buildup, which was only common sense, what with the Ruskies breathing down our necks from just across the Bearing Strait.. that borrowed-from-the-public money has, arguably, been replaced, grradually, over the years by borrowed-from-the-Trust-Fund money. but only a little of it. So little as you’d hardly notice. Still…
Dale the point is that anytime the TF balance is increasing whether from 14 to 100 or 391 to 450 the money is not only ‘available’ for borrowing but is in fact a forced loan to Treasury whether they want/need the money or not.
To repeat anything that actually increases Trust Fund balances on the revenue side whether the NW Plan or Raise the Cap not only makes more money available for borrowing, but also FORCES that money to be borrowed and DELAYS repayment of money already borrowed.
To repeat again in different form. Raising taxes on the rich on behalf of Social Security if done in a way that actually restores solvency means existing Trust Fund Balances (past loans TO THEM) NEVER have to be repaid.
Iterating my repetition one extra time in addition if you want to see that $2.8 trillion dollars returned to workers in the form of benefits the answer is to do nothing and simply let the Trust Fund run down to zero which in turn forces the rich to ‘disgorge’ the money they borrowed in real cash form. And I suppose once the Trust Fund Ratio was down to 100 or 14 or wherever you could put SS back on a true Pay-Go basis. But as it is the two issues of “make them pay back what they borrowed” and “make them pay more for Social Security” in fact work in opposite directions. People who think that “raise the cap” or for that matter “phase in FICA increases” serve to force the wealthy to make good their past guarantees of Trust Fund debt have their arithmetic ass backwards.
Want your money back? Call in the bonds. Want Social Security to be securely funded going forwards? Implement changes in revenue such that those bonds can be rolled over and never called at all. Social Security Solvency means retaining the current $2.8 trillion debt and rolling it over. Insolvency means extracting that $2.8 trillion in the medium term.
No this is not obvious. And no it doesn’t accord with what most people think as equity. But Social Security fixes EITHER on the benefit cut or revenue enhancement side means removing debt from billionaires. Well fine, it is what it is and we can compensate by taxing their money for other purposes. But then again it is what it is. Which is arithmetic.
Bruce
you are repeating yourself. i understood you the first time. and agree, mostly. Frankly, I doubt anyone else understands what you are saying.
but even if “they” have to pay back the Trust Fund, “They” will not be paying it back. The money will come from where money always comes from… the growth in the economy. That’s why the National Debt has never been paid “back.” Meanwhile the Boomers will get the retirement they paid for, if… and probably only if… we do NOT let the TF run to zero (or 100) but make arrangements to pay as we go without the phony debt or backwards deficit hanging over our heads. And, the post boomers WILL get their money back, even if the TF is not paid back… because they will get their higher tax back in the form of higher benefits.
you know this. one of the few.
I don’t disagree with you about any of this. I just don’t think that ‘oo paid ‘oo.. or stole from ‘oo makes any sense. And plays into the Petersons hands to even talk about.
The point is “you are going to need your social security, and you can afford it, easily.” Or am I repeating myself?
And no, I don’t expect you to say what I say. On the other hand, you don’t need to take it personally when I say what I say.
Maybe the assets of the Trust Fund should be viewed in a different manner than as money borrowed and possibly subject to the government’s refusal to repay. Though such a refusal seems remote to me one can never foretell what more draconian turns our unrepresentative Congress may do inn the future.
The Treasury issues many categories of financial instruments. They are mostly viewed as a means for individuals and institutions to store their liquid assets in a safe haven. Buy bonds!!! The SS Trust Fund is no different and the law outlines the mechanism for excess FICA revenues to be kept safe for future use as needed. That’s not quite the same as one agency of the government borrowing from the other as when China, JP Morgan Chase or Krasting “buys” US Treasuries with their surplus cash.
It is more accurate to recognize that the FICA revenue never reaches the Trust Fund as cash. It is immediately denominated as Special Treasury notes. It’s an accounting mechanism defined by the Social Security Act. These assets are not subject to a pay or not pay choice by the Treasury. Nor are they subject to confiscation by some rogue Congress. And as such those assets were never available as payment for military supplies or to rebuild the Hoover Dam. That the assets of the Trust Fund have from time to time been used to balance a unified budget has been an accounting canard given that the law does not recognize a unified budget. There is the general budget and there is the Social Security program with its revenue stream and its Trust Fund.
The assets of the Fund cannot be redirected any more so than could the assets of Enron without some slight of hand activity on the part of some dishonest manipulation of those accounts. Yes, any amount of dishonesty is possible at any time, even in the halls of Congress. Or maybe especially in the halls of Congress. As things stand the Trust Fund Assets are there for the purpose of supplementing the FICA revenue stream when and if needed. Nothing else can be done with those assets.
And before someone wants to suggest that Special Treasuries need not be honored by the Treasury as what they are I remind you that that is also the case with any other Treasury financial instrument whether held by China, JP Morgan Chase Bank or any individual. How likely is it that the Treasury will declare tomorrow that all 10 year T Bills are null and void?
Dale you start false hares and then object when I chase them and track them down. That game gets tiring.
Maybe you should cut your losses and let my posts run without “correction” or “amplification”. Let “a thousand Bruces bloom” and then maybe prune them after the fact in a post of your own. It is kind of sucky having to push back against friends in every fricking post only to have them say “I agree with the substance, but —-“
“Arne seems to be saying… seems….
that we should turn Social Security from “worker pays,” pay as you go, to some kind of “your rich uncle left you a trust fund so you just live on the interest” scheme.”
Actually, I was pretty specific about creating a trust fund by saving it for myself. I think that that is what lots of people believe they are doing with SS (even though PAYGO should not be so hard to understand).
Note that I was also careful to say percent when I meant percent and to leave off percent when I was actually talking about a ratio.
I did not need coberly to tell me that a world in which everyone had a trust fund is politically impossible. I was wondering about the thought experiment of whether it would be economically stable.
“Note that I was also careful to say percent”
OK, I looked back and see that my proofreading of this was no better than when I wrote “incestments”. Yes a ratio of 20 is the same as a ratio of 2000 percent.
I need to go further.
I would have thought that anyone could see that even though the OP is about SS that
“Arne
December 15, 2013 1:42 pm ”
is not about SS at all.
Dale “I didn’t think I was attacking you. or even accusing you of being a closet Reaganaut.
I just didn’t think it was worth the bother of answering the “Reagan stole…” meme, or that if you were going to, it was a good idea to present it all in terms of the TFR and the law forcing him to borrow the money.”
Dale I get that you don’t think any of my line of argumentation is useful. But it rather baffles me why after all these years you think I should just agree I was spinning my wheels. Rather than leaving me at the side of the road.
“Pass along” would be Good Samaritan. I got myself into this mess and am willing to try to extract myself. Without someone telling me for the umpteenth time: “Bruce I told you not to go there”
And Dale more to the point.
Arne and I have been hashing out some technical issues for more than five years now. And sometimes coming to agreement and again coming to an understanding about where we are looking at these TECHNICAL issues in differing waya.
Yet since before 2009 you keep insisting that Arne and I am taking our eyes off the ball. In the Coberly Game. Even though both of us have spent a great deal of effort playing the Coberly Game to the point that we are even credited as co-authors of the Northwest Plan, which properly would be called the Coberly Plan (with contributions by Bruce and Arne). Okay THAT is the Northwest Plan. But Arne and I had a conversation going on before we got dragged into that. And maybe you should have the courtesy of letting us engage in that pre-existing discussion. You don’t HAVE to find it interesting. Or valuable. But for God Sakes man don’t deny us agency here.
Arne
this is a blog.
people comment on what other people say. not always understanding it.
i would say i am sorry you don’t need me to explain things to you. but i am not. it’s what i do.
Bruce
when you say… they should have rebuilt the Trust Fund quicker if they were planning to steal it, did you forget that the only way to build it quicker would have been to increase the tax even more, and there are limits to how much you can increase a tax, even in America, even on poorish people?
see comment to Arne above. instead of accusing me of having an erection about a straw man, you might just have said, “no, that’s not what i meant at all”, and even gone on to explain what you meant in words.
Arne
by the way
it’s not that it would be politically impossible. it’s that it would be economically impossible.
there is a reason why there is a “time value of money.”
and why we pay for our bread one day at a time.
Bruce,
If the TF bonds were stated to be for shortfall coverage only — to be replaced anytime they were used — once the new FICA rate sufficient to cover outgo is passed by Congress — which could take 10-15-20 years if the Republicans were in power …
… I said “if” at the beginning; what was I talking about? …
… Oh; could we have set up the TF more cheaply by just printing the bonds? The auto-payment mechanism would still be there. Perhaps we could even “replace” the used bonds by printing — just incurring inflation whenever we “replaced.” ???
This message sent from Hell.
Dennis
That’s is already, as I pointed out above, pretty much the TF process. FICA revenue flows into the Treasury. Those revenues are used to cover Social Security benefits and related costs. If FICA revenue is not sufficient to cover such benefits and costs the Treasury continues to pay those items and the TF balance is reduced. And vice versa would result in added assets to the TF in the form of Treasury notes. I doubt that Treasury bothers to even print such notes, but the effect is the same. Excess FICA revenue = auto-pay Treasury notes to the TF. They’re one and the same. The excess FICA revenue become, in that manner, an obligation of the government to recognize those Trust Fund assets as being reserved for use within the Social Security program.
There is no legislative requirement that TF expenditures be made up, so to speak. Though there is some repay mechanism in Obama’s shaving off 2% from FICA to make it appear that he was cutting taxes of the working class. That was one dumb ass thing to do. Obama to workers, “And we’ll put extra money in your take home pay by not collecting your retirement funds. Go piss your retirement away now so that we don’t have to ask the wealthy to kick in a little bit more to help get the economy back on track.”
Jack,
I understand what you — and Bruce — are saying. I was just speculating in a little bit of science-fiction/alternate-history: could we have done built a TF by printing the paper instead of taxing actual money — assuming we don’t expect to draw it down much and, then, only temporarily? Just playing with a “magic bullet” idea. 🙂