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Thread: CBO predicts Social Security cash deficits in 2010-11

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    Talking Re: CBO predicts Social Security cash deficits in 2010-11

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    Re: CBO predicts Social Security cash deficits in 2010-11

    Quote Originally Posted by jackalope View Post
    It is held in T-bonds, and collects interest each year. Congress has tapped into it in the past for non-SS spending (Bush did so in each of his budgets, I believe).
    This is a bit of a mischaracterization. Every president has spent all of it. Ever since the decision to keep SS/Medicare off-budget, it's been quite lucrative for sitting politicians to take advantage of the fact that the programs generated huge surpluses which could then be used to offset what would otherwise be considered deficit spending.

    T-bonds are not believed to be mythical IOUs, nor are they believed to be in danger of default. Attempts to portray the SS Trust Fund as non-existent are fear-mongering.
    Again, this belies a misunderstanding of the way the program is organized. As explained up thread, the "trust fund" is merely a set of IOUs written out to the government for the SS program. While you're technically correct that they exist, the way they will be "paid back" is different from what most people assume. Just like we were able to reap the rewards of the extra surpluses during the boom times, we will now have to bear the burdens of the shortfalls. This is because the "repayment" of those IOUs will come out of general revenues. Nobody is claiming that we're going to default on those payments - to the contrary, the problem is that we're going to make them, thus shrinking the portion of the budget left over for us to spend. All else remaining static, the result will be a significant decrease in intragovernmental debt and a corresponding increase in public (read: foreign) debt.
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    Re: CBO predicts Social Security cash deficits in 2010-11

    Quote Originally Posted by RightinNYC View Post
    This is a bit of a mischaracterization. Every president has spent all of it. Ever since the decision to keep SS/Medicare off-budget, it's been quite lucrative for sitting politicians to take advantage of the fact that the programs generated huge surpluses which could then be used to offset what would otherwise be considered deficit spending.



    Again, this belies a misunderstanding of the way the program is organized. As explained up thread, the "trust fund" is merely a set of IOUs written out to the government for the SS program. While you're technically correct that they exist, the way they will be "paid back" is different from what most people assume. Just like we were able to reap the rewards of the extra surpluses during the boom times, we will now have to bear the burdens of the shortfalls. This is because the "repayment" of those IOUs will come out of general revenues. Nobody is claiming that we're going to default on those payments - to the contrary, the problem is that we're going to make them, thus shrinking the portion of the budget left over for us to spend. All else remaining static, the result will be a significant decrease in intragovernmental debt and a corresponding increase in public (read: foreign) debt.
    LOL After all this you basically admit it's not "ponzi scheme" nor "broke".

    It was just you attempting to tie the National debt problem to Social Security and hoping nobody called you on it.

    Why didn't you just say that in the first place! Yes we agree with you! I propose we cut military spending and raise taxes on the rich!
    Last edited by dragondad; 09-23-09 at 10:59 PM.

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    Re: CBO predicts Social Security cash deficits in 2010-11

    Quote Originally Posted by RightinNYC View Post
    This is a bit of a mischaracterization. Every president has spent all of it. Ever since the decision to keep SS/Medicare off-budget, it's been quite lucrative for sitting politicians to take advantage of the fact that the programs generated huge surpluses which could then be used to offset what would otherwise be considered deficit spending.



    Again, this belies a misunderstanding of the way the program is organized. As explained up thread, the "trust fund" is merely a set of IOUs written out to the government for the SS program. While you're technically correct that they exist, the way they will be "paid back" is different from what most people assume. Just like we were able to reap the rewards of the extra surpluses during the boom times, we will now have to bear the burdens of the shortfalls. This is because the "repayment" of those IOUs will come out of general revenues. Nobody is claiming that we're going to default on those payments - to the contrary, the problem is that we're going to make them, thus shrinking the portion of the budget left over for us to spend. All else remaining static, the result will be a significant decrease in intragovernmental debt and a corresponding increase in public (read: foreign) debt.

    Actually, your posts belie a misunderstanding of the SSTF. There are actual purchases of T-bonds being made. There is not 'merely a set of IOUs'. These debt instruments have been issued by the US Gov't, and are payable by the US Gov't. The fact that in the near future the SSTF will not be making purchases of T-bonds and what the effect will be on the US Gov't's ability to continue issueing these debt instruments is a fact that has been pondered and discussed in investment articles, and other corners.

    The trust fund is quite real, is not imaginary, and actually has an impact on the pricing of debt instruments.

    As to every President spending every bit of the trust fund every year, you are going to have to back that up. Please show me where every President since 1983 (?) has sold every T-bond in the SSTF and spent the funds. And, whilst accomplishing that, please explain how the nonexistent SSTF is managing to earn interest every year if every President has spent those funds?

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    Re: CBO predicts Social Security cash deficits in 2010-11

    Quote Originally Posted by dragondad View Post
    LOL After all this you basically admit it's not "ponzie scheme" nor "broke". ]

    It was just you attempting to tie the National debt problem to Social Security and hoping nobody called you on it.

    Why didn't you just say that in the first place! Yes we agree with you! I propose we cut military spending and raise taxes on the rich.
    The fact that you read what I've written in this thread and came away with this conclusion is a bit confusing.

    1) It is quite analogous to a ponzi scheme, in that it survives by promising people future returns for taking their money now, but requires ever increasing number of people at the bottom in order to keep it afloat.

    2) It is most certainly "broke" in the long term. That's what an unfunded liability is. You keep on denying this, but have given no indication that you dispute my underlying claim or even know what an unfunded liability is.

    3) SS certainly made the national debt worse, but not in the way you're implying. A surfeit of easy money allowed politicians to get away with increasing spending without paying the proper political price. It will make the national debt worse in the other way soon enough, once we start subsiding the program out of general revenues after the paper balance is gone.

    4) How does raising taxes on the rich and cutting military spending have anything to do with the structural failings of SS? Unless you're saying "yes, SS will run huge deficits, but rather than fix that, we'll just subsidize it via these new taxes/military cuts," your statement makes absolutely no sense.
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    Re: CBO predicts Social Security cash deficits in 2010-11

    Quote Originally Posted by RightinNYC View Post
    The fact that you read what I've written in this thread and came away with this conclusion is a bit confusing.

    1) It is quite analogous to a ponzi scheme, in that it survives by promising people future returns for taking their money now, but requires ever increasing number of people at the bottom in order to keep it afloat.

    2) It is most certainly "broke" in the long term. That's what an unfunded liability is. You keep on denying this, but have given no indication that you dispute my underlying claim or even know what an unfunded liability is.

    3) SS certainly made the national debt worse, but not in the way you're implying. A surfeit of easy money allowed politicians to get away with increasing spending without paying the proper political price. It will make the national debt worse in the other way soon enough, once we start subsiding the program out of general revenues after the paper balance is gone.

    4) How does raising taxes on the rich and cutting military spending have anything to do with the structural failings of SS? Unless you're saying "yes, SS will run huge deficits, but rather than fix that, we'll just subsidize it via these new taxes/military cuts," your statement makes absolutely no sense.

    1.) It has been taking in more than it has paid out for decades.

    2.) It IS funded - by a dedicated tax. And it is funded for decades into the future.

    3.) What has made the national debt worse has been irresponsible Republican fiscal policy ie "Deficits don't matter" Cheney and co. There is no 'paper balance', there are legal debt instruments being held. If the US Gov't defaults on a legal debt instrument, whether held by the public or not, you will have a whoooollleee heap of trouble. SS won't matter, even if it had it's own dedicated tax. And, btw, NO economist or rating agency believes the US Gov't is in danger of defaulting.

    4.) Addressing the crisis in the general fund by taxing the rich and cutting military spending is wholly appropriate. There is not crisis or structural failing in SS funding.

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    Re: CBO predicts Social Security cash deficits in 2010-11

    "It is most certainly "broke" in the long term. That's what an unfunded liability is. You keep on denying this, but have given no indication that you dispute my underlying claim or even know what an unfunded liability is."

    No, it's not anywhere near the defintion of broke.......... It is what it is, a long term defict.

    Should we do "nothing" about the "long term defict", benefits will be reduce by around 25% around 2040.

    You are not fooling anybody on these boards other than the usual right wing lemmings that are impressed by your long winded, off-on-a-tangent, financial mumbo-jumbo.
    Last edited by dragondad; 09-23-09 at 11:25 PM.

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    Re: CBO predicts Social Security cash deficits in 2010-11

    From the 2009 Trustee report.

    If we do "nothing."

    Similarly, benefits could be reduced to the level that is payable with scheduled tax rates in each year beginning in 2037. Under this scenario, benefits would be reduced 24 percent at the point of trust fund exhaushtion in 2037, with reductions reaching 26 percent in 2083.


    Or we could raise the SS tax now by 16%.

    This deficit indicates that solvency of the combined OASDI Trust Funds for the next 75 years could be restored under the intermediate assumptions if increases were made equivalent to immediately and permanently increasing the Social Security payroll tax from its current level of 12.40 percent (for employees and employers combined) to 14.41 percent.

    What fearmongers refer to as "broke" "ponzi scheme".
    Last edited by dragondad; 09-23-09 at 11:37 PM.

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    Re: CBO predicts Social Security cash deficits in 2010-11

    Quote Originally Posted by jackalope View Post
    Actually, your posts belie a misunderstanding of the SSTF. There are actual purchases of T-bonds being made. There is not 'merely a set of IOUs'. These debt instruments have been issued by the US Gov't, and are payable by the US Gov't. The fact that in the near future the SSTF will not be making purchases of T-bonds and what the effect will be on the US Gov't's ability to continue issueing these debt instruments is a fact that has been pondered and discussed in investment articles, and other corners.

    The trust fund is quite real, is not imaginary, and actually has an impact on the pricing of debt instruments.
    I don't see how any of this is inconsistent with what I've said. The fact that actual bonds (albeit special, non-marketable ones) are being purchased doesn't change the fact that it's largely an accounting trick. If you owe yourself something, it doesn't really matter what form you pretend to owe it in.There is no pile of money sitting around, waiting for us to start drawing from it - just a stack of non-negotiable and non-marketable securities.

    As to every President spending every bit of the trust fund every year, you are going to have to back that up. Please show me where every President since 1983 (?) has sold every T-bond in the SSTF and spent the funds. And, whilst accomplishing that, please explain how the nonexistent SSTF is managing to earn interest every year if every President has spent those funds?
    Again, this is an accounting method. On paper, we've promised to pay back that amount and are even keeping track of the interest that we're promising as well. However, it's absolutely undisputed that the excess funds are being spent. Look at any budget from the past 20 years, or hell, listen to Clinton's OMB:

    "These [trust fund] balances are available to finance future benefit payments and other trust fund expenditures-but only in a bookkeeping sense. They do not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the Treasury that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures. The existence of large trust fund balances, therefore, does not, by itself, have any impact on the Government's ability to pay benefits.
    Or a recent director of the CBO:

    However valid the reasons may have been to establish the accounting conventions the federal government currently uses for trust funds, those conventions confuse almost everyone: the Congress, the media, government officials, and most of all, the public.

    I believe the main source of that confusion is the fact that the
    federal government's trust funds are not trust funds in the traditional
    sense; that is, they do not set aside current income for future use.
    Excess income over outgo for any given trust fund is invested, in a
    certain sense, in special Treasury securities, which are as safe and
    secure as all other Treasury debt. But the Treasury securities held by
    federal trust funds are nothing more than the government's IOUs to
    itself. Look at it this way: if the government had truly invested trust
    fund net income for future use, the Treasury would currently be holding
    hundreds of billions of dollars of real assets that could be liquidated
    in the future to pay for future obligations. But the Treasury does not
    hold any net assets; in fact, all that remains from the so-called
    investment of trust fund surpluses is net debt to the public of $3.7
    trillion.

    Although there is no money in the Treasury to pay for future
    obligations, the obligations to people eligible for Social Security
    benefits are real. And most important, those obligations are a direct
    result of federal law, not a consequence of whatever may or may not be
    credited to the trust funds. In particular, the size of the balances in
    the Social Security trust funds--be it $2 trillion, $10 trillion, or
    zero--does not affect the obligations that the federal government has
    to the program's beneficiaries. Nor does it affect the government's
    ability to pay those benefits.

    This fact is explicitly recognized in the President's budget for
    fiscal year 2000 in the same words used in previous budgets. To quote
    page 337 of the Analytical Perspectives volume: ``The existence of
    large trust fund balances, therefore, does not, by itself, have any
    impact on the government's ability to pay benefits.'' The fact that
    trust fund balances are unrelated to the government's obligation or
    ability to pay benefits needs to be recognized before any proposals to
    address the Social Security and Medicare trust funds can be analyzed.
    In other words, look first to the impact of proposals on increasing
    national saving and raising real growth and then to the impact on
    paying down the debt held by the public.

    Let me apply those principles to the Social Security trust funds.
    In their most recent report, the Social Security trustees estimate that
    the trust funds will not be exhausted until 2032. However, the report
    also includes the fact that starting in 2013, Social Security taxes
    will not be sufficient to meet obligations. If the Social Security
    trust funds were trust funds in the traditional sense, their assets
    could be sold to cover the shortfall. However, as stated above, the
    surpluses in the trust funds have been loaned to the federal
    government, and although special bonds have been issued to indemnify
    the funds, the bonds are nothing more than the federal government's
    IOUs to itself. Starting in 2013, the program's expenditures will
    exceed payroll taxes, and the government will eventually have to go
    further in debt, raise taxes, cut spending, or infuse more general
    revenues to be able to send out Social Security checks. We must look
    beyond the balances in the trust funds to be able to properly evaluate
    any proposal.
    Or, if you still refuse to listen to that, we can turn to the Social Security Administration itself:

    Since the assets in the Social Security trust funds consists of Treasury securities, this means that the taxes collected under the Social Security payroll tax are in effect being lent to the federal government to be expended for whatever present purposes the government requires. In this indirect sense, one could say that the Social Security trust funds are being spent for non-Social Security purposes.
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    Re: CBO predicts Social Security cash deficits in 2010-11

    Quote Originally Posted by jackalope View Post
    1.) It has been taking in more than it has paid out for decades.
    I know. Where did I say anything contradictory?

    2.) It IS funded - by a dedicated tax. And it is funded for decades into the future.
    I know. Where did I say anything contradictory?

    Rather than set up strawmen, why don't you try addressing my actual points?

    3.) What has made the national debt worse has been irresponsible Republican fiscal policy ie "Deficits don't matter" Cheney and co. There is no 'paper balance', there are legal debt instruments being held. If the US Gov't defaults on a legal debt instrument, whether held by the public or not, you will have a whoooollleee heap of trouble. SS won't matter, even if it had it's own dedicated tax. And, btw, NO economist or rating agency believes the US Gov't is in danger of defaulting.
    Again, you're completely missing the point and talking about something that's relatively irrelevant. Regardless of the national debt, SS is still structurally unsound in the long term. That's what an unfunded liability is. This is really not disputable.

    4.) Addressing the crisis in the general fund by taxing the rich and cutting military spending is wholly appropriate. There is not crisis or structural failing in SS funding.
    No, a decision to use ever increasing draws on general revenues to subsidize a program that was supposed to be self-contained is most certainly a structural failing. I can't believe I have to argue this.

    Quote Originally Posted by dragondad View Post
    "It is most certainly "broke" in the long term. That's what an unfunded liability is. You keep on denying this, but have given no indication that you dispute my underlying claim or even know what an unfunded liability is."

    No, it's not anywhere near the defintion of broke.......... It is what it is, a long term defict.

    Should we do "nothing" about the "long term defict", benefits will be reduce by around 25% around 2040.

    You are not fooling anybody on these boards other than the usual right wing lemmings that are impressed by your long winded, off-on-a-tangent, financial mumbo-jumbo.
    Why don't you tally up that 25% cut and let me know what the net value of that is?

    Quote Originally Posted by dragondad View Post
    From the 2009 Trustee report.

    If we do "nothing."

    Similarly, benefits could be reduced to the level that is payable with scheduled tax rates in each year beginning in 2037. Under this scenario, benefits would be reduced 24 percent at the point of trust fund exhaushtion in 2037, with reductions reaching 26 percent in 2083.

    Or we could raise the SS tax now by 16%.

    This deficit indicates that solvency of the combined OASDI Trust Funds for the next 75 years could be restored under the intermediate assumptions if increases were made equivalent to immediately and permanently increasing the Social Security payroll tax from its current level of 12.40 percent (for employees and employers combined) to 14.41 percent.

    What fearmongers refer to as "broke" "ponzi scheme".
    The fact that you don't see either of those scenarios as a huge problem is prima facie evidence that you don't understand what you're talking about.
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