When I Grow Up, I Want to Be a Crony
From the Crony Chronicles, the "cronyism resource." After all, why be a taxpayer, when you could be a tax spender?
CARPE DIEM
Professor Mark J. Perry's Blog for Economics and Finance
Thursday, August 23, 2012
From the Crony Chronicles, the "cronyism resource." After all, why be a taxpayer, when you could be a tax spender?
About Me
- Name: Mark J. Perry
- Location: Washington, D.C., United States
Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan. Perry holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University near Washington, D.C. In addition, he holds an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota. In addition to a faculty appointment at the University of Michigan-Flint, Perry is also a visiting scholar at The American Enterprise Institute in Washington, D.C.
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75 Comments:
I either want less corruption or more opportunity to participate in it.
Jon Murphy: I either want less corruption or more opportunity to participate in it.
_____________________
Yes, that's more or less where I come out on it.
But Obama hasn't offered me any piles of cash lately.
So how about we shrink government?
Ahhh, good find Mark!
"So how about we shrink government"...
Well arbitrage maybe take a look at Sen. Rand Paul's ideas reagarding the budget for FY 2013...
Shrinking government is a good idea, but the biggest share of cronies are the retirees sucking up more tax dollars from SS, Medicare, Welfare.
Juandos,
I'm not going to read all that.
Maybe we could cut out $200B from the federal budget each of the next five years.
Defense, entitlements and discretionary. Everything on the chopping block.
Curious, what happens to annual SS surpluses if the govt does not run a deficit?
Problems with cronies?
The solution is right here.
hancke:
"Curious, what happens to annual SS surpluses if the govt does not run a deficit? "
??
What surpluses would those be?
My grandmother became a naturalized citizen about 75-80 yrs old. She never paid a dime in taxes for SS or Medicare. She collected a SS check for the next 20 years. She didn't need the money, since she lived with relatives that had cash.
Retirees are collecting far more than they put in. Immigrant retirees are the biggest drain, since they never paid into the system.
Immigrant retirees are the biggest drain, since they never paid into the system.
There are far fewer of them, but I totally agree.
I either want less corruption or more opportunity to participate in it.
As always, you have to make your own opportunities. But, in this world, it's not about creating something of value it's about knowing which ass to kiss and kissing it well. You have to climb over the bodies of people you stabbed in the back to get an in with the right crowd. You have to be good at politics.
Or you have to leave.
While you still can.
Interesting -- everyone has their own scapegoat for the current crisis. The problem is this crisis has been developing over the last 4-5 generations. It will only be solved when we will actually have an adult conversation on how to fix it, and yes all of the scapegoat are on the table. I don't know if we are up to it, those looking for scapegoats don't give me much hope.
hancke said...
"Curious, what happens to annual SS surpluses if the govt does not run a deficit?"
Well, first remember that there is no SS Trust Fund. FICA tax receipts are deposited directly into the U.S. Treasury accounts. So the question really should be:
"What would happen to any tax funds deposited into the U.S. Treasury if one year the federal government didn't spend them all?"
In 1999 through 2001, the federal debt held by the public was actually reduced each year - only by a couple of percent, but it was reduced.
I guess my question should be, what will SS surpluses be invested in if the govt does not run a deficit?
Aiken_Bob: "It will only be solved when we will actually have an adult conversation on how to fix it,"
What does "an adult conversation" mean?
Do you believe that people are not being adults when they act in their own self-interest? Do you really expect anyone to not act in their own self-interest?
The challenge for elected leaders is to agree on a compromise among the competing self-interests and then sell it to voters.
hancke,
Again, there is no SS Trust Fund, so there cannot be any SS surplus. There is a U.S. Treasury account, and all the SS tax receipts are depositied into this account.
I don't think anyone ever seriously considered having the federal government invest in private securities. The only time the U.S. budget had a surplus, the surplus was used to retire federal debt. There is so much federal debt that it seems likely that would ever cease to be an option.
Yes, there is a SS Trust fund. It's in the form of Treasury Securities, which is my point. If anyone really believes there is no SS Trust fund then you must also believe there is no Federal debt.
I seem to have more of a left-leaning view than this blog's demographic, so what I say may not be well-received. Maybe that's a good thing -- it might be that a lot of the problems we have could be more easily solved if the right and the left would talk to each other more.
The most poorly paid job I've ever had was as a graduate student researcher doing particle physics research. (The field that just discovered the Higgs Boson and in the past invented the World Wide Web -- Tim Berners Lee worked at CERN). I was (poorly) paid ultimately by a grant from the Department of Energy. I was saddened to hear that the aspirations of a child to work for the DOE were frowned upon. You might as well have said it's bad to for children to want to work for NASA and send people to the moon.
I also happen to believe working in particle physics was more useful for the country than what I did at my next (and current job). As I was poorly-paid, to support my family I decided to try to find the best-paid job I could get with my skills in math and science. That job was for a bank, as an analyst that figured out the value of collateralized debt obligations (CDOs). Since the subprime crisis in 2007, it's now completely obvious that the country would have been much better off if it hadn't created CDOs at all (and paid people to figure out what they're worth).
I guess my point is that not everything the market does is great. And not everything the government does is bad. At least that's my experience. So be careful when you decide that the "SEC" and the "DOE" are "big government" and therefore bad.
hancke: " It's in the form of Treasury Securities,"
I really have no time for debating this myth. If you want to believe there is a trust fund, go ahead and believe it.
Just remember that the federal government could not take those special issue treasury securities and do anything with them They're non-negotiable. The government cannot give them to Ficelity or Vanguard or anyone else and say "invest these in your mutual fund".
Now make your point about what the government should have done with this mythological surplus. But do not expect any response from me. You are a Believer, and nothing aI can write will have any effect on your thinking.
hancke-
as ron asked:
what surplus?
SS is in deficit and expected to stay that way.
"Social Security’s expenditures exceeded non-interest income in 2010 and 2011, the first such occurrences since 1983, and the Trustees estimate that these expenditures will remain greater than non-interest income throughout the 75-year projection period"
http://www.ssa.gov/oact/trsum/index.html
i think the real question is "where will all this money to pay the shortfalls come from?"
SS becomes a paygo system once this alleged trust fund is depleted, but that's in the neighborhood of $2.7 trillion dollars. that's not the sort of cash you can find in the couch cushions.
morganovich: "what surplus?
SS is in deficit and expected to stay that way."
Based on his responses, I think hancke believes the special issue treasury securites represent some accumulated surplus which could be "invested" by the federal government.
Perhaps hancke should join with other Believers and embark on an archeological mission to find Al Gore's mythological SS lock box.
jet-
i believe i know where the alleged lockbox is buried:
the general fund.
given that there is no way the GF can pay it off, my suspicion is that it will be funded by deficits (absent reform) magically transmuting iou's into treasuries and paying out the SS of recipients by putting the taxpayers on the hook for the debt.
the way that SS has been handled is almost certainly the greatest finical fraud in history.
of course, given that no one from mf global is even being charged, i'm not really sure stealing client money is even illegal anymore.
A bunch of comedians here. You did forget to add interest earned from those Treasury securities which when added show 2010 and 2011 SS surpluses.
Note in Morganivich's link "Social Security’s expenditures exceeded non-interest income in 2010 and 2011".
Now if you still choose to believe that the SS Trust Fund is non-existent, then using the same logic we can just cross out the entire Federal debt with that magical pencil or at the least knock off $2.7 trillion of the $15.7 trillion dollar debt. They are in the same "lock box" afterall.
Can I get a straight answer? For arguments sake, let's say the surpluses are theoretical. If there is no Federal deficit, where will SS surpluses be invested?
h-
"
Now if you still choose to believe that the SS Trust Fund is non-existent, then using the same logic we can just cross out the entire Federal debt with that magical pencil or at the least knock off $2.7 trillion of the $15.7 trillion dollar debt. They are in the same "lock box" afterall."
um, no. you seem to be having trouble with the difference between negotiable and non negotiable instruments.
federal bonds are tradable.
federal iou's are not.
even the "interest" is just an accounting fiction as the ious have no set redemption date. they are perpetual loans. there is no "par redemption".
further, if you had read the report i linked, you'd see that such meager interest coverage (paid from the general fund) as currently exists will not persist for more than a couple years. thus, your question about where to put the surplus remains a moot one.
you're talking about a "surplus" of around 50bn a year on 700bn in payouts. just COLA alone will eradicate that in 3 years even without the crushing demographic issue.
you are trying to decide where to put deck chairs on the titanic as though that is somehow the relevant issue.
hancke-
the surpluses were not theoretical. they existed. they were plundered.
if your broker took the money from your account, spent it on a house, and replaced it with IOU's that he had no clear way to pay back, you'd scream bloody murder, right?
so how is this any different?
it's precisely what happened.
this is why my SS account has negative nominal returns and deeply negative real returns. i figured it out once. the first dollars i put into that account when i was 22 will have about 12 cents of buying power when i retire (assuming i get my full benefits, which i won't).
the only difference between the brokerage theft i described and the SS system is the government can print money/sell bonds to the fed and force the IOU chain onto taxpayers through debt assumption or monetary debasement.
there is no hard and fast answer to "what would they do with a surplus". i do not believe there is any established requirement. they could buy treasuries, stocks, or lend it to solyndra.
clearly, the government is a poor steward of savings. what we need are individual accounts under our own control. you simply cannot leave a huge pile of money lying around in a room full of politicians. the result will be disaster and theft, every time.
Interesting -- everyone has their own scapegoat for the current crisis.
Agreed.
The problem is this crisis has been developing over the last 4-5 generations.
I would say longer but in general I would agree.
It will only be solved when we will actually have an adult conversation on how to fix it, and yes all of the scapegoat are on the table. I don't know if we are up to it, those looking for scapegoats don't give me much hope.
There is only one true solution. Given that there are no angels to rule over us the only way to stop theft and corruption in government is to shrink that government and limit its powers. Sadly, too many people confuse society with government.
http://www.youtube.com/watch?v=7GSXbgfKFWg
Morganivich, OK then, the US has $4.8 trillion in intragovernmental debt backed by non-negotiable securities. If these are non-existent then let's wipe them off the books. Now we have a $10 trillion dollar federal debt. Sweet!
Look guys, I'm not supporting the notion that our govt is not screwing us over on SS. It's quite obvious they are. My original question even highlights that. I'm seeking a better understanding of the mechanics of govt deficits and how SS might be a driving factor by requiring a deficit in order to "invest" any surpluses.
"there is no hard and fast answer to "what would they do with a surplus". i do not believe there is any established requirement. they could buy treasuries, stocks, or lend it to solyndra."
I think SS is allowed to only invest surplus in one particular Treasury bond.
"Morganivich, OK then, the US has $4.8 trillion in intragovernmental debt backed by non-negotiable securities. If these are non-existent then let's wipe them off the books. Now we have a $10 trillion dollar federal debt. Sweet!"
you seem determined to miss the point here. (and btw, US public debt is 11tn, not 10)
the point is that SS surpluses were spent and replaced with IOU's that yield way below market.
if the IOU's had been in us bonds, yield would have been twice as high. that is called theft.
these ious's are backed by nothing other than faith. they cannot be sold. what would you rather have, a salable instrument (that would have appreciated in recent years yielding 6% or a non negotiable one yielding 3?
this has been a plundering.
further, this money has to come from somewhere. how are these IOU's to be paid? what gets cut? who gets taxed?
instead of investing privately and getting the return from outside, the government has made that taxpayers pay themselves interest (intergenerationaly).
notions that we are getting "return" are absurd. at best, it's picking one generation's pocket to pay another.
further, you are focusing on the wrong numbers. it's the huge unfunded liability that will be the killer. that's 8.6tn (73k per us household).
had the SS funds been getting actual return, we would not be in that mess. again, where is that money going to come from?
taxes, inflation, and reduced benefits. that's where. it's a horrendous ponzi scheme with mandatory participation.
your notion that we need a deficit to invest SS surplus does not make any sense.
why would that possibly be true?
let's say we are running a surplus. the supply of us bonds is shrinking as they get paid off.
so what?
you can still buy them. there's a market for them. new ones will still be issued as well as old ones expire.
if $500bn of one year bonds expire, some will be reissued. this is especially true of t-bills.
even if they are not, you can still buy existing bonds.
so i really do not see your point.
you seem to be assuming that new bonds need to be issued or there is nothing to buy and that surplus is synonymous with debt free.
that is not the case.
better still, why should they be investing anyhting at all?
we'd be vastly better off with our own savings accounts.
morganovich
"of course, given that no one from mf global is even being charged, i'm not really sure stealing client money is even illegal anymore."
Give it a try, & let us know what happens. I'd love to have a new revenue stream, but fear the consequences. If there aren't any, I'll go for it. :)
ron-
i think i'll stick to just trying to make money honestly.
i do not make big enough political donations to be above the law.
actually, perhaps that's the model for the new millenia:
steal $100 million, buy patronage from the party in power for $20 million, repeat every time you need a new house in the hamptons.
"Defense, entitlements and discretionary. Everything on the chopping block"...
Sen. Rand addresses it all arbitrage...
It's GSATT:
That's great. Thanks. It explains the SS trust fund perfectly.
Those dummies understood how it works better than some of us do.
hancke
"I think SS is allowed to only invest surplus in one particular Treasury bond. "
Why "think" when you can "know"?
oh, and here's the other interesting question:
where does the federal government get the money to pay the interest on internal debt?
taxpayers.
this makes for a pretty attractive loan.
if i could write myself a loan and then have ron pay the interest, well, that would be pretty attractive to me.
not sure ron would be too happy though.
this is what makes federal debt so different from private debt.
private debt needs to be repaid by the borrower. thus, you need to put it to productive use that exceeds the value of the future interest.
government does not even try to do this.
they spend like drunken sailors and never even try to measure what they get for it. (apart from votes)
hancke
One good reason to not merely write off the trust fund IOUs is that any pretense that Social Security is a retirement plan rather that a welfare program for retired seniors, financed by younger workers, would then be impossible.
No one could pretend they had "contributed" to a retirement plan all their working lives and then at retirement began receiving benefits from their "investment".
"not sure ron would be too happy though."
You can bet your ass he wouldn't. :)
This comment has been removed by the author.
nteresting rationale for buying "special" treasury notes instead of marketable treasuries"
By law, income to the trust funds must be invested, on a daily basis, "in securities guaranteed as to both principal and interest by the Federal government. All securities held by the trust funds are "special issues" of the United States Treasury. Such securities are available only to the trust funds.
...Unlike marketable securities, special issues can be redeemed at any time at face value. Marketable securities are subject to the forces of the open market and may suffer a loss, or enjoy a gain, if sold before maturity. Investment in special issues gives the trust funds the same flexibility as holding cash."
That sounds like an argument for holding cash instead of investing in those "risky" treasuries. should we all heed that advice?
In any case, the flexibility argument is nonsense. As treasuries are purchased on a daily basis, older treasuries mature on a daily basis, providing needed liquidity.
"you seem determined to miss the point here. (and btw, US public debt is 11tn, not 10)".
$11,177,326,036,578.95 and $4,783,142,485,532.25 in Intragovernmental debt since you want to be exact. The Internet is amazing indeed.
I certainly didn't miss the point since I asked the question to begin with. I didn't expect extraneous lectures when asking a direct question. "I'm seeking a better understanding of the mechanics of govt deficits and how SS might be a driving factor by requiring a deficit in order to "invest" any surpluses." It's called a question, not a statement.
Thank you Ron for that last post. That is part of the answer to my question.
After re-watching that video, I have changed my mind on something.
I don't want to be a crony. Then you gotta write the laws, lobby, fund-raise, all that stuff. That's a lot of work. I'd rather be the friend of a crony. Let the sucker do all the work, and then I'll just reap the benefits.
"I don't want to be a crony. Then you gotta write the laws, lobby, fund-raise, all that stuff. That's a lot of work. I'd rather be the friend of a crony. Let the sucker do all the work, and then I'll just reap the benefits"
Isn't that what staff is for?
hankle,
As has been pointed out to you a number of times, there is no social security trust fund. The money paid into OASDI is spent immediately. All politicians acknowledge this and is why they call it a pay as you go system. Absolutely NO money is put into any trust anywhere.
The "surplus" you talked about was simply spent on other federal projects.
To suggest that the federal debt is the same as the trust fund is to fundamentally not understand finance and government accounting. You can think of it like this:
You have a mortgage and a savings account. Your mortgage is very real and your savings account is very real. However, instead of putting money into your savings account, you simply write yourself a note every month that you intended to save $X_k for month k, but spent it on something else instead and intend to replace that money in your savings account at some later date. While you may have a savings account and the intentions of saving, it is empty. It most decidedly does NOT have X_1 + X_2 + ... + X_n amount of money in it, despite the fact that you promised yourself you would put that much money into your account. The "surplus" can be thought of as the occasional raise you get in your income that you, also, want to put into your savings account. The surplus for month k is $Y_k. You again write a note to yourself that you want to save this money and will replace it at some unspecified later date, but spend it immediately on other things.
Saying that the social security trust fund is real and is meaningful is the same as saying that the intention of saving your money is exactly the same as actually saving your money. The SS trust fund is a fiction. It is the amount of money the government owes itself. It is the same as the notes you sent to yourself with the intent on putting money into a savings account that you never actually put into a savings account.
I always wanted to grow up to be a string quartet.
Ken, thank you for all that. Failing to understand that the SS Trust fund is part of the federal debt is to fundamentally not understand finance and government accounting. If it does not exist why keep up the accounting and forecasting charades? You are all preaching to the choir here. I perfectly understand where the surplus goes, where it is spent and there really isn't a chance in hell it's going to get paid back since it is generational debt. I get that and if you read my posts I never questioned that. You guys are too eager to bash SS to even comprehend what I am asking.
Sorry to ask an off topic question.
Cronyism is the very reason we will never see real tax reform. What would politicians do if we took away their toys?
KENSs analysis is wrong. The money paid into social security is not part of the national debt. It is still money that has been paid in.
It is true that had it not been paid in, and had eerily bought all the same stuff, then the debt would be far higher.
Or, had it been paid in and just sat there, the debt would still be far higher, only then we could have money to pay the benefits with.
But the problem is a function of time. The money has been borrowed and spent by other agencies, sure enough. In doing so they have incurred obligations to pay the money back, along with a schedule for doing so. Those agencies have in their budgets money for interest payments and debt reduction.
It is not as if all the money is due on one day. It has been borrowed over decades and the repayment will be made over decades.
There will be far fewer federal pension defaults than there have been private pension defaults. And why did private pension defaults happen? Because corporations borrowed or raided their poo pension funds and later could not pay them back: the same scenario as Ken describes.
Our pension funds have been invested in the united states. We expect to get a return on that investment. What keen is suggesting is that this is a worse investment than having your pension fund invested in ( and. Lets diversify here) Enron, Lehman, Adelphi, and a dozen others I could mention.
Besides, the ssh problem is easily fixed: make illegal workers legal, and admit more of them..
hankle,
If it does not exist why keep up the accounting and forecasting charades?
Seriously? People, like you, really think that if you write something down on an official piece of paper, then use a lot of math to forecast something, then it must be real work. Most people do not understand even the concept of money, much less accounting and forecasting, including the politicians. The charade is there to give an air of respectability, but it's just cover to rob tax payers blind.
Maybe, but let's not forget that ss was instituted because private savings and private pensions were found not to work, and subject to fraud.
Millions of people lived out their final years on social security. They are no longer around to join in the argument, but I doubt they would agree that they were robbed blind. Unless it was by their private pensions plan or whole life insurance.
The government has no lock on stealing people blind. Government did not even invent that concept.
The act of stealing people blind was one reason government was invented: to try to stop it.
The fact that individuals and private enterprise have learned to use government to help them steal can hardly be laid at the feet of "government".
Unlike corporations, government is not considered to be a person, so we should not refer to it as if it were a singular entity. If you want to rail against government then rail instead against those who are more adept than you are at getting it to listen to their complaints.
As an example, if SS were to run $100 billion short next year we know taxpayers would be on the hook for it. How would the Treasury record it? As Hydra points out, SS would not tap the entire fund in one year. It's also common knowledge that politicians want to change SS to avoid any repayment. The laws are written to include the mythical trust fund when calculating SS solvency and forced cuts.
If it does not exist why keep up the accounting and forecasting charades?
This is easy. Clinton claimed that he had a surplus because of the accounting charade. Bush and Obama could report lower deficits because of the accounting charade. It has value because many voters are too disinterested or too stupid to see reality as it is.
VangeIV, you actually made a case for it's existence. The interest paid towards the borrowed SS funds added $114 billion to the 2011 deficit while the borrowed surplus was only $69 billion. Seems abusing the Trust funds has lost it's advantage.
"VangeIV, you actually made a case for it's existence. The interest paid towards the borrowed SS funds added $114 billion to the 2011 deficit while the borrowed surplus was only $69 billion. Seems abusing the Trust funds has lost it's advantage. "
hancke: There was no interest actually paid. It is only an accounting entry - another IOU. Seeing the balance in your pretend savings account increase shouldn't make you feel good, as you've promised to redeem those IOUs with real money eventually.
Now that FICA taxes collected are no longer enough to make OASDI payments, the Ponzi nature of this scheme will become apparent to everyone, including those who haven't previously paid much attention to it, and thought it was working well.
Obama's misguided attempt to "stimulate aggregate demand" by reducing FICA taxes only ensures that the day of enlightenment is today.
"KENSs analysis is wrong. The money paid into social security is not part of the national debt. It is still money that has been paid in. "
Gee, I can't seem to find it anywhere. Where do you suppose it is?
"There was no interest actually paid. It is only an accounting entry"
Yes, I understand that and also the 2% payroll tax cut is just an accounting entry transferring "funds" from General Revenue to SS. I never said I thought the SS Trust fund was actually a funded savings account at the Treasury. Just the opposite in fact. Still, the interest owed to SS adds to the Federal debt even if it is only an accounting scheme. Laws are written, policy is made and much discussion centers around this mythical fund.
VangeIV, you actually made a case for it's existence. The interest paid towards the borrowed SS funds added $114 billion to the 2011 deficit while the borrowed surplus was only $69 billion. Seems abusing the Trust funds has lost it's advantage.
Once the contributions are lower than the outlays the advantage is lost. Which is why things are heating up.
I wish we had edit capabilities! Its, its, its, its, its, its, its, its......
"Yes, I understand that and also the 2% payroll tax cut is just an accounting entry transferring "funds" from General Revenue to SS. I never said I thought the SS Trust fund was actually a funded savings account at the Treasury. Just the opposite in fact. Still, the interest owed to SS adds to the Federal debt even if it is only an accounting scheme. Laws are written, policy is made and much discussion centers around this mythical fund."
If you understand all that, then why are you asking the questions you do, as if you DON'T understand it? Are you just trolling people or what?
Read my questions again Ron. I started with ""Curious, what happens to annual SS surpluses if the govt does not run a deficit?"
I was simply asking how any SS surpluses would be 'invested' if there were no budget deficit and secondly does SS require a deficit in order to 'invest' its surpluses (in special issue securities).
Is it safe to say that there would be a 'real' SS Trust fund if SS were allowed to invest in something other than govt debt? My apologies if I am not communicating my question clearly.
The answer I was looking for greatly changes the debate on SS.
We constantly hear the outcry of the SS Trust Fund is a myth as well as any changes (privatization) to SS will destroy it. Currently it is mostly a pay as you go system with an accounting of any invested surpluses that can only be repaid with taxpayer dollars. We know there have been substantial surpluses in previous years with dwindling surpluses more recently. Assuming there will be a fix of some kind to extend the solvency of SS there will likely be $100 billion plus surpluses again. Why not allow investment of SS surpluses in something that is not a driver or enabler of deficit spending?
"My apologies if I am not communicating my question clearly."
That appears to be the problem. Your first question implies that there are annual surpluses, which anyone familiar with the state of SS knows is clearly no longer the case, and could assume that you weren't aware of that fact.
"I was simply asking how any SS surpluses would be 'invested' if there were no budget deficit and secondly does SS require a deficit in order to 'invest' its surpluses (in special issue securities)."
Surplus SS revenue has always been spent as soon as received, and it is necessary to "borrow" money from the SS Trust Fund to do so, in the form of securities guaranteed by the Federal Government (taxpayers). In the past some of those were actual marketable treasuries , as is explained at the Trust Fund FAQ link I posted.
Whether you want to use the word "deficit" when discussing intergovernmental transfers is merely a matter of your prefered definition of the word "deficit". Money the Federal government owes to itself is nothing more than accounting.
In reality, all federal tax revenues are collected by the IRS and are deposited in the general fund of the Treasury, with appropriate ledger entries made. Money in, money out. Beyond that there is only creative accounting - some of which, if used in the private sector, would result in prison time.
So yes, Virginia, there IS a "Trust Fund", but it is only accounting, and there are no real assets in it, only promises made by a government that is currently spending nearly twice as much as it collects in taxes.
Given that the private sector is largely the path to someone's job going offshore, it is quite logical. Through such means, one can use it to good ends such as stopping the bleeding of jobs overseas.
My question sets a scenario of no deficit spending. SS surpluses are obviously confiscated to use towards budget deficits. I surrender to the overstated obvious.
"My question sets a scenario of no deficit spending. SS surpluses are obviously confiscated to use towards budget deficits. I surrender to the overstated obvious."
With no federal defecit spending and no public debt the SSA could still buy IOUs from the treasury. This is internal accounting - money the government owes to itself - and has no more meaning in the real world than your left pocket owing your right pocket money. It allows the pretense that SS is a retirement system instead of an income transfer from current workers to retired workers.
If that's not enough for you, I give up.
This comment has been removed by the author.
I'm not being obstinate, just a bit idealistic. In a zero deficit scenario, why would SS buy IOUs if it's just throwing the money away?
My wife is a retired teacher and their retirement plan excludes them from paying into SS. The employee/employer contribution is about the same but the payback is far better. Galveston County is a similar example with a different structure. SS beneficiaries deserve better. It's the perfect time to severe the Trust fund to deficit tie.
Look. The SS funds are real money, actually paid in, as a percentage of peoples pay.
Where should tha money go"
1) Put in a non interest beraing bank account or used to buy gold which will sit in fort knoox until needed?
2) Invested in free market securities where they can easily take a 25% dive jst when someone is ready to retire?
3) Used to offset other government taxes until some later date? At which time e will have to repay the money we borrowed from ourselves.
I hear a lot of complaints, but I do not hear any reasonable alternatives.
I, for one, am perfectly appy to see my money invested in the US. If it makes the US stronger and the next generation has to pay the bill, so be it.
THEY GOT A DEAL.
The fact remains.
Ppeople paid money to the governement, expectng the government would pay tem back in the future.
Do we allow the government to be a LIAR AND A CHEAT, or not?
These our OUR promises that we mad to OURSELVES.
Who do we think we are kidding here, and who do we think we re cheating?
This has virtually nothing to do with govenrment, and everything to do with our personal and our national honor.
Are we beleiveable, or not?
If not, then expect every other government bond to crash as well.
"In a zero deficit scenario, why would SS buy IOUs if it's just throwing the money away? "
It's just accounting entries. The IOUs explain the $2.7 trillion discrepancy between receipts and expenditures up until now. It maintains the pretense that SS is a retirement program.
"Where should tha money go""
4. Buy marketable treasuries instead of IOUs if you wish to spend the money now, all the while pretending to administer a retirement plan.
5. Allow everyone to invest in the retirement plan of their choice as all private retirement plans do.
"The fact remains.
Ppeople paid money to the governement, expectng the government would pay tem back in the future."
That's the bill of goods we've been sold, alright.
"Do we allow the government to be a LIAR AND A CHEAT, or not?"
LOL It's a little too late to worry about that, don't you think?
The SS program from the very start has been an elaborate Ponzi scheme described dressed as a retirement plan.
Every cent for FICA taxes received has *always* been invested right away in treasuries, and the money spent on general expenses. At some times in the past some of those securities were the same marketable bonds bought and sold daily on the open market. Those have since all been replaced with IOUs that can only be redeemed by taxpayers.
"These are OUR promises that we mad to OURSELVES."
You're funny. We are liars and frauds, then.
"Who do we think we are kidding here, and who do we think we re cheating?"
"We" are kidding everyone who believes SS is a real retirement plan, instead of simply a pay-as-you-go ponzi system of income transfer from young workers to retirees.
"We" are cheating everyone who is forced to participate because they are getting such poor returns on their "investment", and current workers and taxpayers who will be required to contribute higher amounts without getting more for their money.
"This has virtually nothing to do with govenrment, and everything to do with our personal and our national honor."
What are you talking about? There is no "national honor", and I haven't promised workers anything, have you?
"Are we beleiveable, or not?"
Who is "we"? I am believable, you are not and Government is not.
"If not, then expect every other government bond to crash as well."
The IOUs will be paid in one of three ways:
- higher taxes
- deficit spending
- inflating the currency.
hancke: "Assuming there will be a fix of some kind to extend the solvency of SS there will likely be $100 billion plus surpluses again"
That would be just about the worst of all possible scenarios. Whatever the federal government did with those surpluses will absolutely distort free markets and hinder economic growth.
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