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Thread: 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 RightinNYC View Post
    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.



    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:



    Or a recent director of the CBO:



    Or, if you still refuse to listen to that, we can turn to the Social Security Administration itself:
    You have quoted an excerpt on the CATO institutes Social Security Privatization case page, and a Republican CBO director who was also a special assistant to Reagan, who earlier in the testimony you quoted stated:

    " The thing that the Director and Barry and I probably
    disagree about the most is what you can do with trust fund
    accounting.
    And he then goes on to give a non-standard explanation of trust fund accounting.


    If you want to see what the SSA itself says, here you go:

    Far from being "worthless IOUs," the investments held by the trust funds are backed by the full faith and credit of the U. S. Government. The government has always repaid Social Security, with interest. The special-issue securities are, therefore, just as safe as U.S. Savings Bonds or other financial instruments of the Federal government.
    Trust Fund FAQs

    As to your statement that actual bonds being purchased doesn't change the fact that it's largely an accounting a trick is simply false. They are legal debt obligations backed by the full faith and credit of the US Gov't. There is simply no economist or credit agency anywhere that believes that the US Gov't will default on its bonds.


    Here is a Paul Krugman post taking apart the SS Privatization fear-mongerers who want the public to think the SSTF is a fiction:



    (snip ... )

    But the privatizers won’t take yes for an answer when it comes to the sustainability of Social Security. Their answer to the pretty good numbers is to say that the trust fund is meaningless, because it’s invested in U.S. government bonds. They aren’t really saying that government bonds are worthless; their point is that the whole notion of a separate budget for Social Security is a fiction. And if that’s true, the idea that one part of the government can have a positive trust fund while the government as a whole is in debt does become strange.

    But there are two problems with their position.

    more ...

    About the Social Security trust fund - Paul Krugman Blog - NYTimes.com
    Last edited by jackalope; 09-24-09 at 01:49 AM.

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

    Quote Originally Posted by RightinNYC View Post
    I know. Where did I say anything contradictory?



    I know. Where did I say anything contradictory?

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



    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.



    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.



    Why don't you tally up that 25% cut and let me know what the net value of that is?



    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.
    Social Security is not structurally unsound in the long term. Yes, some changes will have to be made, in terms of age and benefit levels, however expecting that no changes would ever be made is unreasonable.

    There is no ever increasing draws on general funds to subsidize a program that is supposed to be self-sustaining, there is repayment of federal funds held in bonds by the funds.

    You are the one setting up the strawman. You are building up the fact that the gov't will have to repay funds to the trust fund into an argument that the fund doesn't exist, and the program will be subsidized by general funds. It's false and dishonest .... unless you are just going to go with the statement that Reagan and Greenspan were dishonest when they sold the public on a highly regressive tax meant to fund future ss benefits when they never had any intention of having the dedicated tax fund anything but tax cuts for the rich and burgeoning deficits that 'fueled' voodoo supply side gimicks? Of course, this 'argument' also implicitly assumes that the US Congress will at some point in the future actually vote to default on the legal debt instruments held by the SSTF?

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

    Quote Originally Posted by jackalope View Post
    You have quoted an excerpt on the CATO institutes Social Security Privatization case page, and a Republican CBO director who was also a special assistant to Reagan, who earlier in the testimony you quoted stated:

    And he then goes on to give a non-standard explanation of trust fund accounting.
    And I also quoted Clinton's director of the OMB, but I note that you ignore that. Why is it that you choose to ignore the things you don't like and just focus on the sources of the others?

    If you want to see what the SSA itself says, here you go:

    As to your statement that actual bonds being purchased doesn't change the fact that it's largely an accounting a trick is simply false. They are legal debt obligations backed by the full faith and credit of the US Gov't. There is simply no economist or credit agency anywhere that believes that the US Gov't will default on its bonds.
    For the third (and hopefully last) time, I don't know why you think this is inconsistent with what I've been trying to explain to you.

    Yes, the special bonds that the treasury is buying have "value" so long as the government intends to honor the SS obligations. Yes, the government will almost certainly honor those obligations. This value exists much in the same way that a promise to pay you $10 from a friend who always pays his money back is the equivalent of $10.

    That's not the point.

    -The very act of honoring those obligations will involve diverting general revenues to "pay back" the money.

    -As a result, the intragovernmental debt that we've built up will simply be shifted over to public debt (unless you think we're running surpluses any times soon).

    -Once that "debt" runs out, we're going to be stuck with a system with ever-increasing deficits and no cushion.

    If you disagree with any of these facts, please explain why.

    Here is a Paul Krugman post taking apart the SS Privatization fear-mongerers who want the public to think the SSTF is a fiction:
    Oh my. Please, please reread everything I've written and then reread the entire article you've linked. For the most part, Krugman is saying the exact same thing I've been saying since the beginning. The only real difference between us is that he doesn't see a problem with SS's rapidly increasing deficits eating up a large share of general revenue. I do, not because it's not "owed" to the SS program, but because it's simply bad news for the country. Furthermore, Krugman ignores the question of what we do after the fund is exhausted. This may simply be because he's overly optimistic:

    The date at which the trust fund will run out, according to Social Security Administration projections, has receded steadily into the future: 10 years ago it was 2029, now it’s 2042.
    That didn't turn out the way he thought it would, did it?

    Alternatively, it may be because he, like every other politician or political pundit dealing with this, will be dead and rotting by the time that my generation is left to wipe up the **** that his generation has left for us.
    Last edited by RightinNYC; 09-24-09 at 02:08 AM.
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    Re: CBO predicts Social Security cash deficits in 2010-11

    Quote Originally Posted by RightinNYC View Post
    And I also quoted Clinton's director of the OMB, but I note that you ignore that. Why is it that you choose to ignore the things you don't like and just focus on the sources of the others?



    For the third (and hopefully last) time, I don't know why you think this is inconsistent with what I've been trying to explain to you.

    Yes, the special bonds that the treasury is buying have "value" so long as the government intends to honor the SS obligations. Yes, the government will almost certainly honor those obligations. This value exists much in the same way that a promise to pay you $10 from a friend who always pays his money back is the equivalent of $10.

    That's not the point.

    -The very act of honoring those obligations will involve diverting general revenues to "pay back" the money.

    -As a result, the intragovernmental debt that we've built up will simply be shifted over to public debt (unless you think we're running surpluses any times soon).

    -Once that "debt" runs out, we're going to be stuck with a system with ever-increasing deficits and no cushion.

    If you disagree with any of these facts, please explain why.



    Oh my. Please, please reread everything I've written and then reread the entire article you've linked. For the most part, Krugman is saying the exact same thing I've been saying since the beginning. The only real difference between us is that he doesn't see a problem with SS's rapidly increasing deficits eating up a large share of general revenue. I do, not because it's not "owed" to the SS program, but because it's simply bad news for the country. Furthermore, Krugman ignores the question of what we do after the fund is exhausted. This may simply be because he's overly optimistic:



    That didn't turn out the way he thought it would, did it?

    Alternatively, it may be because he, like every other politician or political pundit dealing with this, will be dead and rotting by the time that my generation is left to wipe up the **** that his generation has left for us.

    No, I didn't ignore the quote the CATO org's SS Privatization page excerpted, I noted that it was excerpting quotes intended to support its position. The quotes on CATO's page do nothing to negate the fact that the SSTF exists, it holds legal debt instruments, and those debt instruments will be repaid.

    As to diverting general funds to repay debts - we will eventually divert general funds to repay all debts, not just those held by the SSTF. We can start by taxing the rich and cutting defense spending, and someone in the thread suggested, and you dismissed. There is a long-term structural problem with the US Budget, but it is not in the SS funding, despite the many, unsuccessful attempts of the right to make it so.

    Besides the fact that your argument rests on the fact that the Congress would actually have to authorize a debt instrument default (never gonna happen, and again no economist or rating agency believes that will happen), and the US Gov't will have a crisis of epic proportions (a default? are you serious?), the political fallout of such a scam being pulled (the 80-s era imposition of a much higher, highly regressive, dedicated tax to fund boomer SS benefits) would be epic as well.

    Your arguments are dishonest, and pretend that we can actually just wave a magic wand and declare some debts will not be paid. Never gonna happen. And it shouldn't.

    Frankly, the most dishonest aspect of the argument is that it is made at all. It is morally reprehensible to argue in favor of taking the surpluses built via regressive taxation, meant to be a dedicated funding source for social security, and declare they do not exist and those funds do not need to be repaid because we need the money to pay other debts instead (funded by ill-advised republican policies of funding tax cuts for the rich and war via deficit spending).
    Last edited by jackalope; 09-24-09 at 02:26 AM.

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

    Quote Originally Posted by jackalope View Post
    No, I didn't ignore the quote the CATO org's SS Privatization page excerpted, I noted that it was excerpting quotes intended to support its position. The quotes on CATO's page do nothing to negate the fact that the SSTF exists, it holds legal debt instruments, and those debt instruments will be repaid.

    As to diverting general funds to repay debts - we will eventually divert general funds to repay all debts, not just those held by the SSTF. We can start by taxing the rich and cutting defense spending, and someone in the thread suggested, and you dismissed. There is a long-term structural problem with the US Budget, but it is not in the SS funding, despite the many, unsuccessful attempts of the right to make it so.

    Besides the fact that your argument rests on the fact that the Congress would actually have to authorize a debt instrument default (never gonna happen, and again no economist or rating agency believes that will happen), and the US Gov't will have a crisis of epic proportions (a default? are you serious?), the political fallout of such a scam being pulled (the 80-s era imposition of a much higher, highly regressive, dedicated tax to fund boomer SS benefits) would be epic as well.

    Your arguments are dishonest, and pretend that we can actually just wave a magic wand and declare some debts will not be paid. Never gonna happen. And it shouldn't.
    Why do you continue to respond as if I'm talking about whether or not the US will default on this debt? I have never once suggested this, and I'm beginning to conclude that you just aren't understanding what I'm writing.

    We will almost certainly dole out all of the money that the government has said it would, but it's that very act of paying it back that will be so problematic. The fact that you don't recognize this (not to mention your insistence that a $17,500,000,000,000 unfunded liability is "not a problem") means that you're just plain wrong.

    edit:

    re:

    Frankly, the most dishonest aspect of the argument is that it is made at all. It is morally reprehensible to argue in favor of taking the surpluses built via regressive taxation, meant to be a dedicated funding source for social security, and declare they do not exist and those funds do not need to be repaid because we need the money to pay other debts instead (funded by ill-advised republican policies of funding tax cuts for the rich and war via deficit spending).
    Thanks, that's the confirmation that I needed to be sure that you have no clue what I'm talking about. Go back through my posts and see if you can find one place where I suggest this.
    Last edited by RightinNYC; 09-24-09 at 02:32 AM.
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    Re: CBO predicts Social Security cash deficits in 2010-11

    Quote Originally Posted by jackalope View Post
    Sorry, T-bonds are real investments. They earn interest every year. There is nothing imaginary about the Social Security Trust Fund.
    I hate to tell you this but the government doesn't invest that money into value based products and services.

    No "profit" is generated to pay the interest on those loans it has made to itself.

    Quote Originally Posted by jackalope View Post
    They are AAA rated.
    Yea and so were the all those mortgage backed securities that helped tank our economy.
    Having a AAA rating doesn't mean squat anymore.
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    Re: CBO predicts Social Security cash deficits in 2010-11

    Quote Originally Posted by RightinNYC View Post
    Why do you continue to respond as if I'm talking about whether or not the US will default on this debt? I have never once suggested this, and I'm beginning to conclude that you just aren't understanding what I'm writing.

    We will almost certainly dole out all of the money that the government has said it would, but it's that very act of paying it back that will be so problematic. The fact that you don't recognize this (not to mention your insistence that a $17,500,000,000,000 unfunded liability is "not a problem") means that you're just plain wrong.

    edit:

    re:



    Thanks, that's the confirmation that I needed to be sure that you have no clue what I'm talking about. Go back through my posts and see if you can find one place where I suggest this.


    Here you go, posted by you on the first page of this thread, and argued by you elsewhere:

    Please explain where this trust fund is located and how Congress will tap it. This should be amusing.

    You've stated that there are no assets being held, simply 'IOUs' that mean nothing.


    Paying back those debts will not be problematic, if any credit agency thought so that fact would be reflected in a downgraded credit rating. It would further be reflected in the ongoing treasury auctions, which would demand junk bond interest levels b/c the risk of non-repayment would be high.

    You are not arguing economics, or business, or even investment principles. You are making a purely political argument, implying that the SSTF does not exist, and there are no legal debt instruments, simply IOUs which will not be repaid.


    You often finish your arguments with statements that the other person has no idea what the topic is about, or should not be taken seriously for this reason or that. Those statements and arguments diminish your own position, particularly since you fail to lay a sound foundation for your own argument. That has happened with posts of yours in economics, and in statistics. Because you find right-wing arguments and talking points compelling doesn't lend them logic.


    The SSTF does exist. The Congress will never vote to default on the debt instruments held by the fund. The Congress *should* never vote to do so.

    The structural problems with the US deficit do not lie in the SS program, they lie elsewhere. Addressing those problems, particularly with taxes on the rich, and most particularly with addressing the actual crisis - Medicare - is of paramount importance.

    Acknowledging past Republican economic policy decision failures regarding funding tax cuts for the wealthy and funding wars with deficit spending is important. Those policy decisions should never be made again.

    Apart from addressing the deficit, the debt must be addressed. The debt held by the SSTF eclipsed by the debt held by the public, and particularly debt held by foreign nations. This is of far greater concern, and stealing SSTF funds will not solve that problem.

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

    Quote Originally Posted by Harry Guerrilla View Post
    I hate to tell you this but the government doesn't invest that money into value based products and services.

    No "profit" is generated to pay the interest on those loans it has made to itself.



    Yea and so were the all those mortgage backed securities that helped tank our economy.
    Having a AAA rating doesn't mean squat anymore.

    Thank goodness, there was an ill-advised Republican push to privatize the SSTF. Baaddd freaking idea.

    Sorry, mtge backed securities are not on par with treasuries. Corporate bonds are often priced in relation to treasuries. Holders of corporate bonds demand risk premiums not associated with treasuries.

    Altho, there is no question that rating agencies did flub on those mtge backed securities.

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

    Quote Originally Posted by jackalope View Post
    Thank goodness, there was an ill-advised Republican push to privatize the SSTF. Baaddd freaking idea.
    I have to disagree with that mainly because Social Security is inherently discriminatory against some racial minorities and my private investments will forever out pace anything I put in or receive from SS.

    If I have full access to my wages, I can earn exponentially more than I can now.

    Quote Originally Posted by jackalope View Post
    Sorry, mtge backed securities are not on par with treasuries. Corporate bonds are often priced in relation to treasuries. Holders of corporate bonds demand risk premiums not associated with treasuries.

    Altho, there is no question that rating agencies did flub on those mtge backed securities.
    It doesn't matter, the rating agencies labeled them as AAA.
    I don't judge what is or is not a good investment based on arbitrary ratings, I dive right into the companies financial records.

    If the U.S. government were a private company, I'd be highly skeptical of buying into it.
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    Re: CBO predicts Social Security cash deficits in 2010-11

    Quote Originally Posted by jackalope View Post
    Here you go, posted by you on the first page of this thread, and argued by you elsewhere:

    You've stated that there are no assets being held, simply 'IOUs' that mean nothing.
    1) How the **** does that have anything to do with me saying we shouldn't/won't pay it back, which is your claim?

    2) They are IOUs. Again, the fact that they gussied them up by issuing non-marketable securities doesn't mean that they're anything more than that. They are an asset on paper.


    Paying back those debts will not be problematic, if any credit agency thought so that fact would be reflected in a downgraded credit rating.

    It would further be reflected in the ongoing treasury auctions, which would demand junk bond interest levels b/c the risk of non-repayment would be high.
    Explain how you think this money will be paid back. Tell me exactly where you think the actual payments will come from.

    If your answer is anything other than "general revenues," you're dead wrong. Again, this is not something that is up for discussion:

    Why is Reform to Improve the Social Security and Medicare Financial Imbalances Needed?

    Concern about the long-range financial outlook for Medicare and Social Security often focuses on the exhaustion dates for the HI and OASDI Trust Funds—the time when projected finances under current law would be insufficient to pay the full amount of scheduled benefits. A more immediate issue is the growing burden that the programs will place on the Federal budget well before the trust funds are exhausted.

    The difference between the cost of scheduled benefits and tax income for the HI and OASDI Trust Funds is shown in Chart E, together with the Federal general fund revenues provided under current law for SMI. During 2009-17 for HI, general revenues (the red bars in the chart) must be used to cover the interest earnings and asset redemptions required to offset the shortfall of HI tax revenues. Similarly, general revenues cover these offsets for the OASDI deficits during 2016-37 (blue bars).
    Trustees Report Summary


    You are not arguing economics, or business, or even investment principles. You are making a purely political argument, implying that the SSTF does not exist, and there are no legal debt instruments, simply IOUs which will not be repaid.
    HOLY ****, I did not say they will not be repaid. Read the words on your computer screen.

    You often finish your arguments with statements that the other person has no idea what the topic is about, or should not be taken seriously for this reason or that. Those statements and arguments diminish your own position, particularly since you fail to lay a sound foundation for your own argument. That has happened with posts of yours in economics, and in statistics. Because you find right-wing arguments and talking points compelling doesn't lend them logic.
    It's hard not to point that out when you're so blatantly misreading everything I'm saying.

    The SSTF does exist. The Congress will never vote to default on the debt instruments held by the fund. The Congress *should* never vote to do so.
    I didn't say they should. Read what's on your screen.
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