CBO Sleight-of-Hand
I’m late to seeing this, and Bruce has probably already covered it, but Doug Elmendorg at the CBO inadvertently gives away the game on the Administration’s approach to—let alone opinion of—the Social Security “Trust Fund”:
The balances in trust funds have accrued because income associated with those programs has exceeded the expenses; when that happens, the surplus cash flow is used to finance the government’s ongoing activities, and the trust fund is credited with a corresponding amount of Treasury securities. Although trust funds have an important legal meaning, in that they may constrain the amount a program can spend, they are essentially an accounting mechanism and have little relevance in an economic or budgetary sense. The value of Treasury securities held by trust funds and other government accounts measures only some of the commitments the government has made, and it includes some amounts that may not represent future obligations at all. [emphases mine]
Pay particular attention to that last; it’s the closest you’ll find to an acknowledgement from a government official that There is No Crisis.
As Bruce has noted, only by distorting the worst-case and median cases does the Administration produce scenarios under which the Social Security Trust Fund—if credited with its accruals as the Greenspan Commission intended (see “Off-Budget” Again-“; h/t PGL here)—does not have the funds to pay its obligations in perpetuity. (As Dean Baker once observed, if you take those scenarios and apply them to the equity markets, the case for privatization disappears even more quickly.)
Doug Elmendorf’s admission that there may well be a perpetual Social Security surplus, even if it is phrased as “some amounts that may not represent future obligations, stands in stark relief of the most notable “unforced error” of the Obama Administration.
Krugman pointed this out in 2004 or 2005, if you take assumptions above the median the trust fund continues to grow forever. Such assumptions are actually worse than past performance. Past performance is what is usually used in the selling of other financital investments.
But I’m also a bit worried about that last sentence. Not representing future obligations could also be interpreted as meaning those obligations are pre-emptively cut back to reassure rich people that their tax cuts will never need to expire.
Given the actual basis of the system, I think we ought to consider benefit reductions in the same way as we would view government default on our bonds.
ken,
includes some amounts that may not represent future obligations at all……Doug Elmendorf’s admission that there may well be a perpetual Social Security surplus, even if it is phrased as “some amounts that may not represent future obligations,
That is not my reading of what Elmendorf said. At all, and it’s not even close. I don’t even see how you can get there from here.
What he does seem to be saying,if anything, is that the Special Treasuries are not necessarily future obligations of the government. After all, it is easy to forgive a debt to yourself.
Other than the fact that it is currently illegal to “forgive a debt to yourself” if the debt is represented by Special Treasury notes. Granted that the law can be changed at any time. Is that what you’re hoping for, Sammy? By the same reasoning nothing in regards to current government activity should be taken as having a useful life of more than one congressional session.
Jack, at least you recognize that Congress can change, and often does, any law it chooses. What I respond to however, is your attack of Sammy, when it is your own party at fault. The buyers remorse on display here recently is quite amazing.
We tried to warn you. You folks chose not to listen to reason and pinned your hopes on a blank slate with no experience by any reasonable measure.
CoRev,
Can’t blame Obama either. We are just out of money – the government is spending $1.50 for every $1.00 it takes in. So unless you think we can raise taxes 50%…..
It does put an end to coberly/Webb’s conspiracy theory that the wascally wich just want to spit on FDR’s grave. It’s their boy, the most liberal president in history, that has to face the music.
It’s an old story really. Corporations and state/local governments played it too: promise a benefit 40 years down the road in exchange for votes now. It’s an easy promise because someone else has to pay. Then when that “someone else” doesn’t have the money, well they just have to change the deal.
How do these people get around Section 4 of the Fourteenth Amendment (“The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions…shall not be questioned.”)? Wouldn’t you need to amend the constitution to default on the Trust Fund?
Ken, Sammy, Jack, CoRev
I read it the same way Sammy does. Apparently Elmendorf doesn’t believe in paying your debts if you can weasel word your way out of it.
It may be, as Sammy and CoRev say, that you don’t want to enter a contract with someone like that, aka The United States of America, but in fact there is no way of avoiding the fact that the Sovereign can cheat you whenever he likes. The thing is, though, that in a democracy, the people are supposed to be sovereign and the only way the government can cheat us is if we let it.
Sadly, it appears that we are going to let it. And criminals like Elmendorf and Obama are the leaders we deserve.
But Sammy, it’s not a “debt to yourself.” There is no such person as “uncle sam.” It is a debt that one legal entity (Treasury) owes another legal entity (the SS Trust Fund). What you are seeing here is criminal theft. What surprised me was the way they are going to do it. By giving the people the payroll tax holiday, the money in the Trust Fund will be used up, making Social Security “insolvent,” and it won’t be that “they stole it,” it will be that “the people did not pay it.”
oh, especially Sammy,
you can’t avoid dealing with “the government.” Social Security was a great idea. It gave the people a way to save their own money safe from inflation and market losses, and insure their ability to retire on a very modest pension…. paid for by themselves. There should never have been a problem with it, except that the Peterson gang has been lying about it so long even honest people don’t understand it, including even some “experts.” But for people to kill it off, they have to be at least dishonest enough to not bother to learn what it is, and criminal enough to want to hurt the people who have no other way to provide for a reasonable retirement.
Sammy, it’s like you were driving down the street trusting the government to guarantee that green lights mean go, and red means stop, and all of a sudden, they switch the lights to always green so no one has to stop. too bad about the ones that get killed. they should have been more careful.
Elmendorg’s wording suggest that he’s wisely not ruling out any of many, many scenarios over the coming decades in which the trust fund isn’t depleted. (Probably excepting the one suggested by the ending of the movie Cocoon.) I am wondering about the reference to the “legal” constraint on the program–true–but in the next sentence he does not refer to “legal” commitments (only to commitments). Can anyone explain this? It would seem if there’s a legal limit on program spending, there’s at the same time a legal commitment to provide funds up to that legal limit. In other words, the law cuts both ways, no? Perhaps I’m just confused.
This is an embarrassing piece to find on Angry Bear.
Angry Bear suffers a credibilty problem whenever any of its main poster throw up bogus claims. I would put this main post by Ken Houghton near the top of the list of misleading and phony claims.
Ken – “The balances in trust funds have accrued because income associated with those programs has exceeded the expenses; when that happens, the surplus cash flow is used to finance the government’s ongoing activities, and the trust fund is credited with a corresponding amount of Treasury securities.”
This is not a direct quote from the CBO report. Ken’s statement appears to be a summary rewrite of a number of sentences stated on page 20 of the CBO report.
Ken – “Although trust funds have an important legal meaning, in that they may constrain the amount a program can spend, they are essentially an accounting mechanism and have little relevance in an economic or budgetary sense.”
This is not a direct quote from the CBO report. Ken’s statement appears to be a summary rewrite of a number of sentences stated on pages 20-21 of the CBO report.
Ken – “The value of Treasury securities held by trust funds and other government accounts measures only some of the commitments the government has made, and it includes some amounts that may not represent future obligations at all.”
This is a direct quote extracted from summary page IX of the CBO report.
Ken Houghton conveniently ignores statements from the previous paragraph on page IX: “Because those trust funds and other government accounts are part of the federal government, transactions between them and the Treasury are intragovernmental; that is, the government securities in those funds are an asset to the individual programs but a liability to the rest of the government. The resources needed to redeem the government securities in the trust funds and other accounts in some future year must be generated from taxes, income from other government sources, or borrowing by the government in that year.”
Ken Houghton fails to acknowledge the CBO position on projected Social Security funding vs scheduled outlays identified on page 21 of the same CBO report as well as that stated in a number of other CBO reports in making his subsequent phony CBO claims.
CoRev
What I respond to however, is your attack of Sammy
Thanks CoRev. This is what Jack does, attack. Lately I have seen some other lights turn on in his brain, so I will commend him on that.
I don’t understand why Ken Houghton posted this piece at Angry Bear, considering that he ignored other statements and a key reference in the CBO report.
Angry Bear suffers a credibilty problem whenever any of its main poster throw up bogus claims. I put this main post by Ken Houghton near the top of the list of misleading and phony claims. Unfortunately.
Ken – “The balances in trust funds have accrued because income associated with those programs has exceeded the expenses; when that happens, the surplus cash flow is used to finance the government’s ongoing activities, and the trust fund is credited with a corresponding amount of Treasury securities.”
This is not a direct quote from the CBO report. Ken’s statement appears to be a summary rewrite of a number of sentences stated on page 20 of the CBO report.
Ken – “Although trust funds have an important legal meaning, in that they may constrain the amount a program can spend, they are essentially an accounting mechanism and have little relevance in an economic or budgetary sense.”
This is not a direct quote from the CBO report. Ken’s statement appears to be a summary rewrite of a number of sentences stated on pages 20-21 of the CBO report.
Ken – “The value of Treasury securities held by trust funds and other government accounts measures only some of the commitments the government has made, and it includes some amounts that may not represent future obligations at all.”
This is a direct quote extracted from summary page IX of the CBO report, Federal Debt and Interest Costs.
Ken Houghton conveniently ignores statements from the previous paragraph on page IX:
CBO report: “Because those trust funds and other government accounts are part of the federal government, transactions between them and the Treasury are intragovernmental; that is, the government securities in those funds are an asset to the individual programs but a liability to the rest of the government. The resources needed to redeem the government securities in the trust funds and other accounts in some future year must be generated from taxes, income from other government sources, or borrowing by the government in that year.”
Ken Houghton fails to acknowledge the CBO position on projected Social Security funding vs scheduled outlays identified on page 21 of the same CBO report as well as that stated in a number of other CBO reports in making his subsequent phony CBO claims.
Ken – “The value of Treasury securities held by trust funds and other government accounts measures only some of the commitments the government has made, and it includes some amounts that may not represent future obligations at all.”
Ken – “Pay particular attention to that last; it’s the closest you’ll find to an acknowledgement from a government official that There is No Crisis.”
This is an absurd claim. The CBO report, Federal Debt and Interest Costs, states in clear language on page 21:
“More than 200 trust funds exist in the federal budget, but the bulk of holdings of government securities is concentrated in just a few funds. Most of the difference between gross federal debt and debt held by the public is that the former includes balances held by the Social Security trust funds. Those balances reflect a decision by policymakers to set the payroll tax dedicated to Social Security over the past few decades such that the program’s revenues would be greater than the program’s outlays in anticipation of rising benefit costs as the baby-boom generation retires. The debt held by those trust funds measures the amount by which Social Security revenues have exceeded outlays in the past, but it does not measure the program’s future financial burden. Even with the securities held by the trust funds and with a dedicated future stream of revenues, by 2039 those resources will be insufficient to pay the full benefits that will accrue under current law, CBO projects. At the same time, the balances in the Social Security trust funds have significant legal implications: By law, total Social Security benefits cannot exceed amounts available in the trust funds, and the benefits projected to be paid will be smaller in 2039 and beyond than the benefits specified in law. 4”
“4. See Congressional Budget Office, Social Security Policy Options
(July 2010)”
Ken – “Doug Elmendorf’s admission that there may well be a perpetual Social Security surplus, even if it is phrased as “some amounts that may not represent future obligations, stands in stark relief of the most notable “unforced error” of the Obama Administration.”
Another wild-eyed, false claim based on a full read of the CBO report as well as other CBO reports covering Social Security.
This CRS report may interest AB readers:
Social Security: What Would Happen If the Trust Funds Ran Out?
by Christine Scott, Specialist in Social Policy
August 20, 2009
Congressional Research Service (CRS)
http://aging.senate.gov/crs/ss1.pdf
EXCERPTS:
“The Social Security Act specifies that benefit payments shall be made only from the trust funds (i.e., accumulated trust fund assets and current tax income). Another law, the Antideficiency Act, prohibits government spending in excess of available funds. Consequently, if the Social Security trust funds become insolvent—that is, if current tax income and accumulated assets are not sufficient to pay the benefits to which people are entitled—the law effectively prohibits full Social Security benefits from being paid on time.”
“The Social Security Act states that every individual who meets program eligibility requirements is entitled to benefits. In other words, Social Security is an entitlement program, which means that the government is legally obligated to pay Social Security benefits to all those who are eligible for them as set forth in the statute. If the government fails to pay the benefits stipulated by law, beneficiaries could take legal action. Insolvency would not relieve the government of its obligation to provide benefits. If benefits were reduced, beneficiaries would remain legally entitled to the balance.”
“If the trust funds were allowed to run out, Congress could eliminate annual cash-flow deficits by cutting benefits so that spending equals tax income on an annual basis.”
the phrase that seems to hang out to me is “the value of” the treasury securities… what happens if, or more likely when, treasuries are downgraded? is the ‘value’ deemed as the cashflow generated or mark-to-market?
sammy,
You may want to read this report:
Social Security: What Would Happen If the Trust Funds Ran Out?
by Christine Scott, Specialist in Social Policy
August 20, 2009
Congressional Research Service (CRS)
http://aging.senate.gov/crs/ss1.pdf
Let’s hope so. I’m not sure where the notion of “Full Faith and Credit of the US Government” came from, but maybe it was the 14th Amendment. Constitutional Lawyer Obama may know. Next they would have to explain to us why debt held by the Chinese or banks is good, but debt held by the SSTF is no good.
This isn’t the direction they will go, however. Seems default is difficult, unless they default on everything and then we see if the world can swallow that pill. But they can alter the benefit structure. But for this to work anytime in the near future they would need to cut current benefits so the FICA surplus would reappear and could be used to make interest payments on the trust fund debt (not to mention everything else). At that exact point in time we get the stress test for Third Rail politics, since current retirees are hit immediately and there is no longer any hypothetical speculation about the future which has always made discussing tax issues so much fun and painless.
Then they just did a payroll tax holiday and are replacing it by payments from the anemically funded general fund, which is another jaunt off in some weird new direction.
Hard to tell who is driving the bus.
Ken’s quotes came from his link ” inadvertently gives away the game“
First I think the the authors should rewrite the linked to “thingy”, and if they are trying to make points, conclusions, or recommendations, they should state them and label the paragraph indicating them as such. Then we wouldn’t have 17 posts trying to parse meaning into their words. As it stands the “thingy” is a loose collection of fun facts, which appear correct, and some vague nuanced wanderings somewhere in the direction of opinion.
In reading the “thingy” in its entirety, I think they are trying to convey that a sense of solution to the problem is to get around the the deficit cap law (and required congressional vote to increase it) by making only “debt held by the public – the $9T) subject to the deficit cap legality and in effect not consider the “gross debt” figure of $14T (which includes all trust funds).
This of course is just an accounting gimmick, but it takes the heat off the congress to address anything meaningful in the budget, and we can also join the ranks of third world and not so third world countries in the practice of hiding obligations off balance sheet so as not to unduly rattle the bond markets (and trust funds) until we have something really meaningful to tell them.
If you re-read the whole “thingy” with this in mind you may see the gentle persuasion in this direction.
Ken’s quotes came from his link ” inadvertently gives away the game”
First I think the the authors should rewrite the linked to “thingy”, and if they are trying to make points, conclusions, or recommendations, they should state them and label the paragraph indicating them as such. Then we wouldn’t have 17 posts trying to parse meaning into their words. As it stands the “thingy” is a loose collection of fun facts, which appear correct, and some vague nuanced wanderings somewhere in the direction of opinion.
In reading the “thingy” in its entirety, I think they are trying to convey that a sense of solution to the problem is to get around the the Federal debt cap law (and required congressional vote to increase it) by making only “debt held by the public – the $9T) subject to what is presently the “gross debt”cap legality and in effect not consider the “gross debt” figure of $14T (which includes all trust funds).
This of course is just an accounting gimmick, but it takes the heat off the congress to address anything meaningful in the budget, and we can also join the ranks of third world and not so third world countries in the practice of hiding obligations off balance sheet so as not to unduly rattle the bond markets (and trust funds) until we have something really meaningful to tell them.
If you re-read the whole “thingy” with this in mind you may see the gentle persuasion in this direction.
MG
Reading the link:
“Prompt action to restore Social Security solvency would be advantageous.”
Flim flam……
Why fill up the trust fund? It has 2.4T accumulated, paid for tax cuts and war neither of which increased anything to suggest the economy will even be there in 2040.
The money won’t be paid back because: tax cuts for the rich do not grow productivity, sepnding for war profits do not grow productivity, spending for corporate welfare and the rest of the discretionary do not grow productivity, and the working class already puts too much into the social contract in 2040 it will be time to push the class into the 4th world economic grind.
The US G continues to pay out to the ownership class beneficiaries of discretionary spending 3 times what the the first world economies and has at best a mixed economy, first world for 1%, second world for 10-15% and third world for a large sub-class whose SS taxes should go up so the CBO can model congress scamming the special treasuries for the owners.
Here is what bankruptcy judges do….
They decide who gets what of the remains.
The CBO is expecting the judge, the House, will act to not repay SS special treasuries.
That may happen but………………..
I enjoyed MG’s link to Congressional Resaearch Service report.
I found my favorite word “ANTIDEFICIENCY” in the exec summary of the report.
The report, misleadingly said that once the trust fund is “depleted” the SS pays out only what money it has from SS income stream.
This ignores the fact that the congress appropriates funds for paying out SS each year and has the power to tax and go to paygo using added funds from either income taxes, or SS taxes or deficits.
But what really made me hoo-hoo was the CRS student uses the threat of anti deficiency.
Anti deficiency is something I know about. I saw it all the time and no one ever thought to end the cons. I think a US Army PM got caught recently, but no one going to jail.
The entire DoD and most other US Government acquisition program managers are guilty of anti deficiency one time or another, ANTIDEFICIENCY is spending US G money for a thing that the money was not appropriated for.
I just began going through GAO-11-179r, a report on the surety pof the future failure of the NATO Star Wars.
In it GAO recognizes there are no management controls to assure the thing is tested and works to deliver what the US government appropriated the funds for. A comment that is apparent on almost every USG contract.
As the NATO Star Wars falls furhter behind baseline schedule does not work and does not meet spec the money spent diverges from the “baseline” that is was “appropriated” to look like. In time if not the day the “baseline” is written it becomes a scam to get money appropriated for one thing, but the real thing the money is used for is to send profits to buy scrap and rework on something the baseline did not represent.
Anti-Deficiency is never prosecuted.
Maybe it will be used to kill the social contract, if it were applied in the discretionary dealings there would be a lot more white collar jails.
“The value of Treasury securities held by trust funds and other government accounts measures only some of the commitments the government has made,…”
Just because one part of the text is highlighted does not mean we should not read the others, in an effort to get a full understanding of what the author meant. “Treasury securities held by trust funds…measures…commitments the government has made…”
The highlighted section can be read in a couple of ways, which means that, in true bureaucratic manner, it engages in wordiness in service of ambiguity rather than clarity. Planting a flag in one’s preferred reading of an ambiguous statement doesn’t make one’s preferred reading the right one.
Read in its entirity, as best I can tell, the full sentence says “the general fund may be committed to pay more than is represented in the trust funds, and we may not have to pay as much as is in the trust funds.” This, to me, seems very much the sort of thing that an honest, intelligent bureaucrat would say, with equal emphasis on “honest” and “burueacrat”. It boils down to the fact that trust funds do not precisely reflect an amount that must at some point be paid by the general fund to the trust funds.
“The value of Treasury securities held by trust funds and other government accounts measures only some of the commitments the government has made,…”
Just because one part of the text is highlighted does not mean we should not read the others, in an effort to get a full understanding of what the author meant. “Treasury securities held by trust funds…measures…commitments the government has made…” Treasuries held by trust funds are commitments.
The highlighted section can be read in a couple of ways, which means that, in true bureaucratic manner, it engages in wordiness in service of ambiguity rather than clarity. Planting a flag in one’s preferred reading of an ambiguous statement doesn’t make one’s preferred reading the right one.
Read in its entirity, as best I can tell, the full sentence says “the general fund may be committed to pay more than is represented in the trust funds, and we may not have to pay as much as is in the trust funds.” This, to me, seems very much the sort of thing that an honest, intelligent bureaucrat would say, with equal emphasis on “honest” and “burueaucrat”. It boils down to the fact that trust funds do not precisely reflect an amount that must at some point be paid by the general fund to the trust funds.
“Full faith and credit” refers to each state recognizing the laws of other states, granting “full faith and credit” that the law in that state means what it says it means, and honoring the consequences. If you marry in Tennessee, you are still married in Ohio. If you owe taxes to Tennessee, you still owe them if you move to Ohio.
It was part of the Articles of Confederation, and adopted into the Constitution. In a union of states, this is among the most important housekeeping details.
Actually, there is nothing here that damages the Webb view one iota, though nice try saying so. The fact is, this is not a math problem at all. That has been the heart of Webb’s analysis, and is entirely correct. A different set of assumptions regarding future economic performance leads to a different result regarding the health of the trust fund. Just about every effort to “save” social security that includes enough detail to do any math ends up with less generous benefits in the period after the exhaustion of the trust fund than simply letting Social Security pay out what comes in when the time comes.
In similar manner to the deficit, the math of Social Security is not entirely clear, but it is not the central problem. What to do about Social Security is a political problem. Social Secutieis enemies and its less courageous friends pretend the math is definitive, but it simply isn’t. Even those who argue that the 2% FICA holiday (actually just 1% of overall contributions) will be the death of Social Security as we know it make that argument based on the political door that has been opened, not the math. Fact is, the cost to the trust fund from the recession is massively larger than from the FICA holiday, but the FICA holiday is a precedent. Recession is not a precedent.
And while we are at it, nobody who knows any US political history can honestly call Obama the most liberal US president. He is a DLC Democrat. His distinction is in passing legislationn that other Democratic presidents have wanted to pass, but could not. His health care package is on a Republican model. His START treaty does far less than others, and has widespread support from the foreign policy smarty-pants crowd. Obama is about as liberal as, say, Richard Nixon.
apparently when Sammy promises his creditors that he will pay next year it doesn’t really mean anything.
MG,
To pick at nits……………
How come this CRS report does not footnote the annual GAO audit of the federal trust funds?
CRS footnotes themselves regularly!!
I know the answer.
kharris
thanks for the defense. i think you are wrong about the 2% equals 1%. 2% not paid by the worker equals 16% of SS income.
And, if you assume the Trustees Report is as good a guess as can be made, a math problem becomes evident. A math problem that the experts and liars resolutely ignore, because the answer is “the projected shortfall can be made up with a tax increase that amounts to forty cents per week each year.” CBO knows this… CBO option number three: increase the payroll tax one half of one tenth of one percent each year…”
This does not result in less benefits… but the same monthly replacement rate, which is, by some ways of looking at it, MORE benefits… the same monthly rate paid over more months.
this is better than “nothing” which would, if the Trustees projections are correct, lead to a sudden drop in benefits of about 25%. this would hurt, Rosser’s Equation notwithstanding. Rosser points out that the reduced benefits would buy more than current full benefits because they are based on a higher wage base…. failing to recognize that part of the way Social Security works is that the higher wage base… caused by growth in the economy… does the same work as “interest” on market investments, and is part of what makes SS a better deal than just parking your savings in a bank account, or even buying a government bond.
SS is a political problem only in the sense that some politicians want to kill it. and Obama is either a criminal or an idiot.
Treasuries held are NOT “commitments” they ARE obligations.
To a government budget person a commitment is when you put the money in the check book to sometime in the future be obligated.
Do not let anyone confuse a commitment which is a cash accounting term used to execute an annual budget with an obligation which is what constitutes a bond.
Worlds of difference.
CBO and CRS engage in flim flam studies just like their private sector counterparts in the agit prop tanks.
PJR
you are not confused. you are just experiencing the difficulties of trying to make sense of the words of a liar. the enemies of SS don’t try to make sense. they just say whatever they think will weaken SS.
MG
if you are correct, i would owe Elmendorf an apology. I haven’t time right now to read closely.
kharrris
again, with reference to MG’s reading of the original document, you … and Elmedorf… may be right. i’ll let my earlier comments stand until i get a chance to research the whole thing…. because the way I read ken’s post conformed with the interpretation given SS by the Liars that i run into all the time.
kharris,
I agree with the Webb/coberly analysis of the SSTF. Unfortunately, the SSTF is virtually irrelavent. It is an accounting construct, when the government is run 100% on a Cash Flow basis. Furthermore, the Webb/coberly analysis assumes that the Special Treasuries will be honored, something that Elmendorf seems to raise some doubt on.
Let me see if I have this right. Social Security is a political problem “only” because politicians want to kill it. Setting aside that there are backers of those politicians who also want to kill it, how is any political problem ever more than “only” a problem because politicians make it so? Sliding an “only’ into your statement doesn’t change the reality.
As to this being more of a math problem than I suggest, well if you insist on your mathematical formula as a “fix”, then you’ll probably tend to see math as important. That is pretty much what we see whenever technocrats marry themselves to a particular solution. The issue resolves itself in 3 steps. The first two are so completely intermingled that they happen simultaneously, and for political reason. Politicians decide that something must be done, because they want to choose a particular thing that will be done. From the public relations point of view, it is necessary to give the impression that “we need to do something” comes first, followed by “and this is what we’ll do”, but that is not the way things work in politics. Deciding what you want to do is often the same thing as deciding that it needs to be done. The 3rd step is, of course, doing the deed.
The premise of your solution is that we take the Trustees word for the need to act. That in itself is a decision that has political implications. If it did not, your premise would be easier to allow, even if not all that well founded. Not well founded and politically dangerous, together, make your premise unacceptable.
Full faith and credit applies to laws but most importantly, judgements handed down from courts. It applies to acts that are coming from a court, not necessarily laws or civil actions. A state can choose to respect a marriage in another state, it cannot choose to not honor a divorce. The marriage is a civil action, the divorce is judicial. State law would govern what civil actions that were originated out-of-state would apply to the state itself.
My license to hunt in Alabama doesn’t mean I can hunt in New York City during Alabama’s hunting season. My license to conceal carry in Arizona doesn’t carry over to New Hampshire. My Virginia fishing license doesn’t allow me to fish in the Potomac River, which falls under MD jurisdiction (at least it used to 15 or so years ago when a MD ranger crossed into VA and cut my line when I failed to produce a MD fishing license).
This back & forth is interesting, shows how different people are in their interpretation of the word. I may be wronf, but my read here, is that the comments come from different age mind sets, which doesn’t do anything for my mind set, other than cause me to feel/think I’m doomed. Why, one might ask? Simply this, I’m 72 years of age, I live off my Social Security, Medicare, have disposed of most tangible assets in my quest to live without competing with my 3 cats who gets to eat first. This banter gives my used heart flutters when I read the doom & gloom that some of you post. I’ve posted this before, but seem to be shuffled to the dust bin as being irrelivent, but instead of arguing who’s right & who’s wrong, which is subjective, how about a consensus for a permanent solution, how to impliment, instead of falling into the trap of helping this once great country continue its slide down the sewer?
sammy
but the money is there. the people who will need the benefits when they are old can pay the “tax” for them now. this process can continue forever as long as people have a need to insure their retirement. the “government” does not supply the money, it only manages the program.
you have to come to grips with two thoughts.
first is that you will never get rid of the government. and you wouldn’t like the results if you could.
the second is that when any particular congress or administration does something immoral… can’t call it illegal because they make the law… that doesn’t mean that the people who have been warning you that it is happening have been wrong. it just means you haven’t been paying attention.
it amazes me that people listen to “official” liars and say “see that’s what we said would happen.”
why doesn’t it occur to them to get mad and stop it from happening? what is there about an official liar that makes you say “that’s the way things are”? of course there are liars in politics. and some of them get elected. doesn’t mean we can never have a government program that meets our needs.
sammy
you are failing the mental hygiene test. in the first place you and co rev “attack” just as much as jack or i. in the second place the fact that someone disagrees with you does not prove they are wrong, much less mentally defective… though they might be.
the sad fact about human brains is that they are wired so that once you have been wrong about something for a long enough time it is almost impossible for you to see or understand what is “right.” i use quotes, because nothing is ever perfectly and forever right. except some things.
kharris
no. but it would be too hard to explain it to you.
the math is important. and so is the Trustees Report… as the “best” prediction we have. it can be wrong, and should be challenged, as others have done. but if the bad guys are using it illegitimately to sow panic, it is important that someone use math to show that it does not say what they bad guys are saying that it says.
the “only” in my remarks is a word that has meanings other than what you assume. SS is a real problem in the real world. if its expenses are going to rise, then something will need to be done about it. that is not a political “problem.” it only becomes a political problem when you start to argue about WHAT to do about it. now in the world of politics facts rarely count for much, but for the rest of us it is useful to know what the facts are so that we don’t just choose the side whose lies we like the best.
MG makes a point elesewhere in this thread that Ken may have mis quoted Elmendorf. IF so, I may have misjudged him.
But if he did say that the Trust Fund has no importance to economics or the budget, he was either dead wrong, or using words in a way that are easily confused and used by the real liars.
sammy
thank you. my “plan” does assume that the Trust Fund will be honored. But I have also written that even if the Trust Fund is not honored, Social Security can continue on a pay as you go basis with no real injustice to anyone, The Boomers get the retirement they paid for. The post boomers will have to pay a little more than they expected, but will get their money’s worth in their own longer retirements. It is better to be robbed than to be robbed and murdered. The Liars don’t really care so much about robbing SS, they want to murder it.
The government may be run on a cash flow basis… indeed, i think it must be… but it still pays back the money it borrowed whether from granny’s savings bond,the chinese, or the SSTF.
moreover, the money used to repay the SSTF is NOT “paying for SS”, it is paying for whatever was bought with the money borrowed FROM SS.
Ok, there is the “Full Faith and Credit” phrase in the articles and it applies to legal standing of laws between states, which was a big issue in 1776. Since then, the same term has been used quite often to describe how serious the US is about standing behind its debt obligations, as in “credit”.
Here is an example from the treasurydirect website.
“
TreasuryDirect is the only financial services website that lets you buy and redeem securities directly from the U.S. Department of the Treasury in electronic form backed by the full faith and credit of the U.S. government.”
http://www.publicdebt.treas.gov/
Some like to make a big deal about the fact that “special treasuries” in the trust fund are somehow different, and the specific difference is that “special” means “no good”.
So next I imagine that someday the proponents of this interpretation will have to flesh out their position and explain how the intent of the original SS legislation was to create an legal entity charged with creating fraudulent credit instruments. And this fraud was perpetrated for 70+ years before being detected by the government. All within the backdrop of GASEs and investment banks creating perfectly legal credit instruments backed by the USG whether the USG intended to or not.
Very strange reality to argue in my opinion, but that doesn’t mean they won’t try.
norman
solution: pay for SS with a tax rate necesary to cover the cost of a very modest retirement. that will turn out to be the present tax rate plus about a half a tenth of a percent a year more to keep up with longer life expectancies.
you won’t get a consensus because no one is listening. it would take about an hour to explain it carefully, and some people will never understand it. meanwhile the Liars have a billion dollar war chest to spread their very clever lies.
oops GASs s/b GSEs. The spell checker was getting too insightful.
MG you might want to check out Flemming v Nestor; somehow I doubt Ms. Scott’s conclusion about the right to sue would hold up in light of it. Not to mention that the U.S. can’t be sued against its will.
http://www.ssa.gov/history/nestor.html
Plus the last two paragraphs you quote seem to contradict themselves, which fact probably owes more to your attempts to selectively cherry pick text which you really don’t understand to begin with. In my conservations with former Deputy Commissioner Biggs it seems that the conclusion made at a high level meeting in his time at SSA is that there would be a legal obligation to pay back benefits from the time the Trust Fund actually hit exhaustion to the time that Congress took action to either change the schedule or the revenue stream. There is no particular reason to believe action would actually be delayed until that point or that if the worst happened that action would bit be taken within at worst a few months of depletion in much the same way as back benefits were paid to unemployment recipients last spring.
And your habit of expressing disagreements in terms of your opponent being either deranged “wild-eyed” or totally ignorant or simply deliberately misrepresenting various government reports that as often as not have not actually been introduced into the discussion until you bring them in is as annoying as hell.
Special Treasuries are not marketable and so can’t be downgraded. Their value and yield are set on issuance and don’t vary in reaction to fluctuations in the market. That is they can only be redeemed at par and never have to or can be be sold into the market,
Congress does not appropriate funds to pay Social Security benefits, it only appropriates funds to pay for Administration of the Trust Funds. Which does allow room for mischief, but only over that 1% of yearly outlays due to admin.
The Special Treasuries in the DI Trust Fund are being honored right now, as interest started being taken in cash in 2006 and principal last year. This fact alone makes the whole Phony IOU argument close to spurious as does the fact that Social Security was cash flow negative more years than not from 1957 to 1982. The whole concept of ‘Phony IOUs’ only began to be floated in the late 90’s/early 2000’s when Trust Fund depletion was retreating at a rate of more than a year per year suggesting that that date would never actually come. Whereupon the folks at Cato’s Project on Social Security Privatization (later Orwellian style renamed Cato Project on Social Security Choice) suddenly decided that the metric was not ‘surplus’ and ‘Trust Fund ratio’ but instead ‘primary surplus’ or cash-flow even as they ignored the history of Trust Fund redemptions from 1971 to 1982 when the Special Treasuries were honored down to the next to the last penny.
If the government is run 100% on a cash flow basis why are checks still flowing to people on DI? After all that fund is cash flow negative to the tune of around $3 billion per month.
MG you don’t explain WHY the text you cite contradicts Ken’s reading. Instead you just jump to the ad hom. You can believe that Ken’s reading is wrong (which for once I actually concur) without jumping to the claim that he is hysterical (wild-eyed) and lying (false). Or at least I can, you never seem to accept the possibility of good faith error, instead you almost assert or insinuate that it is the result of malice aforethought. Which is why you are less than popular in some circles.
Apologies for jumping the thread like this but things got so off track down below that appending this to the end would seem to do no good.
On my reading Elmendorf is making neither Ken’s nor Sammy’s point perhaps because the wording is clumsy and perhaps deliberately so. If you click through and read the entire CBO Director Blog entry it is not clear that the bolded sentence here even applies to the Social Security Trust Funds as opposed to the other 198 or so Trust Funds that Elmendorf cites. If we examine the list of the largest Trust Funds we find some like the Leaking Underground Storage Tank Trust Fund and the Oil Spill Liability Fund and the Black Lung Disability that conceivably might now or in the future have assets in excess of actual future obligations.
http://www.treasurydirect.gov/govt/reports/tfmp/tfmp.htm
And there was a period in the early 2000’s that it appeared that at least the Social Security OAS Trust fund was in the category. In fact in 2005 it seemed inconceivable to just about anyone not named Dean Baker that the Bush economy could tank in the way it ended up doing starting with the productivity crash in 2005 Q3, which should have been a sign to someone that ongoing good economic numbers were being driven by something other than fundamentals. (Well now we know, by late 2005 we were already into the housing bubble which was artificially holding up residential construction and raw land prices with the result that everyone got over leveraged). But in any event the crash of 2007-2008 made the liklihood of an actual over-funded Social Security system very remote in comparison to the outlook just a few years before. (I still believe the bias is to the upside of Intermediate Cost but perhaps not enough to just grow our way out of this without some version of the NW Plan giving the needed assist). In other words what PGL and I might have believed in Oct 2006 has encountered a new set or circumstances come 2010.
In light of that and some of the material that MG presents below (but as typical never bothers to explain) I don’t think Elmendorf really had the Social Security Trust Funds in mind when he wrote the bolded clause. Instead he is making a more generalized point that the government has recognized a certain set of future obligations and set up 200 or so Trust Funds in an attempt to as best as possible allocate future outlays in accordance with current revenue and appropriations to those Trust Funds without guaranteeing that there will always be a one to one correspondence.
Now I have no idea about the legal status of claims on the Black Lung Disability Trust Fund, it may be that the government is bound by statute to make up the difference between existing or future assets and valid claims, what I do know is that Social Security recipients are not in that same position, at least on most experts reading of the Supreme Court case Flemming v Nestor. On the flip side there is no legal mechanism i know of that would simply allow the government to ignore the legal claim of Social Security to redeem its current assets even as it has no right to demand that revenues be made available to pay the full scheduled benefit after those assets have been fully redeemed, an event currently scheduled for around 2037 on a combined basis.
Bruce
thank you for your scholarship and sanity. I was reacting to the apparent lies from Kens quotes, and to the general campaign of lies from the Big Liars. Glad to have you set the record straight.
But we still need to watch out for the lies.
Clarification (i hope)
you can be “cash flow negative” while paying your bills out of savings. this is a rather common situation for people and businesses. it only sounds sinister when someone says a government program is “cash flow negative.”
I’m repeating the comment I had made up post as it seems clear that neither sammy nor corev had actually read it. Exactly how is this an “attack” on sammy rather than a simple statement of fact. If I had said that sammy is either a deceitful troll or an ignorant boop, thaqt would have been an attack. No, I only said that sammy’s prior comment ignores the current legislative status of the SS Trust Fund.
“Other than the fact that it is currently illegal to “forgive a debt to yourself” if the debt is represented by Special Treasury notes. Granted that the law can be changed at any time. Is that what you’re hoping for, Sammy? By the same reasoning nothing in regards to current government activity should be taken as having a useful life of more than one congressional session.”
What many commentators seem to be missing is the point that the SS Trust Fund is not simply a future debt described by law which can be modified by future legislative action. The Trust Fund is the excess FICA that we have all been paying into the SS program for the past 35 years, at least. That money was spent by the Treasury in support of the general budget after being accounted for as assets of the SS program and held in the Trust Fund. Replay, previously paid by workers, not as income tax but as SS future benefits assets, and spent by the government after being invested with the Treasury in the form of Special Treasury notes. Those assets were not promises by the government to pay a future obligation. Those assets were paid by workers into a retirement program. What the Treasury did with the funds after having issued the Special Treasury notes is not the issue. The funds started out as FICA contributions deducted from all of our earnings for the purpose of creating a viable and sufficient Fund that would supplement future FICA receipts if and when those were not sufficient to pay benefits.
Repeat after me. FICA contributions, the payroll taxes, are paid into the Social Security program and provide the funds needed to pay benefits to current recipients. There has been an excess of FICA contributions for a long while and that excess is the Trust Fund and that Trust Fund is the basis for all payments to beneficiaries. What the Treasury owes to the Fund as a result of its past borrowing from the Fund is not discretionary any more than the debt owed to you or anyone as represented by any T-Bill you may purchase. And banks are currently buying lots of T-Bills rather than lending money. If the Special Treasury notes are subject to welsh legislation so too is every other T-Bill.
Webb – “In light of that and some of the material that MG presents below (but as typical never bothers to explain) I don’t think Elmendorf really had the Social Security Trust Funds in mind when he wrote the bolded clause.”
The CBO staff (identified by name) that wrote the report provided specific information about CBO’s opinion on the future of Social Security projected obligations vs revenue streams in the text of the report. The staff also linked to the July 2010 CBO report on Social Security options. This information is in plain English for anyone to understand.
the sort of lies that are evident in today’s Bruce Bartlett in Fiscal Times. sorry not to give a link but it is beyond my current computer capabilities.
it would be an instructive exercise for the reader to go through the Bartlett in order to find all the distortions of fact and cute uses of language to mislead.
MG
there is no such thing as plain English that anyone can understand.
Jack,
If the Special Treasury notes are subject to welsh legislation so too is every other T-Bill.
There is a significant difference between a 3rd party debt and an intra-party debt.
The conseqences of defaulting on a 3rd party debt, like a regular t bill, are lawsuits, garnishments, increased borrowing costs, and reduced access to credit. The consequences of defaulting on a intra-party debt, like the Special Treasuries, are nothing, it just requires a bookkeeping notation and a shrug of the shoulders.
Webb – “MG you don’t explain WHY the text you cite contradicts Ken’s reading. Instead you just jump to the ad hom. You can believe that Ken’s reading is wrong (which for once I actually concur) without jumping to the claim that he is hysterical (wild-eyed) and lying (false). Or at least I can, you never seem to accept the possibility of good faith error, instead you almost assert or insinuate that it is the result of malice aforethought. Which is why you are less than popular in some circles.“
The CBO staff (identified by name) that wrote the report and supervised its writing provided specific information about CBO’s opinion on the future of Social Security projected obligations vs revenue streams in the text of the report. The staff also linked to the July 2010 CBO report on Social Security options. This information is in plain English for anyone to understand.
Ken Houghton ignored key provisions in the report which specifically addressed the combined Social Security OASDI trust funds. I cited that information. This isn’t the third grade where someone needs to explain what a paragraph states. The writing is in plain English.
Houghton had the responsibility to read the brief report prior to making his claims. You can try to cover that up on Ken’s behalf, but it’s not going to hold water.
You’re trying to justify Ken Houghton’s statements as a good faith error. The man is an school trained economist; the CBO report was a brief read; the report specifically explains CBO’s position on the projected status of Social Security’s OASDI trust funds; the CBO report cites another CBO report on Social Security written this year; CBO’s stated opinions on the future of Social Security funding are well known to those who read such materials.
And you haven’t bothered to explain why you think that Ken Houghton’s reading is incorrect. But you don’t have to bore everyone with a lengthy explanation. Besides, the brief CBO report already answered the mail on Ken Houghton’s bogus claims.
Webb – “MG you don’t explain WHY the text you cite contradicts Ken’s reading. Instead you just jump to the ad hom. You can believe that Ken’s reading is wrong (which for once I actually concur) without jumping to the claim that he is hysterical (wild-eyed) and lying (false). Or at least I can, you never seem to accept the possibility of good faith error, instead you almost assert or insinuate that it is the result of malice aforethought. Which is why you are less than popular in some circles.“
The CBO staff (identified by name) that wrote the report and supervised its writing provided specific information about CBO’s opinion on the future of Social Security projected obligations vs revenue streams in the text of the report. The staff also linked to the July 2010 CBO report on Social Security options. This information is in plain English for anyone to understand.
Ken Houghton ignored key provisions in the report which specifically addressed the combined Social Security OASDI trust funds. I cited that information. This isn’t the third grade where someone needs to explain what a paragraph states. The writing is in plain English.
Houghton had the responsibility to read the brief report prior to making his claims. You can try to cover that up on Ken’s behalf, but it’s not going to hold water.
You’re trying to justify Ken Houghton’s statements as a good faith error. The man is an school trained economist; the CBO report was a brief read; the report specifically explains CBO’s position on the projected status of Social Security’s OASDI trust funds; the CBO report cites another CBO report on Social Security written this year; CBO’s stated opinions on the future of Social Security funding are well known to those who read such materials.
And you haven’t bothered to explain why you think that Ken Houghton’s reading is incorrect. But you don’t have to bore everyone with a lengthy explanation. Besides, the brief CBO report already answered the mail on Ken Houghton’s bogus claims.
coberly, did you even bother to read the brief CBO report before you started making your accusations?
Webb,
I mentioned the CRS report because it is cited in the CBO report that Ken Houghton discussed in the main post. I cited a few paragraphs that I thought general readers might be interested in.
If you want to write a main post on the CRS report, have at it.
You’re still trying to mount a phony defense of Ken Houghton’s opinions in the main post. That’s laughable, considering that you offer nothing of merit in his defense and nothing in support of your previous statement on this comment thread that you think Houghton is wrong.
Houghton wrote a poor main post. Get over it.
Apparently, Bruce Webb didn’t know that the CRS report was cited in the CBO report.
I get a statement every year from the SS administrators and one piece of info on it is how much money me and my employer have paid in. They also project what my benefit is likely to be someday.
In fact, I believe that anyone whom has ever had a job gets a statement like this too.
I vote we steal sammy’s trust fund.
In double fact, I have been reading he same sound bites come out of sammy as relentlessly as a tape recorder powered by the energizer bunny ever since I’ve been reading this blog. So I was wondering if Dan could start one of those blog votes and we can all vote on the issue.
Something like this:
Shall we steal sammy’s trust fund?
X Yes
No
Sammy,
What legislative basis is there for the distinction that you are making between Special Treasury notes and all other Treasury debt? Would you please cite the basis for categorizing different forms of Treasury debt? Keep in mind that the debt to the Trust Fund is spelled out in the Social Security legislation. Might that place such debt on a higher level of priority than T-Bills held by private parties or other nations? The USofA is not a corporation. What legislative basis do you have for suggesting that any one form of US Treasury debt is subordinate to any other form of such debt?
Webb,
I mentioned the CRS report because it is cited in the CBO report that Ken Houghton discussed in the main post or one of the other two CBO reports I identified (one of which is cited in the CBO report in the main post). I provided a few statements from the CRS report that I thought general readers might be interested in. Whether any AB readers look at the report and draw whatever personal conclusions is their business.
If you want to write a main post on the CRS report, have at it.
You’re trying to mount a phony defense of Ken Houghton’s opinions in the main post. That’s laughable, considering that you offer nothing of merit in his defense and nothing in support of your other statements on this comment thread that you think Houghton is wrong.
Houghton wrote a poor main post. Get over it.
MG
a good example of my point. which accusations of mine are you referring to? my accusation that there is no such thing as “plain English that anyone can understand”? a fairly well established “fact” of cognitive science is that most of the time most people don’t understand what the person they are talking to is saying. usually it doesn’t matter. when it does matter, people can keep talking and try to be careful and eventually understand well enough. i’d like to think that Bruce’s comments here, and yours, helped a great deal.
so, do you mean my accusations about Elmendorf? I have apologized for that… with the reservation that what he appears to have said about the Trust Fund having no meaning to the budget is false, and dangerously misleading, and, especially as quoted here by Ken, lends itself almost word for word to the Lies told by the Peterson foundation and its friends.
but no, I have not read the CBO report… not this one… I have read other CBO reports that tell me that Peterson and Obama and all of the non partisan experts are lying. they are lying in that they proclaim a crisis in Social Security and offer solutions that will cause great harm to hundreds of millions of people, but the CBO report on “options” clearly (sic) says that Social Security can be “fixed” with a tax increase of one half of one tenth of one percent per year. Which, oddly, is the same amount I have been trying to tell people about: forty cents per week this year, and an amount that will “feel like” forty cents per week each year for a period of time that comes to an end long before the total amount represents any loss in living standard for the people paying the tax.
and, no, i don’t expect people to understand that without taking the time to ask hard questions… as long as they are as hard with themselves as they are with me, i would welcome that.
i get a little tired of mindless bluster.
MG
you made a useful contribution to this thread. now you are spoiling it with bluster and bullying.
sammy
it ought to require a popular revolution. i don’t know what you mean by an “intra party debt.” but i think it means you don’t think there is more than one person in “the united states of america” and that these people can’t come to an agreement to lend each other money using the federal government as a kind of escrow agent. that’s an interesting idea. it seems to mean you think “the government” is a monolithic power unto itself, and “the government” can do whatever it wants. as a mater of political fact, you could be right, but as a matter of “law” and reason and decency, there is no reason we should put up with it.
Sammy,
It’s four days later and you haven’t provided any support for your comment which I requested. “What legislative basis is there for the distinction that you are making between Special Treasury notes and all other Treasury debt? Would you please cite the basis for categorizing different forms of Treasury debt?” Speak up boy, or has the cat got your tongue?