Saturday, January 28, 2012

Sugar Tariffs Cost Americans $3.86 Billion in 2011

The chart above displays annual refined sugar prices (cents per pound) using data from the USDA (Tables 2 and 5) between 1982 and 2011 for: a) the U.S. wholesale refined sugar price at Midwest markets, and b) the world refined sugar price. Due to import quota restrictions that strictly limit the amount of imported sugar coming into the U.S. at the world price, the domestic producers are protected from more efficient foreign sugar growers who can produce cane sugar in Central America, Africa and the Caribbean at half the cost of beet sugar in Minnesota and Michigan.

Of course, there's no free lunch, and this sweet trade protection comes at the expense of American consumers and U.S. sugar-using businesses, who have been forced to pay more than twice the world price of sugar on average since 1982 (28.6 cents for domestic sugar vs. 14 cents for world sugar, see chart). How much does this trade protection cost Americans?

We can estimate the cost of sugar protection, using some additional data from the USDA (Table 1) about sugar:

1. American consumers and businesses consumed 10.18 million metric tons (22.44 billion pounds) of sugar last year, and therefore every 1 cent increase in sugar prices costs Americans an additional $224.4 million per year in higher prices.

2. The U.S. produced 7.15 million metric tons (15.76 billion pounds) of sugar last year.

3. Due to quotas, Americans were only allowed to purchase 3 metric tons (6.67 billion pounds) of world sugar, or about 30% of the total sugar consumed. Domestic sugar producers ("Big Sugar") are allowed to control 70% of the sugar market every year through protectionist sugar trade policies that strictly limit foreign competition.

4. If sugar quotas were eliminated, and American consumers and businesses had been able to purchase 100% of their sugar in 2011 at the world price (average of 31.68 cents per pound) instead of the average U.S. price of 56.22 cents, they would have saved about $3.86 billion. In other words, by forcing Americans to pay 56.22 cents for inefficiently produced domestic sugar instead of 31.68 cents for more efficiently produced world sugar, Americans pay an additional 24.54 cents per pound for the 15.76 billion pounds of American sugar produced annually, which translates to $3.86 billion in higher costs for American consumers and businesses.

(Note: This is an estimate based on the assumptions that: a) the amount of sugar consumed in the U.S., and b) world prices, wouldn't change if the U.S. sugar market was completely open.)

Bottom Line: The cost of most trade protection is largely invisible and hard to calculate, but the cost of sugar protection is directly visible and measurable, since the USDA and the futures markets regularly report prices for both high-cost domestic sugar and low-cost world sugar. Like all protection, sugar tariffs exist to protect an inefficient domestic industry (sugar beet farmers) from more efficient foreign producers (cane sugar farmers), and come at the expense of the U.S. consumers and the American companies using sugar as an input, and make our country worse off, on net.

I'm reminded of the recent Quote of the Day from Bastiat: "Treat all economic questions from the viewpoint of the consumer, for the interests of the consumer are the interests of the human race." U.S. sugar policy has a long history, going back to 1789 when the First Congress of the United States imposed a tariff upon foreign sugar, and is a perfect illustration of trade protection that ignores the viewpoint of disorganized, dispersed consumers in favor of the concentrated, well-organized interests of producers.

115 Comments:

At 1/28/2012 10:42 AM, Blogger VangelV said...

This is a perfect example that shows how both parties are the same when it comes to ripping off consumers to support corporations that donate money to the 'right' politicians from both sides of the political spectrum.

 
At 1/28/2012 11:20 AM, Blogger John Thacker said...

You do know, of course, that the estimate is wrong because another big thing that the subsidy does is cause us to consume more high fructose corn syrup instead of sugar. (Coke in the rest of the world uses sugar.)

Certainly that's one reason why support for the sugar price increases comes from non-sugar producing states as well. There are a lot of corn states too.

 
At 1/28/2012 11:24 AM, Blogger Che is dead said...

"This is a perfect example that shows how both parties are the same ..." -- Vange

While I certainly do not support import quotas for sugar, this instance hardly provides proof supporting your broad generalizations. Taken as a whole, Republican trade policies have been far more in line with free market principles. Free trade agreements negotiated and supported by Republicans have languished for years because of Democrat obstruction. Get a clue.

 
At 1/28/2012 12:00 PM, Blogger Benjamin Cole said...

The entire USDA, and much of the $1 trillion-dollar-a-year Defense-Homland Security-VA megaplex is lard for GOP constituents and clientele, and pure coprolite for US taxpayers.

Per resident, Americans now pay $3,333 to Defense, HS-VA.

That's $13,000 for the typical family of four. In income taxes--not payroll taxes.

Every year, and next year will be worse. The GOP will never say global threats have reduced to the point we don't need the coprolite anymore. Romney is braying we need to spend more. We must prevail in Eatcrapistan, against rag-heads armed with homemade bombs. Only a few decades and several trillion dollars more (from taxpayers to GOP coffers), I guess.

We buy USAF airplanes that require 119 hours of service for every hour of flight. (See Stealth B2). The plane cost $2 billion per copy. We have used the precious B2 against the ferocious air defenses of Afghanistan Kosovo, Libya and Iraq. This is just one example of reckless taxpayer-sucking spending in Defense.

There are GOP trenchermen who insist they are "conservatives," but from what I see, our two political parties are just agglomerations of different corrupt interest groups.

I disagree with VangeIV on some issues and some observations, but he is true to his foundational beliefs, which are libertarian. Good for Vange IV.

 
At 1/28/2012 12:00 PM, Blogger Larry G said...

and yet.. listen to this Republican:

" Adam Smith, The Tampa Bay Times: “Speaker Gingrich, in Iowa you were a big supporter of ethanol subsidies. Here in Florida, sugar is a very important industry, and it’s subsidized, as well, with import restrictions, quotas. There’s a conservative movement to do away with these programs. In the case of sugar, critics say it adds billions of dollars to consumers grocery bills every year. What would you do about that?”

Newt Gingrich, Republican Presidential Candidate: “Well, I pretty enthusiastically early in my career kept trying to figure out how to get away from the sugar subsidy. And I found out one of the fascinating things about America, which was that cane sugar hides behind beet sugar. And there are just too many beet sugar districts in the United States. It’s an amazing side story about how interest groups operate.
In an ideal world, you would have an open market. And that’s I think that would be a better future and, frankly, one where cane sugar would still make a lot of money. But it’s very hard to imagine how you’re going to get there.

http://goo.gl/sVdHA

 
At 1/28/2012 12:11 PM, Blogger Buddy R Pacifico said...

From the book A Political History of the Tariff 1789-1861:

"On April 8. 1789, one week after the first Congress of the United States assembled a quorum James Madison introduced tariff and tonnage bills...for the speedy supplies of the federal treasury....

At the time no sugar was grown in the United States. So, why did Madison want a tariff on sugar? To force the British to open the West Indies, where sugar was grown, to U.S. flagged ships.

The sugar tariff was opposed by Northern merchants and Southern growers, because it effected their exports.

Sugar and other tariffs were the main source of U.S. federal revenue until 1861. Sugar tariffs seem to be tradional now and not logical.

 
At 1/28/2012 1:43 PM, Blogger Che is dead said...

Ah, "Benji" and Larry, a tag-team of ignorance.

Let's look at the sugar growers subsidies specifically. In 2008, a Democrat controlled congress decided to override a presidential veto of a $300 billion farm bill. Contained in that bill were special provisions for the sugar industry:

Sugar producers also make out like Beltway bandits, receiving the difference between the world price of sugar, which is now $12 per pound, and the guaranteed price of about $21 per pound. That's a roughly 75% subsidy for already wealthy cane growers and a nice payoff for the $3 million they contribute to House candidates each year. -- WSJ

The 2008 farm bill also created a sugar-to-ethanol program under which the government buys excess imported sugar that might put push domestic sugar prices down and requires that the government to sell the excess sugar, at a loss if need be, to ethanol producers.

Bush had sought to limit farm subsidies to those earning less than $200,000 a year, which would have effectively ended such programs. The Democrat bill supposedly limited subsidies to those earning $750,000, but provided loopholes to make it closer to $2.5 million.

Yes, many Republicans supported the bill and shamefully voted with the Democrats to override the presidents veto. But under your theory, all farm subsidies exist only as sops to rural, Republican constituencies. If that is true, why would the Democrats pursue the passage of this bill so aggressively? And why, if they are so concerned with the "little guy", write in provisions that provide that subsidies go to multi-millionaires?

By the way, this wasn't the first time that Bush had tried to end farm subsidies. As part of the WTO Doha trade negotiations Bush proposed ending farm subsidies, of every kind, providing that the EU do the same:

GLENEAGLES, Scotland — President George W. Bush said he was seeking agreement with the European Union on a plan to eliminate by 2010 the $112 billion a year that rich countries spend subsidizing their farmers.

"We want to work with the EU to rid our respective countries of agricultural subsidies," Bush said at a news conference in Gleneagles, where he is attending a meeting of the Group of 8 leading industrialized nations.

Bush said that aid should be eliminated as part of the so-called Doha Round of negotiations within the World Trade Organization ...

The president's call to end the subsidies seems to go beyond proposals now being considered within the WTO. -- The New York Times

Shortly after that, the Democrats voted to end his "fast-track" trade authority.

Even putting your heads together, you come up a few cards short of a full deck.

 
At 1/28/2012 1:48 PM, Blogger Larry G said...

Oh.. she is dead.. I only pointed out the the Republican contenders for the Presidency don't sound so committed to ending the sugar subsides.

When Mr. Newt says "...it’s very hard to imagine how you’re going to get there. ", it's not exactly inspiring confidence.

but she is dead.. methinks you're short of more than a few cards in the deck... and worse don't have a clue.... the man who does not know he does not know....

;-)

 
At 1/28/2012 1:56 PM, Blogger juandos said...

"The entire USDA, and much of the $1 trillion-dollar-a-year Defense-Homland Security-VA megaplex is lard for GOP constituents and clientele, and pure coprolite for US taxpayers"...

Still repeating the same old lie, pseudo benny?

Do you ever do any homework or is shooting from the lip your only style?

 
At 1/28/2012 1:57 PM, Blogger Che is dead said...

As for the rest of your little rant, here's a short video that will help put the federal budget into perspective for you: LINK.

Defense spending is the least of our problems.

 
At 1/28/2012 2:18 PM, Blogger Larry G said...

In terms of the deficit - it is easy for some to get confused when including FICA and SS/Medicare Part A spending.

Setting aside for the moment the debate over payroll taxes... if you take FICA/SS/Medicare Part A out of the picture -you are left with the actually tax vs spending deficit conundrum.

"cutting" FICA/SS/Medicare Part A will do nothing to help the annual structural deficit because FICA can be spend only on SS/Medicare Part A - that's why it is called "mandatory" because the law requires FICA be spent ONLY for that purpose.

Further the law says that spending on SS/Medicare Part A CANNOT EXCEED FICA revenues.

It's sort of a self balancing system that keeps SS/Medicare Part A from running a deficit.

Not to say that there is not plenty of entitlement fertile ground left to plow - for Medicare Part B,C,D and MedicAid.

But let me point out that Medicare Part B is voluntary not mandatory. The govt is mandated to fund Medicare Part B but it also has the ability to bump up the premiums.. which is should do but keep in mind that right now out of the 1.5 trillion annual deficit that only 210 billion is Medicare Part B while over 700 billion is DOD and that's not counting another 300-600 billion that is spend on "national defense" and DOD "entitlements.

In terms of the deficit itself - if you take out the FICA/SS which has no effect on the deficit - and look at what remains in terms of entitlements and DOD and National Defense - you could CUT ALL of Medicare Parts B,C,D AND MedicAID and food stamps and STILL be left with well over 500 billion in deficit.

them's the facts.

no amount of hand-waving can change it - even from she is dead and her lame videos.

 
At 1/28/2012 2:22 PM, Blogger juandos said...

"if you take FICA/SS/Medicare Part A out of the picture -you are left with the actually tax vs spending deficit conundrum"...

Why take it out?

Its still money that is extorted...

Its just wealth redistribution...

 
At 1/28/2012 2:35 PM, Blogger Larry G said...

re: what take it out?

1. - it's always been there - even when there was no budget deficit.

2. - it's not what is causing the current deficit - we did not get the deficit and debt from FICA spending.

3. - you might have a debate about FICA/SS in terms of whether we should have a payroll tax (or not) or how much but that issue has right now has absolutely nothing to do with the current deficit and the reasons behind it.

... unless of course your "solution" to the deficit and budget is to kill SS/Medicare Part A and use the FICA money to balance the budget.

you could take that position but it would be so far out in left field that not even Ron Paul would take it on.

We got to this deficit without any help from FICA/SS.

 
At 1/28/2012 3:05 PM, Blogger juandos said...

"it's always been there - even when there was no budget deficit"...

What?!?! As long as you've been alive there's been budget deficits...

Its due to the explosion of constitutionally questionable spending, a.k.a. entitlements...

"We got to this deficit without any help from FICA/SS"...

Ahhh, more that repetitive syndrome in action...

 
At 1/28/2012 3:21 PM, Blogger Larry G said...

wrong chart guy.. try this one:

http://www.usgovernmentspending.com/spending_chart_1900_2016USp_XXs1li111mcn_G0f

in terms of FICA - it has in the past been "off budget' to signify that it used no general revenues to pay benefits and it's funding source was earmarked ONLY for SS/Medicare A.

As such, it has NEVER been spending that has caused a deficit.

In fact, as I have pointed out, it is by law, illegal for it to go into deficit.

Now.. if you are really SERIOUS about dealing with the deficit and debt then you'd deal with the things that have caused it FIRST , BEFORE you expand out the argument that FICA should ALSO be used to balance the budget - an argument that will fall on deaf ears all around, including all but the most radical politicians.

No industrialized country in the world does not have a payroll tax for social security and attempting to make the abolition of SS and subsequent plundering of FICA will not advance anything - unless of course that is your real goal.

talk about repetitive cognizance.... hoooweee...

Part of the problem right now is that even the Fed govt combines these two when dealing with the budget.

It's in Wiki that way and in the video you "shared" that way but there is no chance of a snowball in hell that anyone in Congress is going to agree to re-direct FICA to pay off the deficit/debt and abandon SS.

only in the wet dreams of the most ardent anti-govt zealot is that a possibility.

 
At 1/28/2012 4:10 PM, Blogger juandos said...

"wrong chart guy"...

LOL!

Thanks for playing...

Pick up your door prize on the way out...

 
At 1/28/2012 5:04 PM, Blogger Ron H. said...

"Newt Gingrich, Republican Presidential Candidate: “Well, I pretty enthusiastically early in my career kept trying to figure out how to get away from the sugar subsidy. And I found out one of the...blah blah blah"

Translation: "I support the quotas."

 
At 1/28/2012 5:17 PM, Blogger juandos said...

"Translation: "I support the quotas.""...

Ahhh yes, the sweetness of DC employment...:-)

 
At 1/28/2012 5:18 PM, Blogger PeakTrader said...

Many people don't realize Obama and his cronies made the country weaker and poorer, not stronger and richer.

And, if Americans had to actually pay for all the government regulations and spending, instead of being subsidized by foreigners, the country would be even weaker and poorer.

 
At 1/28/2012 5:41 PM, Blogger Ron H. said...

Che: "As for the rest of your little rant, here's a short video that will help put the federal budget into perspective for you: LINK.

Defense spending is the least of our problems.
"

Thanks for the link. That pretty much says it all in clear, easy to understand terms. But I suspect you have *still* overshot your target audience.

 
At 1/28/2012 5:45 PM, Blogger Ron H. said...

juandos: "Ahhh yes, the sweetness of DC employment...:-)"

It's amazing that anyone can use so many words to say "I support the quotas". I guess that's what being a politician is all about.

 
At 1/28/2012 5:46 PM, Blogger Ron H. said...

Peak: "And, if Americans had to actually pay for all the government regulations and spending, instead of being subsidized by foreigners, the country would be even weaker and poorer."

Actually, it would be pretty much impossible.

 
At 1/28/2012 5:50 PM, Blogger Ron H. said...

"In terms of the deficit - it is easy for some to get confused when including FICA and SS/Medicare Part A spending."

LOL! Boy, I'll say.

 
At 1/28/2012 5:55 PM, Blogger Larry G said...

take FICA/SS out of it for a minute and look at what is left.

2.1 trillion in revenues.
1.3 trillion of that is income taxes

900 billion is DOD
500 billion is National Defense

210 billion is Medicare Part B
100 billion is Medicare Part C-D
350 billion is MedicAid
xxx is food stamps, housing (if someone knows fill it in).

these are the "drivers" in increased spending.

most all of them have doubled since 2000.

now you've got to come up with 1.5 trillion in less spending.

 
At 1/28/2012 9:15 PM, Blogger Dahveed said...

Because of the support of inefficient sugar production, we also have the ecological disaster that is typical western farming. Too much fertilizer, pesticides, and a lack of crop rotation means the land and surrounding areas have been contaminated.

Also, due to the corn subsidies, most commercial sweetening is done with much cheap corn syrups.

While I'm generally supportive of domestic food production, sugar is one item we could use less of in our diets.

 
At 1/28/2012 9:21 PM, Blogger VangelV said...

While I certainly do not support import quotas for sugar, this instance hardly provides proof supporting your broad generalizations. Taken as a whole, Republican trade policies have been far more in line with free market principles. Free trade agreements negotiated and supported by Republicans have languished for years because of Democrat obstruction. Get a clue.

Sorry but I see no evidence that the GOP is any better. Bush raised import duties on steel, lumber, and a number of other products while he had a GOP controlled Congress to support his views. The sugar and ethanol subsidies were not a GOP or Democrat thing. They have been supported by both parties.

 
At 1/28/2012 9:26 PM, Blogger VangelV said...

Many people don't realize Obama and his cronies made the country weaker and poorer, not stronger and richer.

And many people don't realize that the GOP was also protectionist and, "made the country weaker and poorer, not stronger and richer," to use your words. The supporters of both sides have a blind spot that does not see the weakness in their own position and the extent of their own hypocrisy.

The GOP talks big on fiscal conservatism and small government but when it is in power it grows government and spending at similar rates to the Democrats. The Democrats talk big on civil liberties but are just as likely to support the growth of the police state when their man is in power.

And, if Americans had to actually pay for all the government regulations and spending, instead of being subsidized by foreigners, the country would be even weaker and poorer.

They do pay. They just don't see it because both parties resort to the inflation of money and credit by the Fed to cover up their sins.

 
At 1/28/2012 10:46 PM, Blogger Jon Murphy said...

Good God, you guys spend so much time trying to assign blame, this party or that party, that you both miss the issue entirely. It doesn't matter who is at fault. All that matters is that this is further evidence tariffs are damaging to the economy.

 
At 1/28/2012 11:11 PM, Blogger VangelV said...

Good God, you guys spend so much time trying to assign blame, this party or that party, that you both miss the issue entirely. It doesn't matter who is at fault. All that matters is that this is further evidence tariffs are damaging to the economy.

Yes. And if the same two party system remains nothing will change. That is the point.

 
At 1/29/2012 1:07 AM, Blogger PeakTrader said...

Ultimately, the American people are to blame.

They want things they don't have to pay for, whether it's from taxing others, the hard work of foreigners, or higher prices of some goods.

 
At 1/29/2012 1:39 AM, Blogger Che is dead said...

"Yes. And if the same two party system remains nothing will change. That is the point." -- Vag

Yes, we need the one true party. The ideologically pure party. One that will last a thousand years.

You're pathetic.

 
At 1/29/2012 2:15 AM, Blogger Che is dead said...

"I see no evidence that the GOP is any better. Bush raised import duties on steel, lumber, and a number of other products while he had a GOP controlled Congress to support his views." -- Vag

Yes, Bush put strategic tariffs on steel imports for a very short time, but the tariffs were deliberately riddled with exceptions which made them nearly meaningless. As for the Canadian softwood tariffs, they were put in force after Canada violated trade agreements by heavily subsidizing softwood exports to the U.S.. Those tariffs were lifted after negotiations with Canada. In both cases the Democrats complained that Bush had not raised tariffs enough.

When George W Bush took office the U.S. had free trade agreements with only three nations. By 2008, he had increased that number to 14 and had negotiated free trade agreements with three more - Columbia, Panama and South Korea. International trade increased by more than 60 percent during his administration.

So, the equivalence that you are trying to draw is grounded only in your own ignorance.

 
At 1/29/2012 8:39 AM, Blogger bob wright said...

I'm with Jon Murphy.

Like a nagging spouse, all this back-and-forth is just talk and accomplishes nothing.

Rather than focusing (harping actually) on those issues on which we disagree - and there will always be issues on which we disagree - we should act on that one issue on which we agree.

If you are predisposed to vote democrat, so be it.
If you are predisposed to vote republican, fine.

One issue that the typical democrat and republican (the man on the street as opposed to the professional politician) can agree on is that sugar tariffs harm the "many" and benefit the "few."

So why can't we actually accomplish something and end the tariff?

Rather than tilting at windmills, we should act.

 
At 1/29/2012 8:45 AM, Blogger Larry G said...

" Rather than tilting at windmills, we should act. "

because the people who get the sugar subsidies set aside enough to buy the votes of both Dem and Republican Congress Critters?

so..in effect, you and I are paying to bribe the congress critters to vote against our own interests, eh?

nice system, eh?

 
At 1/29/2012 9:25 AM, Blogger VangelV said...

Yes, we need the one true party. The ideologically pure party. One that will last a thousand years.

No. You need choice. Look at the way that the mainstream parties control access to the ballot and you will see just how little difference there is between the American system and the system in most countries that you consider to be tyrannies. While I think that they are idiots there is no way to justify denying Newt and Snatorum access to the Virginia and Arizona ballots.

And you fail to recognize that you do have a one party system. The only choice that voters have is to decide which wing of that bird of prey to put into power.

 
At 1/29/2012 9:37 AM, Blogger VangelV said...

Yes, Bush put strategic tariffs on steel imports for a very short time, but the tariffs were deliberately riddled with exceptions which made them nearly meaningless.

See how you justify actions that are supposedly against the principles that the GOP is said to stand for? The tariffs were not meaningless. They hurt domestic consumers and kept alive inefficient producers whose unwanted production capacity weakened their competitors. You either believe in free trade or you don't. The actions suggest that the GOP does not.

As for the Canadian softwood tariffs, they were put in force after Canada violated trade agreements by heavily subsidizing softwood exports to the U.S.

As I said, you either believe in free trade or you don't. Asking consumers to pay more for houses to protect a few inefficient domestic companies is harmful. End of story.

Those tariffs were lifted after negotiations with Canada. In both cases the Democrats complained that Bush had not raised tariffs enough.

Bush still acted against free market principles. And there was little 'negotiation' being done. The US government used its power to meddle in the market and extort concessions from producers. While he did return $4 billion the US still kept $1 billion in duties and used them to subsidize their faltering lumber industry.

The problem for the US is that Canada is now looking to rely less on the US as a customer and to look at other markets for its products. The Chinese have made huge inroads in the natural resource sector both as customers and as investors and are looking to increase their purchases at the expense to American consumers. From what I hear from a few of my sources future deals may include the use of a mixture of currencies and gold for settlement purposes instead of exclusive reliance on the USD.

If the USD loses its reserve currency advantage both the GOP and Democrats will be to blame for the damage done to the domestic economy.

 
At 1/29/2012 9:46 AM, Blogger VangelV said...

When George W Bush took office the U.S. had free trade agreements with only three nations. By 2008, he had increased that number to 14 and had negotiated free trade agreements with three more - Columbia, Panama and South Korea. International trade increased by more than 60 percent during his administration.

This is like having Reagan take credit for the deregulation actions began by Carter. Bush simply followed up on the activities began by Clinton. But arguing that agreements that run to hundreds of pages and have thousands of definitions, standards, etc., an example of free-trade only shows how little GOP supporters understand economics. You don't need government agreements to have free-trade. All you do is open your markets for competition as Hong Kong and Singapore did.

What you and most GOP supporters call free-trade agreements are just managed trade agreements. By supporting those managed trade proposals most Republicans only transfer more power to the President and expand the influence of government. They ignore that the President has no power in the Constitution to engage in trade negotiations and that the power to conduct trade negotiations and construct trade agreements belongs to Congress.

Is it really free-trade when some document specifies how out of round tomatoes can be? Or specifies the aspect ratio range for cucumbers?

 
At 1/29/2012 9:58 AM, Blogger VangelV said...

If you are predisposed to vote democrat, so be it.
If you are predisposed to vote republican, fine.


But there is no difference when you vote for a candidate who does not the oath to obey the Constitution. It makes no difference when the primary disagreement is about the rate of expansion of the growth of government when survival depends on cutting the size of government.

One issue that the typical democrat and republican (the man on the street as opposed to the professional politician) can agree on is that sugar tariffs harm the "many" and benefit the "few."

So why can't we actually accomplish something and end the tariff?


Because both parties are bought and paid for. What you don't understand is that the logrolling process used by the two parties makes it nearly impossible to take back the subsidies. The sugar tariffs gain support not because the Senators from Michigan want to subsidize sugar. They don't. But they still vote for them because the Senators from Florida agreed to vote for their automobile industry subsidies.

The bottom line is that it is the system that is corrupt. To change it you need to ensure that all of the political players respect the limits set in the Constitution as it was written and that changes in interpretation happen via the amendment process, not judicial activism.

 
At 1/29/2012 10:04 AM, Blogger VangelV said...

because the people who get the sugar subsidies set aside enough to buy the votes of both Dem and Republican Congress Critters?

so..in effect, you and I are paying to bribe the congress critters to vote against our own interests, eh?

nice system, eh?


As usual, your ignorance shows up very quickly. For the record, the sugar industry does not have enough money to bribe Congress. The way the process works is that the politicians who are bought and paid for by the sugar lobby trade votes with the politicians who are bought and paid for by other lobby groups. If you want my vote to subsidize ethanol, solar panels, GM, the F-35, a new carrier group, etc., you have to vote to subsidize corn. The practice is called logrolling.

The only way to end this crap is to make sure that Congress and the President cannot stray from the limits set by the Constitution. But both Republicans and Democrats are too scared to cut the size of government because most of their voters have become dependent on it in some form. Which is why I believe that the process will only end when the USD loses a great deal more of its purchasing power and the market is finally allowed to liquidate malinvestments.

 
At 1/29/2012 11:11 AM, Blogger Che is dead said...

"See how you justify actions that are supposedly against the principles that the GOP is said to stand for?" -- Vag

No, I am not justifying them. I am acknowledging them and putting them into perspective by looking at his entire record. I would have let the EU and the Canadians subsidize their exports as it reduces the cost of these inputs for us at the expense of their respective peoples. The fact remains that in each case the Democrats wanted a more restrictive and punitive response. That hardly makes your case that the two parties are the same with regard to trade.

"You either believe in free trade or you don't. The actions suggest that the GOP does not." -- Vag

This demand that the Republicans act at every moment with ideological purity, and without political consideration, or they are exactly the same as the Democrats, is the sign of a mental disorder. Did Bush and the Republicans advance free trade significantly overall during their tenure? YES. Did they push it much harder than the opposition. YES.

"What you and most GOP supporters call free-trade agreements are just managed trade agreements." -- Vag

Again, with the demand for purity. Trade agreements are negotiated with consideration for the interests of both parties. And while I might argue that completely free and open exchange would be in everyones best interest others might disagree. So, I am willing to settle for anything that advances the ball and hope for greater opening in the future.

All the rest is just bullshit. Expecting the real world to conform to some utopian vision that you personally hope for is childish. Grow up.

 
At 1/29/2012 11:14 AM, Blogger Larry G said...

" As usual, your ignorance shows up very quickly. For the record, the sugar industry does not have enough money to bribe Congress. The way the process works is that the politicians who are bought and paid for by the sugar lobby"

which is what? bribing congress you fool!

does it matter how?

no. the point is that when you buy something with sugar in it - you are helping the sugar lobby to bribe congress.

I doubt very seriously that you actually know how.. since you've got a bunch of other things wrong also.

 
At 1/29/2012 11:25 AM, Blogger VangelV said...

No, I am not justifying them. I am acknowledging them and putting them into perspective by looking at his entire record. I would have let the EU and the Canadians subsidize their exports as it reduces the cost of these inputs for us at the expense of their respective peoples. The fact remains that in each case the Democrats wanted a more restrictive and punitive response. That hardly makes your case that the two parties are the same with regard to trade.

The point is that the GOP took actions that were anti-market and anti-consumer. They talked about free-markets but acted against them. If the GOP is unwilling to defend the markets voters who believe in them should find a party that will defend them.

This demand that the Republicans act at every moment with ideological purity, and without political consideration, or they are exactly the same as the Democrats, is the sign of a mental disorder. Did Bush and the Republicans advance free trade significantly overall during their tenure? YES. Did they push it much harder than the opposition. YES.

No they did not. The push towards more managed trade agreements did not begin with Bush but with Clinton. And managed trade is not free trade. To have free trade all you have to do is open up your ports, not thousand page agreements that have bureaucrats expand their power to write standards that neither producers nor consumers are interested in.

I am pointing out the hypocrisy. You are excusing it.

Again, with the demand for purity. Trade agreements are negotiated with consideration for the interests of both parties. And while I might argue that completely free and open exchange would be in everyones best interest others might disagree. So, I am willing to settle for anything that advances the ball and hope for greater opening in the future.

I thought that the point was free-trade? Free trade does not need bureaucrats deciding how round tomatoes have to be before they can be sold to consumers. In a free trade system the consumers get to decide if they want the tomatoes or not. And you don't sacrifice principle for the 'hope' that the same corrupt idiots that have always been in power will change in the future.

All the rest is just bullshit. Expecting the real world to conform to some utopian vision that you personally hope for is childish. Grow up.

There is nothing 'utopian' about my vision. You open up your markets to all products and let the consumers and producers take advantage of the products that they can choose. Cut your taxes so that producers get to keep what they earn. Fire government bureaucrats who make decisions that should be made at much lower levels. Stop spending money that you borrowed from China or created by the printing press. Don't rob savers of purchasing power. Don't give the banks free money that they can use to speculate. Don't bail out bad decisions.

This is not utopian. It is what a free country is supposed to be.

 
At 1/29/2012 11:35 AM, Blogger VangelV said...

which is what? bribing congress you fool!

does it matter how?


Yes it does fool. There is no way to take logrolling out of the system. The way to end this crap is to limit the power so that Congress and the President can't transfer wealth and purchasing power from workers, savers, and producers to special interest groups looking for handouts. Fortunately, that is what the Constitution actually requires. To fix your problem all you have to do is to insist that the politicians comply with it as it was written.

The problem is that there are too many people on both sides who do not like that idea because they get handouts from Congress that they do not wish to lose. This is why the game will continue until the country is bankrupt and the USD is no longer the primary reserve currency of the world. Buy gold and silver.

 
At 1/29/2012 11:37 AM, Blogger Che is dead said...

OK, you win. Now go sit in your room holding your breath until your face turns blue. Maybe then the rest of the world will realize what a mistake they've made by refusing to follow your diktats. We will all do nothing until it conforms to your every precondition.

By the way, who is that in the picture with you, your Dad?

 
At 1/29/2012 11:45 AM, Blogger VangelV said...

OK, you win. Now go sit in your room holding your breath until your face turns blue. Maybe then the rest of the world will realize what a mistake they've made by refusing to follow your diktats. We will all do nothing until it conforms to your every precondition.

By the way, who is that in the picture with you, your Dad?


I am not holding my breath. I make my living by betting that Americans will continue to make excuses as you do and will drive their nation into bankruptcy. I have no guilt from making a profit because unlike most of you deluded hypocrites I have argued that freedom, a sound currency, and fiscal restraint are what is required to solve the problems. The consolation prize for being ignored is becoming richer. How are you making out?

 
At 1/30/2012 3:55 PM, Anonymous Anonymous said...

he subsidy does is cause us to consume more high fructose corn syrup instead of sugar. (Coke in the rest of the world uses sugar.)

Which is why Coke made in the US tastes awful.

 
At 1/30/2012 5:27 PM, Blogger OBloodyHell said...

>>> The entire USDA, and...

BENNY!!

HEAD ----- ASS

More separation is called for!!

Get a frigging CLUE.

No one gives a damned about your stupid problem with the government spending money on something which is ACTUALLY IN THE PROPER SPHERE OF GOVERNMENT.

That it could be done more efficiently and effectively might be argued, but you aren't arguing that AND, more critically, you bring it in as the entire comment almost EVERY FRIGGING POST REGARDLESS OF THE TOPIC.

You're an ephing broken record -- STFU, it's BORING.

I'm not bothering to read ANYTHING you say the MOMENT you bring that subject up.


And I'm sure I'm hardly alone in that. GET THAT? YOU're *not* getting read as a result of this idiotic anti-military obsession of yours.

Geez. Can I spell it out more obviously for you?

 
At 1/30/2012 5:39 PM, Blogger OBloodyHell said...

>>> I only pointed out the the Republican contenders for the Presidency don't sound so committed to ending the sugar subsides.

Being committed to a goal does not require a willingness to commit political suicide. That "all or nothing" crap is exactly that --- CRAP.

Trust me, Larry, Benny is a couple suits short of a full deck, and chances are, if you're in agreement with him, probably you are, too.


>>> In terms of the deficit - it is easy for some to get confused whenIn terms of the deficit - it is easy for some to get confused when...

... you fail to grasp that the Fed uses funny money accounting techniques when it comes to ALL of this. The Clinton WH pulled this crap, by selling US bonds to itself via the SS agency buying bonds with the money from FICA, etc. This defacto transferred it out of the limited arena you claim it's in and into a whole different spending arena. It's widely known that it's how the CWH made the claim that they'd "balanced the budget" -- all it was was an accounting trick, nothing more... and it's why a BBA won't mean DICK unless you also tie it to an absolute requirement that the Fed (hell, make it ALL government agencies -- Fed, State, Local) use GAAP techniques for all accounting purposes (It should also be absolutely tied to a repeal of the Income Tax Amendment, but that's another topic).

 
At 1/30/2012 5:46 PM, Blogger OBloodyHell said...

>>> As such, it has NEVER been spending that has caused a deficit.

Larry, you are either lying through your teeth or a total moron.

As I just noted in the previous comment, that "hard line" you refer to was broken over a decade ago by the Clinton WH. And this is so widely known that in order to have any valid opinion on the budget, you'd have to have encountered it.

Which means one of two things:

a) You're expressing an opinion on something without bothering to do and due diligence when it comes to learning about the issue

or

b) You DO know about it and are lying through your teeth attempting to BS people that it doesn't exist.

So which are you, Larry? A fool for expressing an opinion on a matter you're blatantly ignorant about, or a lying POS telling people something he knows for a fact isn't true?

 
At 1/30/2012 7:07 PM, Blogger Larry G said...

what do you think bloody diarrhea?

why don't you regale us with your view ?

what "hard line" are you blathering about anyhow?

 
At 1/30/2012 7:23 PM, Blogger VangelV said...

So which are you, Larry? A fool for expressing an opinion on a matter you're blatantly ignorant about, or a lying POS telling people something he knows for a fact isn't true?

The first one. Larry is very ignorant about the issues that he is debating and merely stating opinions, which he considers the equivalent of actual knowledge.

 
At 1/30/2012 9:13 PM, Blogger OBloodyHell said...

>> what "hard line" are you blathering about anyhow?

The one you claim exists between FICA receipts and the general slushpool of tax income and expenditures, while clearly not grasping that line was crossed a decade and a half ago.

All you had to do was read what I said and then do some searching to verify it for yourself, but that's too much work. It also probably wouldn't be spelt out in monosyllables or with pretty comic book pictures (PotUSMan, and his amazing sidekick, Geithnerd!), so you likely wouldn't understand it anyway.

 
At 1/30/2012 9:16 PM, Blogger OBloodyHell said...

P.S., utter fool it is, clearly.

You don't grasp the slightest thing you're talking about, you're just parroting things lying charlatans like Krugman have blathered about, with no clue even what questions to ask when things they say clearly make no sense, or conflict abso-ephing-lutely with previous comments by them.

 
At 1/30/2012 9:38 PM, Blogger VangelV said...

You don't grasp the slightest thing you're talking about, you're just parroting things lying charlatans like Krugman have blathered about, with no clue even what questions to ask when things they say clearly make no sense, or conflict abso-ephing-lutely with previous comments by them.

As I concluded quite some time ago our friend is one of the dumbest and most ignorant people around. Many have tried to teach him but he refuses to actually look at the facts, use logic, or learn anything. Either he is a brilliant person putting everyone on or he makes imbeciles seem intelligent in comparison. I fear it is the latter of the two.

 
At 1/31/2012 5:10 AM, Blogger Larry G said...

Van proved sometime ago that he did not know shit from shinola on SS but it did not keep him from his blather.

it took over 100 posts for him to start to understand that he did not understand but it did not change his insulting demeanor.

that is who he is no matter how ignorant he is is on a subject and as I said anyone who describes the world in terms of grand worldwide conspiracies is missing more than a few suits from the deck anyhow.

I'm game here to trade insults as long as you fools are- so have at it dufus.

 
At 1/31/2012 8:28 AM, Blogger VangelV said...

FICA is NOT spent on the general budget.

You don't ever learn, do you? When SS funds are exchanged for special purpose IOUs the money is spent for general operations. It has been for decades, which is why Al Bore ran on the lock-box issue against Bush.

 
At 1/31/2012 9:08 AM, Blogger Larry G said...

I don't think YOU learn buttface.

all the money collected from FICA is spent ONLY on SS/Medicare Part A - no matter than it is exchanged temporarily with treasury notes until the benefit checks go out.

You're either dishonest or a total nincompoop... what an idiot you are.

 
At 1/31/2012 3:36 PM, Blogger VangelV said...

all the money collected from FICA is spent ONLY on SS/Medicare Part A - no matter than it is exchanged temporarily with treasury notes until the benefit checks go out.

That is not true. The surplus goes to the government and gets spent as Congress and the Oval Office decide. In exchange the 'trust fund' gets IOUs that the Treasury may or may not honour by using borrowed, taxed, or printed money.

 
At 1/31/2012 7:38 PM, Blogger Larry G said...

" That is not true. The surplus goes to the government and gets spent as Congress and the Oval Office decide. In exchange the 'trust fund' gets IOUs that the Treasury may or may not honour by using borrowed, taxed, or printed money. "

the trust fund holds the FICA revenues as treasury notes and they have always been redeemed and if they were not, FICA would not be put in that trust fund any longer.

Every penny of what FICA takes in is spent or ultimately will get spent on SS/Medicare A benefits. NONE of it is ultimately spent on anything other than SS/MPA benefits.

The fact that temporary surpluses go to the trust fund is no different that any other trust funds like the gas tax or even Medicare Part B premiums.

Here's the TRUTH.

FICA is a dedicated earmarked fund that can ONLY be ultimately spent on SS/Medicare and is.

It's NOT PART of the rest of the budget at all.

you will find NO appropriations of FICA to ANY other budget category - ZERO.

show me in the budget document where FICA funds things other than Ss/Medicare Part A. It does not.

so you're playing a disingenuous game here and telling a lie...to serve your own disreputable agenda.

here's the truth.

if you look at the 2.1 trillion in revenues - and think that 2.1 trillion is what available to DOD and other entitlements, you're wrong.

What is available is not the 2.1 but the 2.1 MINUS the FICA revenues or about 1.3 trillion.

that's the amount that is available to DOD, Medicare Part B,C,D, MedicAid and the rest of govt.

and what we spend is 3.4 trillion - none of it is FICA.

combining FICA with the rest of the budget MASKS the real numbers.

it hides the fact that while we take in about 1.3 trillion - we spent about that same amount on National Defense when you add up DOD and the VA, homeland Security and other DOD/ND expenditures like Satellites and the like.

the current narrative that we can balance the budget by cutting only the entitlements is a total lie and it misleads those who are gullible enough to believe it.

 
At 1/31/2012 7:53 PM, Blogger Larry G said...

..." and what we spend is 3.4 trillion - none of it is FICA."

oops..my bad...

what we spend that is not FICA is about 2.6 trillion when what we have for actual nonFICA revenues is about 1.3 trillion.

 
At 1/31/2012 9:44 PM, Blogger VangelV said...

the trust fund holds the FICA revenues as treasury notes and they have always been redeemed and if they were not, FICA would not be put in that trust fund any longer.

The revenues have been spent. All the 'trust fund' holds are promises to tax or borrow more so that the revenues can be returned. Yet we had Obama speculate about SS cheques not going out if the debt ceiling was not raised.

If there 'trust funds' were real they would have marketable securities that could be cashed in on the open market. They do not. They are an accounting illusion that would be punished by jail time if it was tried by private industry.

 
At 2/01/2012 6:05 AM, Blogger Larry G said...

" The revenues have been spent"

every day more FICA money goes into the trust fund and every day older treasury notes are redeemed.

the money in the trust fund is spent like money in a checking account but it is paid back when the money is needed.

if the trust fund ever did not pay back the notes - they'd not put FICA money in it any more and just keep the FICA money to spend on SS benefits.

The point that you do not understand or will not admit is that every day FICA revenues come in and every day SS benefits are paid - no matter what happens with the operation of the trust funds.

The trust funds are the EXCESS of what what FICA has generated not the entire FICA funding stream.

and as I have pointed out repeatedly - the FICA/SS trust fund not only works exactly as designed, it is but one of dozens of trust funds that work the same way.

You started out not understanding how the trust funds work and you still don't know because how they work violates your ideology.

 
At 2/01/2012 8:22 AM, Blogger VangelV said...

every day more FICA money goes into the trust fund and every day older treasury notes are redeemed.

the money in the trust fund is spent like money in a checking account but it is paid back when the money is needed.


The issue is the contributions that should be in the trust funds. If you look at the numbers there are trillions in funds that were spent for general operations and replaced with IOUs. Those IOUs are not marketable, which means that they have to be paid out of future taxes. If you don't understand what that means it is evidence that you have a serious problem with critical thinking.

 
At 2/01/2012 10:13 AM, Blogger Larry G said...

" The issue is the contributions that should be in the trust funds. If you look at the numbers there are trillions in funds that were spent for general operations and replaced with IOUs"

and every one of those IOUS was redeemed for cash to pay benefits.

Not a PENNY of FICA - gets ultimately spent on anything other than SS/Med A.

Look at the SS Trust Fund Summary.

every penny of FICA gets spent ONLY on SS/MedA.

you are dishonestly focusing on it's temporary holding area - the trust fund accounts.

the money from FICA gets exchanged for Treasury notes and the money spent but when the treasury notes get redeemed - cash money is transferred to SS/Med A benefits.

the most important point here is to recognize that FICA does not fund the general budget.

Including FICA revenues "on budget" is deceiving because it's basically money in and money out without any financial benefit to the non-FICA budget.

If you REALLY want to UNDERSTAND the budget - you need to subtract out the revenues and expenditures associated with FICA and look at what is left because that's the real budget and that's the real deficit spending - and it those items in that budget that will have to be cut to balance the budget.

Some day..someone will "suggest" that we de-fund SS and Med A and use the FICA money to balance the budget.

that "someone" will have a political life of one nano-second.

All others who suggest that are not living in the real world.

the real world is this.

1.3 trillion in Income revenues
2.6 trillion in spending

none of it involves FICA/SS/MedA

those who suggest otherwise are just obfuscating the realities to serve an ideological agenda which ..as I said.. goes nowhere in the real world.

 
At 2/01/2012 10:19 AM, Blogger Larry G said...

" Those IOUs are not marketable, which means that they have to be paid out of future taxes. If you don't understand what that means it is evidence that you have a serious problem with critical thinking. "

the IOUs are "loans" that must be paid back just as the treasury notes sold to the public are.

so what?

If FICA generated the money then that money belongs to SS/MedA.

if you "borrow" it then you owe it back. That's what the trust fund accounts for.

It's is public debt. There are other trust fund accounts that are also "owed" back from the govt that have to be paid back with taxes or by debt.

you seem to forget that the money originally came from the payroll tax not income taxes.

you look at the second half of the transfer only and pretend the first half did not take place.

and you are also wrong about the IOUs.

When the govt today pays back the FICA money - it ALSO does it by selling treasury notes ..in effect ..converting one kind of debt for another.

If there was no trust fund and FICA was sequestered and could not be borrowed.. SS/MedA would be funded and the govt would have to borrow by selling treasury notes instead of exchanges special issue notes for FICA money and then paying it back later by selling treasury notes.

 
At 2/02/2012 10:26 AM, Blogger VangelV said...

and every one of those IOUS was redeemed for cash to pay benefits.

Actually, no they were not. So far SS has been collecting more than it has been paying out. Very little has been 'redeemed' and anything that has tends to come out of other funds that are supposed to be set aside for the future. Even your man says that SS does not have the money that you think that it does and depends on the ability of the government to borrow.

Obama: Social Security Checks Threatened If Debt Ceiling Deal Isn't Reached

If the trust funds had actual marketable securities there would have been no need to be concerned for nearly a decade from now. But because contributions were taken and spent the trust funds have nothing that can be sold to raise the cash needed to make the payments.

 
At 2/02/2012 10:29 AM, Blogger VangelV said...

the IOUs are "loans" that must be paid back just as the treasury notes sold to the public are.

so what?


So what? I can go and sell a T-bill in minutes and get the market price. The IOUs can't be sold anywhere. They depend on the government being able to borrow AND the willingness to use the cash that it borrowed to pay SS recipients instead of using it to fund the military, government pensions, education, law enforcement, etc.

One is a marketable security. The other is a promise made by politicians who are no longer in office.

 
At 2/02/2012 10:46 AM, Blogger Larry G said...

" Actually, no they were not. So far SS has been collecting more than it has been paying out. Very little has been 'redeemed' and anything that has tends to come out of other funds that are supposed to be set aside for the future."

you talk a big talk about ignorance and logic but you don't learn.

EVERY SINGLE DOLLAR of FICA gets converted to redeemable special issue notes and the older special issue notes are redeemed for CASH EVERY SINGLE DAY.

"Even your man says that SS does not have the money that you think that it does and depends on the ability of the government to borrow.

Obama: Social Security Checks Threatened If Debt Ceiling Deal Isn't Reached"

because if they cannot sell treasury notes, they cannot provide cash to redeem the older notes.

we've been over this - many times an you keep falling back to your propaganda even when you are given facts.

your ideology is so important to you that the truth does not matter.

you simply are not of this world, guy.

you live in hour own self-constructed world believing what you wish to believe to fit your ideological beliefs.

"If the trust funds had actual marketable securities there would have been no need to be concerned for nearly a decade from now. But because contributions were taken and spent the trust funds have nothing that can be sold to raise the cash needed to make the payments."

They WERE NEVER DESIGNED to do that.

they were designed to function as a pay-as-you-go account where payroll taxes collect get converted to special issue notes and older notes are redeemed to pay benefits.

what is left over is the trust fund.

you are just being a purposeful idiot here... basically because you cannot accept the realities.

you are out of touch guy.

no wonder you tend toward conspiracy theories.

I could respect you if you took the facts but disagreed on the philosophy but you refuse to accept documented facts.. as a pretext to your beliefs.

that's just plain dumb.

 
At 2/02/2012 11:09 AM, Blogger VangelV said...

you talk a big talk about ignorance and logic but you don't learn.

EVERY SINGLE DOLLAR of FICA gets converted to redeemable special issue notes and the older special issue notes are redeemed for CASH EVERY SINGLE DAY.


No dumdum. SS contributions were higher than payments. There was no need to redeem any of the trillion plus that was stolen and spent on general funding.

because if they cannot sell treasury notes, they cannot provide cash to redeem the older notes.

If the notes had any value they could be sold in the market just like normal treasury bonds. The fact is that they have no value. They are not anything other than a promise to borrow, tax, or print new funds in the future. In the private sector that is called theft.

 
At 2/02/2012 11:19 AM, Blogger Larry G said...

" No dumdum. SS contributions were higher than payments. There was no need to redeem any of the trillion plus that was stolen and spent on general funding."

ALL TRUST FUNDS WORK THAT WAY AND THEY WERE EXPLICITLY DESIGNED TO WORK THAT WAY.

You can disagree with the way they were designed but disagreeing with the facts is just dumb.

"If the notes had any value they could be sold in the market just like normal treasury bonds. The fact is that they have no value. They are not anything other than a promise to borrow, tax, or print new funds in the future. In the private sector that is called theft."

They ARE, in effect sold on the market even time the govt sells treasury notes to repay the special issue notes.

It's NOT THEFT guy. You may not like it or agree with it but it's the way the system was designed on purpose and yes..the private sector does the same thing... when they "convert" debt.

what is this about anyhow?

the point was made that FICA is not part of the general revenue budget.

no FICA money is ultimately spent on anything other than SS/MedA.

We should be so lucky to have the rest of the budget operate that way.

FICA is designed by law not to pay out more in benefits than it takes in - in revenues.

show me another part of the budget that works that way.

anyone who wants to believe that FICA is spent on any thing other than SS/MedA is either ignorant of the facts or purposefully ignorant of the facts.

either way - they are out of touch with the realities and in your case it's a self-imposed ignorance to suit your whacked out ideology.

 
At 2/02/2012 2:32 PM, Blogger VangelV said...

ALL TRUST FUNDS WORK THAT WAY AND THEY WERE EXPLICITLY DESIGNED TO WORK THAT WAY.

You can disagree with the way they were designed but disagreeing with the facts is just dumb.


I don't disagree that the 'trust funds' were designed to be stripped of contributions that could be spent on general operations and replaced with IOUs. That is my point. The money is gone and there is nothing marketable in the so-called 'trust funds.'

They ARE, in effect sold on the market even time the govt sells treasury notes to repay the special issue notes.

Really? On what market can I buy one of these IOUs? The government honours some of its promises by printing money, issuing debt, or taxing but it has not set aside the contributions as all other trust funds do. This is why Obama can claim that the cheques will not go out; he knows that the funds have no cash and is hoping to scare voters into pushing their representatives into voting for more debt.

 
At 2/02/2012 2:41 PM, Blogger Larry G said...

" Really? On what market can I buy one of these IOUs? The government honours some of its promises by printing money, issuing debt, or taxing but it has not set aside the contributions as all other trust funds do. This is why Obama can claim that the cheques will not go out; he knows that the funds have no cash and is hoping to scare voters into pushing their representatives into voting for more debt. "

it has nothing to do with Obama.

the system that all Trust Funds follow has been in place for along time.

I understand the frustration that the govt spends the money in ALL of the trust funds..then pays it back by selling more treasury notes.

but, assume we don't pay back the SS trust fund - what happens?

Well.. benefits would drop to a 75% level unless/until something else was done.

Killing the trust fund would just advance the 2037 date to today.

but what effect would that have on the debt - and the deficit?

well..the debt would be reduced by 2.1 trillion but nothing at all would happen to the deficit because as I said earlier FICA has absolutely nothing to do with the general revenue budget much less the deficit.

but what exactly is your point here anyhow?

are you not, essentially blaming FICA and SS for something they had no role in other than generating a surplus?

you can't fix the current 1.5 trillion structural deficit by doing anything to FICA/SS/MedA as that program - by law - cannot pay out more in benefits than FICA brings in.

so what exactly is your point?

we take in 1.3 trillion and we spend 2.6 trillion.

What that means - realistically is that half way through the year, we are out of money and have to sell more treasury notes to cover the shortfall.

what does FICA/SS/Med A have to do with that?

nothing, right?

 
At 2/02/2012 3:36 PM, Blogger VangelV said...

it has nothing to do with Obama.

the system that all Trust Funds follow has been in place for along time.

I understand the frustration that the govt spends the money in ALL of the trust funds..then pays it back by selling more treasury notes.


Selling more treasury notes means borrowing more. You are confused by the fact that so far the government has had to pay little of what it stole from the trust funds because the contributions have been typically higher than the payouts. This means that the government has yet to be tested when it has to tax and borrow for general operations AND tax and borrow an additional amount to return what has been stolen.

 
At 2/02/2012 3:42 PM, Blogger Larry G said...

" Selling more treasury notes means borrowing more. You are confused by the fact that so far the government has had to pay little of what it stole from the trust funds because the contributions have been typically higher than the payouts. This means that the government has yet to be tested when it has to tax and borrow for general operations AND tax and borrow an additional amount to return what has been stolen. "

huh?

when we spend 2.6 trillion and we take in 1.3 trillion.. how can you say "the govt has yet to be tested"?

Every year, we spend twice as much as we take in in income tax revenues.

what happens to the trust fund is a gnat on a dogs butt.

no matter what happens to FICA - it won't change the fact that we spend 2.6 when we take in 1.3.

why do you not focus on that?

that's what stole the trust fund - not anything that FICA or SS did.

it was/is the prolific spending of the general revenues that is the problem.

why do you focus on FICA trust funds?

 
At 2/02/2012 3:44 PM, Blogger Larry G said...

" You are confused by the fact that so far the government has had to pay little of what it stole from the trust funds"

not at all.

I'm pointing out to you that this problem applies to ALL the trust funds. The civil service and retirement trust funds. The gasoline tax trust funds.

The Medicare Part B,C,D trust funds.

ALL of those funds are spent also.

so why do you focus on ONLY ONE trust fund and even that fund has ZERO to do with the 1.3 trillion additional spending on the general revenues sides of the budget?

 
At 2/02/2012 8:28 PM, Blogger VangelV said...

but, assume we don't pay back the SS trust fund - what happens?

Well.. benefits would drop to a 75% level unless/until something else was done.


That would mean that the contributions were stolen and that future contributions will be even smaller. Anyone who is in his thirties would be looking at a huge negative return on his/her contributions and a terrible retirement package coming from the government.

 
At 2/02/2012 8:30 PM, Blogger VangelV said...

huh?

when we spend 2.6 trillion and we take in 1.3 trillion.. how can you say "the govt has yet to be tested"?


You are looking in the wrong place. Some of the shortfall is coming from the excess contributions dummy. The government steals from SS. It pays out less than it takes in.

 
At 2/02/2012 8:40 PM, Blogger Larry G said...

" That would mean that the contributions were stolen and that future contributions will be even smaller. Anyone who is in his thirties would be looking at a huge negative return on his/her contributions and a terrible retirement package coming from the government. "

no it won't.

it is a pay-as-you-go system and people will get out of it at least what they put into it.

the basic problem is that when it was created the life expectancy was in the 60's and now in the 70's.

that means many people get more out of it than the put into it and that's not sustainable.

people will have to retire later and/or pay more into it or other changes.

but here's what it won't do.

it won't pay out more in benefits than what it takes it - unlike other appropriated entitlements like Medicare Part B.

If Medicare Part B was set up like FICA - benefits would be capped at whatever revenues brought in.

you'd want the FICA approach for all entitlements.

but again - the real point here is that FICA/SS/MedA have nothing to do with the current deficit.

and cutting SS won't reduce the current deficit one penny.

FICA/SS/MedA are not the problem in the budget.

 
At 2/02/2012 9:25 PM, Blogger VangelV said...

Every year, we spend twice as much as we take in in income tax revenues.

what happens to the trust fund is a gnat on a dogs butt.


You are missing the point. Some of the money you are spending comes from the contributions taken from workers. That money was exchanged for IOUs that require either more taxes or more borrowing to be paid back. The money is gone. End of story.

 
At 2/02/2012 9:28 PM, Blogger VangelV said...

no it won't.

it is a pay-as-you-go system and people will get out of it at least what they put into it.


Just how do you expect three workers to pay enough to provide one retiree with everything that he has contributed?

 
At 2/02/2012 9:35 PM, Blogger Larry G said...

" You are missing the point. Some of the money you are spending comes from the contributions taken from workers. That money was exchanged for IOUs that require either more taxes or more borrowing to be paid back. The money is gone. End of story. "

it's not gone unless and until the Congress reneges on the debt.

and it's not any more "gone" for SS than it is for the gas tax or the Medicare part B trust fund both of which also trade cash for special interest notes. In fact, dozens of trust fund accounts would fare no differently.

That's about 4-5 trillion of the 15 trillion debt - right?

but assume they do.

what effect would not paying the trust fund have on FICA and the budget/deficit?

FICA will continue to generate 800-900 billion in revenues that will go to (reduced) SS/MedA benefits and none of it will go towards the budget nor have any effect on the deficit.

killing the trust fund will have ZERO impact on the regular budget and the deficit.

 
At 2/02/2012 9:39 PM, Blogger Larry G said...

" Just how do you expect three workers to pay enough to provide one retiree with everything that he has contributed?"

because they will retire later.

FICA may be extended past the current 106K limit like Medicare Part A already is.

some benefits might be means-tested.

but if absolutely nothing is done - benefits will STILL be paid.

the program will NOT go broke.

this kind of problems are small potatoes compared to the other part of the budget and deficit.

but the ironic thing is that we're talking about severely cutting Medicare Part B benefits and nary a complaint from folks like you.

why do you support massive cuts in one entitlement and not another when both are not sustainable without changes?

 
At 2/02/2012 9:41 PM, Blogger Larry G said...

Let me ask you this.

would you support changing SS such that you stop getting benefits once they match what you paid into the system (plus interest)?

would that be fair?

 
At 2/03/2012 9:59 AM, Blogger VangelV said...

it's not gone unless and until the Congress reneges on the debt.

But it is gone. It was spent already. What you are arguing is that Congress will borrow more to replace it. But what others have been trying to tell you is that if that was the plan Congress should have left the contributions in place and borrowed what it needed for general operations from the market.

This is where you are having trouble understanding the issue. An accounting fiction is a fiction no matter how you spin it. When the funds are taken out and spent they are gone. They are not, as many proponents of the current system like to argue, hiding in a lock box. The IOUs are just promises to tax more, borrow more, and/or print more in the future. That implies are far riskier present than you wish to admit.

 
At 2/03/2012 10:06 AM, Blogger VangelV said...

because they will retire later

Say you pay $21,000 per worker for SS. That means that you have to have your current workers contribute $7,000 per year to pay for the retirees. Now you could only steal $3K from them and borrow or print the other $4K but that is still deferred taxation that will have to be settled eventually.

The only issue is how the settlement comes. If things go the way that they have been President Obama, President Mitt, or President Newt will have to decide whether to cut payments, increase the retirement age, or print enough money to have inflation do the job for him.

You are also missing the other big item. As any actuary will tell you, the zero interest rate policies of the Fed are putting major stresses on all defined benefit plans. The reason why unfunded liabilities have exploded is not simply due to more promises being made but because the discount rate has collapsed. This is a much bigger problem than you can imagine. While the impact will be seen in the private sector first eventually bond buyers will figure out what it means for the finances of the US federal government, municipalities, and the states.

 
At 2/03/2012 10:08 AM, Blogger VangelV said...

would you support changing SS such that you stop getting benefits once they match what you paid into the system (plus interest)?

would that be fair?


No. I would allow people to opt out instead. Let them decide how much to set aside for their own retirement and deal with the the liquidity injections of the Fed and the implications of lousy government policies that they support at the ballot box.

 
At 2/03/2012 10:37 AM, Blogger Larry G said...

"But it is gone. It was spent already. What you are arguing is that Congress will borrow more to replace it. But what others have been trying to tell you is that if that was the plan Congress should have left the contributions in place and borrowed what it needed for general operations from the market."

it works this way ON PURPOSE for ALL TRUST FUNDS guy.

it's the LAW

you can't change it by pretending otherwise.


"This is where you are having trouble understanding the issue."

I'm have absolutely no trouble at all.. you are the one who pretends the law says something else.

"An accounting fiction is a fiction no matter how you spin it. When the funds are taken out and spent they are gone. They are not, as many proponents of the current system like to argue, hiding in a lock box. The IOUs are just promises to tax more, borrow more, and/or print more in the future. That implies are far riskier present than you wish to admit. "

there is no spin here. It works the way it was designed to work.

you don't like it. you disagree with it but it's the truth.

why do you have trouble with reality?

you don't seem to be able to differentiate between the way the law is written and what you'd prefer.

that's what I call willful ignorance.

you blather on about others not understanding what they read but this is crystal clear.

You've been pointed to the references and you still disbelieve.

Yes.. I know..another grand conspiracy, right?

 
At 2/03/2012 10:38 AM, Blogger Larry G said...

you are having problems with a panoply of govt policies here... but SS works exactly as designed.

 
At 2/03/2012 10:40 AM, Blogger Larry G said...

" No. I would allow people to opt out instead. Let them decide how much to set aside for their own retirement and deal with the the liquidity injections of the Fed and the implications of lousy government policies that they support at the ballot box. "

and what would you do when they got old and had not set aside a nest egg?

Every single industrialized country in the world has a individual mandate for social security.

what you are arguing is that the US revert to a 3rd world country on social security.

it's yet another dream world of yours that has ZIP to do with the political realities.

you keep stepping back....stepping back.. and off the cliff in your logic and ability to deal with reality.

 
At 2/03/2012 2:37 PM, Blogger VangelV said...

Vangel: "But it is gone. It was spent already. What you are arguing is that Congress will borrow more to replace it. But what others have been trying to tell you is that if that was the plan Congress should have left the contributions in place and borrowed what it needed for general operations from the market."

Larry: it works this way ON PURPOSE for ALL TRUST FUNDS guy.


Yes it does. They money is stolen on purpose and when it is needed the government has to depend on the ability to borrow or tax more. So what? The fact that the scheme works that way does not change the fact that the contributions have already been spent and replaced with IOUs that have no market value.

 
At 2/03/2012 2:52 PM, Blogger Larry G said...

" Yes it does. They money is stolen on purpose and when it is needed the government has to depend on the ability to borrow or tax more. So what? The fact that the scheme works that way does not change the fact that the contributions have already been spent and replaced with IOUs that have no market value. "

what is gone is about two years worth of FICA taxes.

so, let's presume it's gone and won't be paid back.

what is your real point here?

FICA will continue to collect payroll taxes and continue to pay benefits and may need to be reformed but it will still do what it was designed to do.

It will not be "broke" as you have contended.

It has ZERO impact on the Annual budget and it has ZERO impact on the 1.5 trillion deficit.

No matter what happens to FICA/SS, it won't have any impact at all on the budget and the deficit.

so what exactly is your point?

isn't your whole entire point that you disagree with the way that all trust funds were designed to work?

what else?

 
At 2/03/2012 4:49 PM, Blogger VangelV said...

what is gone is about two years worth of FICA taxes.

so, let's presume it's gone and won't be paid back.

what is your real point here?


No. What was gone is a surplus that should have kept the program going for a decade or more after the shortfalls began. That would have given more time to have real reforms that would change the programs in a meaningful way.

Frankly, the debt picture is already horrible. We know that the Fed holds $6.3 trillion in US debt. With the US government owing government pension plans and other government 'trust fund' accounts another $4.6 trillion borrowing enough to pay back the funds will not be easy. Those are huge numbers and the government will have a hard time borrowing once the treasury market figures out that the mathematics guarantee a default when measured in purchasing power.

The bottom line is that the game is over. We should see a huge pop in the USD and the UST market if speculators hunt for a large liquid market if the Euro fails. But given the position of the cities and states and the inevitable failure of the federal government the medium to long term for the USD is down.

Keep in mind that Helicopter Ben has already told us that he will keep printing money and keep rates low for several years. Eventually that means that the base metals, agricultural commodities, equities, precious metals and other real assets will have to go up in price even if they are losers in real terms.

 
At 2/03/2012 5:42 PM, Blogger Larry G said...

"No. What was gone is a surplus that should have kept the program going for a decade or more after the shortfalls began. That would have given more time to have real reforms that would change the programs in a meaningful way."

2.1 trillion would not last a decade and I would concur with your premise except it's not true.
it's your view but until they disavow the debt - it's still a debt and any politician who says we should write it off is toast.

"Frankly, the debt picture is already horrible. We know that the Fed holds $6.3 trillion in US debt. With the US government owing government pension plans and other government 'trust fund' accounts another $4.6 trillion borrowing enough to pay back the funds will not be easy. Those are huge numbers and the government will have a hard time borrowing once the treasury market figures out that the mathematics guarantee a default when measured in purchasing power."

if they don't take action .. I don't disagree with what you say. I think there is still time to deal with it before a default.

"The bottom line is that the game is over. We should see a huge pop in the USD and the UST market if speculators hunt for a large liquid market if the Euro fails. But given the position of the cities and states and the inevitable failure of the federal government the medium to long term for the USD is down. "

it's the best, most safest debt in the world. It will be the last to fail.

"Keep in mind that Helicopter Ben has already told us that he will keep printing money and keep rates low for several years. Eventually that means that the base metals, agricultural commodities, equities, precious metals and other real assets will have to go up in price even if they are losers in real terms."

maybe...remember the votes come from a committee...right?

 
At 2/03/2012 8:30 PM, Blogger VangelV said...

2.1 trillion would not last a decade and I would concur with your premise except it's not true.


Of course not. But it would last if it paid for a decade of shortfalls.

it's your view but until they disavow the debt - it's still a debt and any politician who says we should write it off is toast.

My point is that the math does not work. For an example look to Greece or any of the other PIIG countries.

if they don't take action .. I don't disagree with what you say. I think there is still time to deal with it before a default.

No there is not. The total unfunded liabilities stand at more than $100 trillion and rising by more than $3 trillion a year. There is no way to save anything right now. Default in some form is inevitable.

 
At 2/03/2012 8:35 PM, Blogger Larry G said...

"No there is not. The total unfunded liabilities stand at more than $100 trillion and rising by more than $3 trillion a year. There is no way to save anything right now. Default in some form is inevitable."

you're all wet on this.

these are projected shortfalls - if nothing is done.

and the shortfalls in FICA/SS case does not mean default at all.

it means lower benefits but still benefits paid.

you're all wet on this.

Many of the state pension funds have unfunded liabilities.

but they way off in 2080 and in the meantime, they're taking actions to fully fund the pensions.

Medicare Part B and MedicAid have unfunded liabilities but we also know they are going to change those programs which will have the effect of wiping out the unfunded liabilities.

you make it out to be a bugaboo that it simply is not.

 
At 2/03/2012 8:47 PM, Blogger VangelV said...

it's the best, most safest debt in the world. It will be the last to fail.

It is the biggest by far. Your debt to GDP ratio is very similar to that of Ireland and Portugal and you have capital destroying military commitments around the globe that will continue to demand that revenues be diverted from productive activities.

I suspect that we will see failures of several large municipalities and states within a year and that there will be a devaluation of the USD right after the EU situation settles out. That devaluation will be the default as all those fools who depended on their pensions to have purchasing power will find out what the Fed's actions have really created.

 
At 2/04/2012 9:20 PM, Blogger VangelV said...

you're all wet on this.

these are projected shortfalls - if nothing is done.


This has been explained to you before. It is what you need to put into the trust funds TODAY to be able to pay off all the recipients that you have made promises to.

Basically, the actuaries look at all of the payments that were promised and the marketable assets that are held by the trustees and the contributions that are expected to come in. They use a discount rate to calculate the present value of the assets and the liabilities. If the NPV of the assets is higher there is a surplus. If the NPV of the liabilities is higher there is a need for contributions of that amount to make the plan viable. In the case of the US it needs to set aside more than $100 trillion today to make good on all of its future promises. The problem is that GDP is a small fraction of that and that the addition to the unfunded liabilities is around 30% of GDP this year and increases every subsequent year until significant changes are made.

 
At 2/05/2012 6:49 AM, Blogger Larry G said...

" This has been explained to you before. It is what you need to put into the trust funds TODAY to be able to pay off all the recipients that you have made promises to."

but your "explanations" don't wash.

your "explanations" are what you want to believe but not the facts.

your "explanations" ignore the realities and rely on misinformation and not understanding nor accepting the realities.

"Basically, the actuaries look at all of the payments that were promised and the marketable assets that are held by the trustees and the contributions that are expected to come in. They use a discount rate to calculate the present value of the assets and the liabilities. If the NPV of the assets is higher there is a surplus. If the NPV of the liabilities is higher there is a need for contributions of that amount to make the plan viable. In the case of the US it needs to set aside more than $100 trillion today to make good on all of its future promises. The problem is that GDP is a small fraction of that and that the addition to the unfunded liabilities is around 30% of GDP this year and increases every subsequent year until significant changes are made."

they do indeed but unfunded liabilities are FUTURE - if NOTHING IS DONE IN THE INTERIM.

1. they have NOTHING TO DO WITH the trust funds - NOTHING.

2. they are a project based on what happens if no action is taken in the interim.

3. all companies and all states use a similar approach and many, if not most have the same problem and know they have to make adjustments.

4. this does not mean you are currently "broke" nor does it mean you inevitably go into default.

5. you blow this up into something it is not - to basically support your ideological approach to these issues.

ANY plan - public or private that has future obligations has to analyze current funding verses future payouts and it's not unusual with changing demographics and economies for adjustments to be made.

but here's where your thinking is really just not making it.

Take Medicare Part B - which is NOT funded from FICA but IS funded from appropriations from the General Fund.

what exactly is an unfunded liability for that program?

define it and how it happens.

now tell me what happens to fix it.

we raise premiums and cut benefits, right?

and when we raise premiums and cut benefits what happens to the projected unfunded liabilities?

don't they go away if we increase premiums and cut benefits?

isn't that what everyone has been saying has to happen anyhow?

so why do you focus on unfunded liabilities as if they are something we have no choice in dealing with and ultimately they will "default"?

this is just plain disinformation and propaganda on your part guy because you KNOW this and yet you continue to pander and demagogue it.

 
At 2/05/2012 7:34 AM, Blogger Larry G said...

the other problem I have with your portrayal of these issues is that you lump them all together and say 100 trillion without really differentiating what that really means and what portion of it is the different entitlements.

you also don't mention the horizon years which are far in the future - as compared to the near term deficit and debt picture which are much more serious and much more immediate.

the unfunded liability of SS for instance is small compared to the unfunded liabilities of the appropriated entitlements which are funded not from FICA but from income tax revenues.

For instance, the Medicare Part D Prescription Drug entitlement has as larger or larger unfunded liability than SS and the "fix" is relatively simple - just increase the co-pay and no more unfunded liability.

but you make it out to be a Armageddon style problem and it's just not.

if you looked at just about ANY private health insurance company - and they did a 70 year horizon analysis - THEY would ALSO show unfunded liabilities ... but those liabilities would never happen if the insurance companies increased their rates - which they will do to make mid-course corrections.

you act like this is purely a problem only with US Govt entitlements and it's not.

it's a typical issue with both public and private plans.

and it typically is addressed by increasing set-aside money and/or trimming/changing benefits.

 
At 2/05/2012 8:55 AM, Blogger VangelV said...

but your "explanations" don't wash.

Sure they do. The fact that you do not like the explanation is your problem. Go and find an accountant or actuary and have them explain how pension funding works.

 
At 2/05/2012 8:58 AM, Blogger VangelV said...

the other problem I have with your portrayal of these issues is that you lump them all together and say 100 trillion without really differentiating what that really means and what portion of it is the different entitlements.

The government has made promises. It needs $100 trillion to honour those promises and that number goes up every year. That is a fact. The choices are fairly simple. That too is a fact. The government can choose to default outright or it can default by choosing the inflation route.

 
At 2/05/2012 9:23 AM, Blogger Larry G said...

" The government has made promises. It needs $100 trillion to honour those promises and that number goes up every year. That is a fact. The choices are fairly simple. That too is a fact. The government can choose to default outright or it can default by choosing the inflation route. "

the govt did not make "promises" guy.

do you think the govt "promised" to pay any/all Medicare part B expenses forever no matter the consequences?

do you think any company would make irrevocable "promises" to pay benefits they knew they could not sustain?

Nope.

and what is your solution anyhow?

isn't your "solution" to cut benefits ALSO?

the only "fraud" here your illicit portrayal of "promises" and "default" when neither are true.

this will never be a "default" just reduced benefits/increased premiums which is the answer for ANY plan - public or private - that is not fiscally sustainable.

your portrayal especially in the context of the CURRENT budget and deficit is a blatant misrepresentation of the facts and realities and you do this even when you do know the facts because it satisfies your ideological views.

that's simply not honest.

and it's simply not the truth.

and you know it.

 
At 2/05/2012 9:25 AM, Blogger Larry G said...

tell me EXACTLY what the govt has "promised' for Medicare Part B,C and D.

what did they promise?

 
At 2/05/2012 10:48 AM, Blogger VangelV said...

the govt did not make "promises" guy.

Sure it did. It sends out statements telling people how much they will get. That is a promise.

 
At 2/05/2012 10:52 AM, Blogger VangelV said...

tell me EXACTLY what the govt has "promised' for Medicare Part B,C and D.

what did they promise?


Look it up.

 
At 2/05/2012 11:38 AM, Blogger Larry G said...

do you see anywhere where it says "these benefits will never change"?

let me ask you this.

who pays for these benefits?

do you think the govt promised that these benefits and the price paid for them will never change?

show me where it promises that.

 
At 2/05/2012 11:42 AM, Blogger VangelV said...

do you see anywhere where it says "these benefits will never change"?

let me ask you this.

who pays for these benefits?


When you send out a letter or booklet promising a certain benefit it is a promise. Of course it can change as can any promise that is made by anyone who has the ability to declare bankruptcy or the means to change the rules.

But when that happens what you have is default. And no amount of spinning will change that fact. As I wrote above, you might want to look into a few books that explain what unfunded liabilities mean and teach the basic math that shows that default is inevitable.

 
At 2/05/2012 11:52 AM, Blogger Larry G said...

" When you send out a letter or booklet promising a certain benefit it is a promise. Of course it can change as can any promise that is made by anyone who has the ability to declare bankruptcy or the means to change the rules."

the "book" comes out every year guy just like your own private insurance policy.

the benefits are good for one year or until the law changes.

"But when that happens what you have is default."

you have a default when you tell people that Medicare Part B which is a income-tax-funded, VOLUNTARY entitlement that the price is going up and the benefits trimmed?

that's a "default"?

it's a " default" when you tell MedicAid recipients that what is covered has changed?

"And no amount of spinning will change that fact. As I wrote above, you might want to look into a few books that explain what unfunded liabilities mean and teach the basic math that shows that default is inevitable."

I don't need to look into a "few" books guy.

you need to because you clearly do not understand what they are or how they work when it comes to govt appropriated VOLUNTARY entitlements that are paid for ONLY with premiums and not payroll taxes.

do you understand this?

you better go pick up a "few" books, guy because the appropriated entitlements don't work at all like the earmarked (FICA) entitlements and the VAST, VAST Majority of this "unfunded liabilities" BLATHER is about Voluntary appropriated entitlements.

 
At 2/07/2012 12:01 PM, Blogger VangelV said...

you have a default when you tell people that Medicare Part B which is a income-tax-funded, VOLUNTARY entitlement that the price is going up and the benefits trimmed?

that's a "default"?


When you promise people that their contributions entitle them to benefits based on a certain formula and later change the formula and cut the benefits you have a default.

 
At 2/07/2012 12:04 PM, Blogger Larry G said...

" When you promise people that their contributions entitle them to benefits based on a certain formula and later change the formula and cut the benefits you have a default."

It's a VOLUNTARY program funded from general revenues - NOT FICA payroll.

what you are offered changes almost every year.

you pay by the quarter and the plans change on the fly, over time...usually annually - very similar to private insurance.

there is no guaranteed-never-to-change benefits

your idea of "default" applied to private plans means every time they change their plans - they "default".

WTF?

Do you call the Republicans Plan to convert Medicare part B to a voucher system - a "default"?

why can't you admit when you are wrong guy?

 
At 2/07/2012 3:38 PM, Blogger VangelV said...

The Hockey Stick Illusion: Climategate and the Corruption of Science

I was talking in general dummy. There are trust funds that have been robbed all across the spectrum. It is not just SS and Medicare but also highway funds, special purpose funds, and government pension funds. You can argue that stealing from the highway fund and not building the highways is not a default because it is hard to find specific promises but you can't do that with SS or pensions.

 
At 2/07/2012 4:32 PM, Blogger Larry G said...

the "trust fund" issue has nothing to do with "unfunded liabilities".

and the "unfunded liabilities" for Medicare Part B are a bizarre concept because no one is promised anything other than the availability of Medicare Part B - for purchase.

the price, nor the benefits are not guaranteed except for a year at a time - just like private insurance is.

there is no "default" no more than there is a "default" for private insurance that also increases in prices and/or reduces in benefits.

and yet the lions share of the so-called 100 trillion in unfunded liabilities is Medicare Part B.

a totally bogus concept emanating from the right wing echo chamber as part and parcel of their propaganda campaign against entitlements in general.

You have to WANT to KNOW the TRUTH.

you can DISAGREE with it philosophically but to uses lies to portray something that is not true is not a principled opposition.

it's just dishonesty.

it more or less DEFINES the politics of entitlements these days.

a govt "trust fund" is NOT a pension fund ...does not function like a pension fund... it's very much like a checking account that temporarily holds revenues until they are spent on earmarked purposes.

but the Heritage and other like-minded have demagogued them and used disinformation campaigns to promote outright lies about what they are and are not.

what this does is confuse so many people that a principled debate on the issue and what to do about it is nearly impossible.

Now. why would folks like the Heritage people do something like this to start with?

It's almost as if they really don't want a debate on the merits.

they just want to foster an opposition jihad among those who are too lazy to seek the truth before they take a principled position.

this is the state of politics these days

 
At 2/07/2012 7:33 PM, Blogger kkflash said...

Wow! VangelV & LarryG have been going at this argument for more than a week. I've read all your comments & want to help you guys cut to the chase: 1) The Social Security system as it is currently conceived and funded is unsustainable. That means US taxpayers will have to kick in more, or the beneficiaries will get less than what government officials told them, probably both. But then, that's already happened several times. I call that a lie.
2) Medicare, in all its permutations, takes in less in payroll taxes and premiums than it costs in benefits. This too, is unsustainable and will have the same solution as SS. I call that a lie too.
3) Unemployment benefits, with the recent and upcoming extensions, alas, also now pay out more than collected in supposedly earmarked payroll taxes, and so have joined the debt creation machine.
4) Other entitlement programs, along with the actual & constitutionallly proper business & expense of government, are funded from general revenues, of which we again have far too little.
5) All this has been going on for sometime now, and the sum of all those unfunded, vote-buying political promises, bailouts, & really does come to a ~$100 trillion liability (Sorry Larry, but VangelV is right about this one.)
6) Larry is right about some of those payments coming due quite far in the future, but it matters not because there is ZERO chance of all those payments being made when due. He seems to think its OK for the government, or anyone else apparently, to change the terms of the deal as they go along, but I call that a lie too.
The one thing I think we all can agree on is that government has lied to the people they represent, and many will suffer because of it. So, now you can argue, as the current batch of lying politicians are doing, about who is to blame, and who should suffer to pay for it.

 
At 2/07/2012 7:48 PM, Blogger Larry G said...

@kkflash

you go some of it right but some of it wrong

" 1) The Social Security system as it is currently conceived and funded is unsustainable."

depends on what you mean. By law, without changes in the law, it cannot pay out more than it takes in.

Without changes it will still take in more than a trillion a year and pay out a trillion a year - albeit in reduced benefits but a long way from no payments at all.

"That means US taxpayers will have to kick in more, or the beneficiaries will get less than what government officials told them, probably both."

agree.

"But then, that's already happened several times."

yes.. because demographics change.

"I call that a lie."

it works the same way for private insurance and private pensions.

private insurance goes up and private pensions have to change in response to changing conditions. It's called economic reality


"2) Medicare, in all its permutations, takes in less in payroll taxes and premiums than it costs in benefits."

you need to understand the DIFFERENCE between Medicare Part A and Medicare Part B. They are not funded the same way and you need to understand the difference and how that changes things.

" This too, is unsustainable and will have the same solution as SS. I call that a lie too."

it's no more a lie than it is for any other health insurance that changes in cost and benefits in response to changing demographics and economic conditions.

 
At 2/07/2012 7:48 PM, Blogger Larry G said...

"3) Unemployment benefits, with the recent and upcoming extensions, alas, also now pay out more than collected in supposedly earmarked payroll taxes, and so have joined the debt creation machine."

agree.. typically unemployment "rolls" with the economy

"4) Other entitlement programs, along with the actual & constitutionallly proper business & expense of government, are funded from general revenues, of which we again have far too little."

far too little what? Are you Aware that Medicare is really 4 programs and Medicare Part B,C and D are funded from general revenues?

"5) All this has been going on for sometime now, and the sum of all those unfunded, vote-buying political promises, bailouts, & really does come to a ~$100 trillion liability (Sorry Larry, but VangelV is right about this one.)"

nope. an "unfunded liability" in the context of an general revenue-funded program makes no sense. Seniors do NOT prepare into Medicare Part B.
there is no more an "unfunded liability" for Medicare Part B than there is for DOD - because BOTH are appropriated programs funded from income tax revenues not payroll taxes.

"6) Larry is right about some of those payments coming due quite far in the future, but it matters not because there is ZERO chance of all those payments being made when due. He seems to think its OK for the government, or anyone else apparently, to change the terms of the deal as they go along, but I call that a lie too."

your auto and health insurance company does the exact same thing in response to the exact same factors.

when your insurance premium goes up and they change your benefits - is that a "lie"?

"The one thing I think we all can agree on is that government has lied to the people they represent, and many will suffer because of it. So, now you can argue, as the current batch of lying politicians are doing, about who is to blame, and who should suffer to pay for it."

with respect to Ss and Medicare the govt has not lied.

How those programs actually work is laboriously documented.

What has happened is that the average American is ignorant as a post when it comes to understanding how these programs work.

I think what is "lying" is when people and politicians say that we can balance the budget by just cutting entitlements.

that's a LIE.

we take in 1.3 trillion in income taxes and we spend 2.6 trillion and none of it is Social Security or Medicare Part A.

when people says that SS / MedA are part of the deficit problem - they are the ones who are lying.

we cannot get to solutions or compromises or agreements on how to proceed as long as people do not understand the facts.

 

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