By James Kwak
In this season of fiscal brinksmanship, the topic of Social Security has once again come to the fore. Republicans are generally in favor of cutting benefits, although they are bit afraid to say so after the demise of George W. Bush’s privatization “plan”; Democrats are generally in favor of not cutting benefits. But many liberals have another argument: Social Security is irrelevant to the whole issue of deficits and the debt, since the program cannot have any impact on either.
I generally count myself as a liberal, but I think this is a misleading argument. This could take some time to explain, as I’ll try to go through it carefully.
The standard liberal argument goes like this: Social Security has its own funding scheme that is walled off from the rest of the federal government. Employees pay payroll taxes into the Social Security trust funds, and benefits are paid out of those trust funds. The crux of the argument is that Social Security, by law, may not spend money that it does not have in its trust funds. It is impossible for Social Security to incur a deficit over the long term, since it can only spend money it already collected. In the words of Dean Baker:
“Social Security is prohibited from spending any money beyond what it has in its trust fund. This means that it cannot lawfully contribute to the federal budget deficit, since every penny that it pays out must have come from taxes raised through the program or the interest garnered from the bonds held by the trust fund.”
To begin, let’s clear a distracting issue out of the way. The annual federal budget balance is measured two different ways. The “unified budget” balance includes cash flows associated with Social Security (that is, payroll taxes in and benefit payments out). The “on-budget” balance excludes those cash flows (and the Postal Service). Obviously, Social Security does not contribute to the “on-budget” balance but it does contribute to the “unified budget” balance. But that’s all economically irrelevant, since in this case how you measure the thing doesn’t change the thing. (This isn’t quantum physics, after all.) The important number is the amount of money that the federal government has to borrow from the public, and that number is not affected by which budget balance you look at.*
Moving on to the main course: Dean Baker is absolutely right about current law. So for illustrative purposes, let’s posit an alternate universe, in which current law includes the following General Revenues Clause (GRC): “If the Social Security trust funds are unable to pay scheduled benefits to beneficiaries, those benefits will be paid out of general revenues.”
How would the existence of the GRC affect anything? It can’t have any impact on the national debt until the GRC begins to affect actual Social Security cash flows. And that won’t happen for as long as Social Security is able to pay benefits out of its trust funds.
The real question is what happens when the trust funds run out of money, which is currently expected sometime in the 2030s. In the current law universe, benefits automatically get cut to the level of incoming payroll taxes, which will be about a 25 percent cut; Social Security has no impact on government borrowing and hence the national debt. In my alternate universe, Social Security continues to pay full scheduled benefits, which requires additional government borrowing and increases the national debt.
The first question is: Which one do you think is more likely in the real world? Do you really think that Congress will sit by and let Social Security benefits be cut by 25% overnight? Or do you think that Congress will amend the law, essentially inserting the GRC, to preserve full benefits for seniors?
Of course we can’t predict the future with certainty, but I would say that if Congress in twenty-five years is anything like Congress today, it will find a way to pay full benefits. So when we talk about the impact of Social Security on the national debt, the most likely scenario is that it will increase the national debt—exactly as if the GRC existed today. That’s the main reason why I think it makes sense to take Social Security into account when projecting future national debt levels.
But let’s say I’m wrong and that Congress will stand by as seniors’ Social Security checks get cut by 25 percent. That’s not a good thing.
In my universe (where the GRC exists), when the trust funds run out money, Congress will have choices. It could: (a) increase taxes to pay scheduled benefits; (b) reduce other spending (like on aircraft carriers) to pay scheduled benefits; (c) borrow more money to pay scheduled benefits; or (d) cut benefits by 25 percent. In the current law universe, Congress will have to choose (d). It’s not hard to see that my universe is better than the current law universe. The two are equivalent if (d) is a better choice than (a), (b), and (c), but otherwise my universe is preferable. This is especially true for liberals, who in ordinary circumstances would prefer (a), (b), and (c) to (d).
So let’s say we know with certainty that the GRC will never be inserted and benefits will have to be cut. In that case, Social Security cannot increase the national debt. But we would actually be better off if the GRC existed and Social Security could increase the national debt, because of the options that would give Congress in the mid-2030s—including the options to raise taxes on rich people or cut defense spending.
In other words, if you are right that Social Security cannot increase the national debt, you should acknowledge that that is actually a bad thing. If you care about preserving Social Security benefits, you should prefer a world with the GRC.
Put another way, if you make the argument that Social Security cannot increase the national debt, you are conceding that there should be an across-the-board benefit cut the moment that the trust funds run out of money. Is that what you want?
On its face, the statement that Social Security cannot increase the national debt, and therefore should be off the table, seems like a classical liberal position. On inspection, though, I think it is misleading, since Congress is more likely to add the GRC than not. And for traditional liberals, I think it’s actually counterproductive, since it is premised on the unavoidability of a draconian benefit cut in twenty-five years.
* There is a separate, equally confusing, debate over the implications of the fact that the Social Security trust funds are invested in a special kind of Treasury bonds. The short answer is that because Social Security exists, the Treasury Department had to borrow less money from the public in the past few decades, when Social Security was running surpluses; but in the future, the Treasury will have to borrow more money from the public, because the Social Security trust funds will be redeeming some of those special Treasury bonds.
The Baseline Scenario 
Even without a GRC, there isn’t anything stopping congress from implementing (a) ideally before the trust funds run out of money in the 2030’s because life expectancy is only going to go up as medical advances continue so future beneficiaries should be paying into it now in order to keep it solvent for when they retire in twenty to forty years.
The simplest and fairest solution is to remove the cap on Social Security contributions, so that million-dollar-a-year earners pay the same percentage as those at the bottom of the economic ladder.
You are making this too complicated – the fact is that current TAX revenue does not cover current spending, but my current social security payments make it appear that the deficit is smaller than it really is. If Congress had instituted a “lock-box” as some advocated years ago, this would be apparent. The solution is not to include social security in calculation of the debt, but to raise tax revenues to cover actual cost of current spending. Social security should appear as a surplus on current books, in order to fund future liabilities, as was planned. Social security payments may need to be raised slightly to extend future solvency, but should not be raised to cover current account deficit.
Two points:
first, it is rather nuts to assume that the contribution cap does not increase over time, if for nothing but inflation. I think this extends this projected 2030 date quite a bit if not resolving it.
second, if there was a ‘lockbox’ where would they put the funds? The stock markets? God, i hope not. How about something safe and good for the country, like in a special class of Treasuries. Oh yeah, that is what they did.
If Social Security Trust Fund is not sound, then Treasuries are not sound. And there lies the problem.
Wall Street wants to get its hand on the money and take a piece of it. And the Republicans have hated the program on principle since inception.
But it is one of the best programs of its type that the US has.
Time to stop running unfunded wars and giving tax cuts to the wealthy.
“Put another way, if you make the argument that Social Security cannot increase the national debt, you are conceding that there should be an across-the-board benefit cut the moment that the trust funds run out of money. Is that what you want?” Kwak
How about simply increasing the FICA deduction percentage, which has been suggested by many others. A nice simple solution to the possibility that the economy will not improve enough to extend the 2033 scenario. It would take an increase of about 0.50%. On the other hand we could wait ten years to see if the economy has revived and unemployment has receded to a non-recessionary level.
You were right the first time. Social Security is not a participant in the deficit process. The SS Trust Fund is just another creditor to the Treasury.
Burn The Patriot Act and watch the deficit balloon down.
Private sector, market-based defined benefit plans have disappeared along with the unions that fought for them. Few people will be able to save even a fraction of the amount they need for a decent retirement in 401(k) style plans. So, having tried markets and seen them fail, we now need to turn to the system that we know works.
We should be talking about doubling the size of social security, not cutting it. In a country this wealthy it is scandalous that we are condemning an entire generation to poverty in their retirements simply because we can’t muster the political will to make businesses and the ultra-rich pay their fair share of our taxes, or to reduce the unaffordable waste of the world’s largest military, or recognize that “market-based” retirements have failed. .
Taxes to invest in our future and provide necessary services — like a decent retirement, medical care, schools and higher education, transportation and other infrastructure, research and development, regulation to ensure that markets work to serve rather than exploit us, and so on — are the “price of civilization.” For a generation, too many Americans have been unwilling to pay that price.
We can no longer afford that foolishness. No modern economy or decent society can survive without a large and effective government. “Starving the beast” is a very poor way to get it to work for us. It is time, instead, to insist that those who benefit the most from our society — the best-off — also take responsibility for its continuance.
Lift the cap on FICA. Tie the interest rate paid on the Social Security trust fund to the interest rate the US charges our students. Introduce a VAT.
And begin to fund the investments we need — starting with a modern energy system and railroads, an effective medical care system, properly funded higher education and universal child support payments — to catch up with the other wealthy countries.
http://www.huffingtonpost.com/the-sunlight-foundation/fiscal-cliff_b_2204849.html
Ah well Jim,
A can of worms is opened here, and one post won’t be enough comprehensive enough to even tackle how the program works…you are sort of accurate, and not.
Another approach is to consider is that a very minor increase in contributions makes the gigantic and scarey numbers go away…
Why not follow Canada’s example and (a)raise premiums so that future beenfits are assured and (b) allow Social security funds to be invested in a wide array of assets with higher yields. According to Canada’s Chuief Actuary, based on conservative assumptions, no premium increase should be needed over the next 75 years as the Canadian version is moving from a pay-as-you-go to an increasingly pre-funded system. David Crane
kwack didsappoints me.
he needs an alternate universe to claim that SS affects the deficit. this is the kind of mind rot that led Orszag to invent the “legacy debt.”
the fact is that Congress can prevent the 2030 or so shortfall by raising the payroll tax one tenth of percent per year between now and then. this is eighty cents per week for the average worker who is expected to get pay increases of eight dollars per week per year over the same time. and the worker will get that money back, with interest, when he needs it.
staying in the real world would help us realize there is NO problem with Social Security, only a phony problem created to stampede the people into accepting cuts that will destroy the program as meaningful insurance.
reread kwak. i think my misspelling of his name above was appropriate. apparently he thinks that paying back the Trust Fund increases the debt. Actually it decreases it. What it is about Social Security that attracts “experts” who don’t know anything about it to offer cute “analyses”?
GReat post, thanks
kwak said,
“Put another way, if you make the argument that Social Security cannot increase the national debt, you are conceding that there should be an across-the-board benefit cut the moment that the trust funds run out of money. Is that what you want?”
apparently he cannot conceive that there might be an across the board payroll tax increase the moment the trust funds run out of money.
it would take a 2% increase for each the employer and the employee. a bit of a shock perhaps, but hardly a crisis. remember that the money will not be subtracted from the economy, but be spent instantly by the people getting the un-cut benefits.
and it’s probably worth mentioning that it’s not exactly the Trust Fund running out of money that is the problem. The Trust Fund… created to help the boomers fully fund their own retirement… was always supposed to run out of money (except for the traditional one year’s reserve). but while it is funding the boomer retirement it masks the effect of increasing life expectancy.
it is paying for that increase in life expectancy that will require the 2% increase in the tax.
it is reasonable for the workers to “have to” pay a little more in order to cover the extra costs of their own longer retirement. nicely for them, this little more will come out of a “lot more” pay by the time it is needed.
In the current world, SS doesn’t impact the debt. But it seem it would impact the deficit if SS revenue is inadequate to currently fund SS outflow, since the government then would have to buy back enough of the SS treasury bonds to fund current outflow. It would have to borrow the money – adding to the deficit, remove the cap, reduce other spending, or increase taxes – income or payroll. I didn’t notice a clear statement in James article of the current cash flow situation.
So it may be, or will in the near future, impact the deficit. Raising the cap would simply decrease a little the accumulation of wealth to the 1% being allocated by our government. Since the governments’ sloping of the economic playing field has been leading to the widening income gap since the `70s, it’s past time for a correction.
Chaining the COLA, which Obama appears to favor, would make it worse. It could lead to higher medical expenses since seniors may be forced to shift to less nutritious, but, cheaper, food in order to make ends meet. They could decrease their quality of life by indulging in fewer creature comforts, but many have already done so to the point of despair. They might consider buying cheaper, but more expensive to maintain items, but that would just get them further behind, where the government picks up the increased medical expenses caused by the less nutritional food.
Elephant in the Room
09/14/12 – InsureBlog by Bob Vineyard [edited]
=== ===
Well, there is a trust fund, but there isn’t any money in it. Not real money. Only IOU’s [a government promise to find the actual, consumable resources somewhere, somehow.] Those in denial say the federal government has never defaulted on their obligations so the IOU’s are “secure”.
Here is the truth.
The accumulated deficit is $16 trillion, roughly 100% of GDP.
As if that isn’t bad enough, you need to factor in our unfunded liability, the amount we owe for future obligations. Things like federal pensions, Social Security promises, and Medicare promises.
The unfunded liability exceeds $100 trillion.
=== ===
This must always be added to any discussion of any government “trust fund”.
There is nothing of value in the Social Security “trust fund” (or in any US government “trust fund”). There is only a politician’s promise to find the money [real resources] somewhere that was paid in at one time, but has already been spent. The trust fund bonds are only a paper record of what was collected in taxes above the then immediate cash needs of Social Security. That amount “above” was put into the general Treasury and spent, leaving a notation (a bond) behind to note the borrowing.
Ponzy Schemes Like Social Security
Social Security is a direct-pay program. Amounts collected this year are all paid out, either to recipients or to government programs. The Ponzi scheme is ended. From this time on, more will be paid out than collected in cash. Only continued government borrowing can make up the shortfall. Or, the government will reduce benefits or inflate the currency. Seniors may get $100 in benefits, which may buy only what $50 buys today.
Here is an XTraNormal video (2:12) which presents the facts about the Social Security Trust Fund bonds. (Don’t be bothered by the name of the video, “Pharmacy tech qualification test”.)
Amazingly, this is exactly like an insane person saving up for his children’s college education. He puts $100 each Friday into his savings account. Each Monday he takes out that $100 and spends it on entertainment, but he carefully records what he owes to the “college fund”.
When his kids are 18, he tells them that he saved $50,000 over the years, as shown on his “fund account paper” (the trust fund bonds). He only has to pay back what he took out, or borrow the money in the name of the children. Are they happy at that result?
This has been justified over the years with the bromide “we owe the money to ourselves, so why not spend it now?” OK. Now, in retirement, someone (the young?) will have to generate the real resources to pay for the seniors, if they can be forced to do this.
I enjoy reading the Econ Blogs across the internet as a retired economist myself. Having a BSci in Econ/BMgt from the Air Force Academy and a MA in Econ/HumRel from Webster University and retired as the VP of Investment Services from a large CA Credit Union.
The hysteria around the national debt is ridiculous and a red herring from the real economic problems facing America. Lets take it by the numbers:
1. The US Gov’t has the monopoly power to print US Dollars, any time, as much as it wants, for whatever reasons the US Congress deems necessary.
2. The only reason the US Gov’t does not simply print money, but instead uses a fractional reserve system (Read that it supplies Treasury Bills, Bonds, etc to the market) is so that the Fed can control interest rates in the Economy through open market operations (monetary policy), giving the Fed the ability to control the economy, somewhat. This means that the Fed controls the interest rate on the debt that everyone is so worried about, and has set that rate to just over ZERO! Since the US Gov’t has the ability to print as many $ as it wants, it can always control interest rates denominated in US $, the interest rate is NOT SET BY BOND VIGILANTES!
3. Congress has the ability to spend into the economy as little or as much as it wants. This is known as FISCAL POLICY, and is much more powerful in situations like the one we find ourselves in now, where we face the REAL risk of debt deflation (Yes, that is really, really, really, a bad thing- just look at Japan and what has happened to their economic situation over the last 20+ years)
3. Right now, with high unemployment and production capacity sitting idle, the economy needs more capital in the system. This lack of capital is a result of the Financial Crisis of 2007-2009 where large amounts of capital were destroyed by debt default, etc. If we can put our unemployed back to work and our production capacity back in motion, the national debt, social security problems, the medicare problems, and many other financial issues would be solved or at least brought back to a reasonable level.
4. Although I believe that the current tax situation is unfair to over 99% of the population of the US, we do not need to increase total taxes right now (that doesn’t mean that we shouldn’t tweak who is paying what proportion of current revenues to make the system more fair). Any revenue taken out of the system will only contribute to more unemployment and additional idle production capacity. Instead, this is the time Congress should increase spending on our infrastructure to inject the necessary capital into the system to jump start the economy back into near full production capability.
5. The only real risk to the economy and the nation of spending this extremely necessary capital into the economy is inflation. That’s right, the ONLY RISK to the system is inflation. Not Default, Not Bond Vigilantes, Not China, Not the BRICK, only inflation. And, inflation (cost-push type inflation, the kind you get from the Gov’t printing money) will not occur until the economy is back to full capacity, and can be controlled handily by the Fed as the time approaches.
So, what do we do now? First, contact your congressman and tell them to stop wasting their time on worrying about the debt, and start thinking about how they can stimulate the economy through reasonable gov’t spending programs that will benefit society fairly, put our unemployed back to work, produce more goods and services so that taxes will naturally increase and solve all the damn financial problems we currently face!
I have NEVER been so disappointed in James Kwak’s thinking… well, just once before. He made a very simple issue very complex — as pointed out by Bill Ridge | November 28, 2012 at 5:30 pm, and Coberly.
I agree w/ you, but worry abt a threat you don’t mention: the Republican gambit of “guaranteeing benefits for people 55 and over,” but phasing in cuts for everyone else. When/if that happens, general support for maintaining full benefits “for current seniors” will erode very quickly. Why wd a 20-, 30-, or 40-something be willing to pay to support me (or even her parents) at benefit levels she will be denied? She will not, and should not. The class-warfare will have been diverted into generational warfare, and only the 1% wd benefit.
Iv’e never seen a bigger bunch of rookie’s post absolute nonsense about so many things they have very little knowledge about. And just as I gave up on the politicians, i shall do the same to this dumbed down brigade. Don’t know where you came from, but i’m certain you will slowly return there once you embarrass yourself’s enough to fly away.
I will pick one though, the inflation boy. There are different types of inflation, [[what the hell is this about?] @the kind you get from the Gov’t printing money) will not occur until the economy is back to full capacity, and can be controlled handily by the Fed as the time approaches.]
First there monetary inflation, which comes from bad monetary policy( the gvt printing to much money), and next there is price inflation or, bad regulating policy ( like not having enough food storage to feed your animals in a bad weather year causing them to come to mkt early, and then not having enough of them causing prices to rise, that’s called supply and demand). Finally there is hyperinflation, which occur’s when you buy to much stuff from overseas for too long a period of time, and do not correspondingly import the same value of goods. This puts dollars into hands of foreigners from which they can now compete dollar for dollar against the same citizens they got those dollars from. Think from the 1970’s to now with middle east oil. And think Japan, with TV’s, fridges, and cars, and now China with about everything else. This cause’s prices too rise during any type of a crisis because we are now competing with the same ones we used to control. It’s is also call hyperinflation when you have to in return, borrow those same dollars back at the tune of 42 cents on the dollar to finance your yearly gvt (we crossed that threshold in 2008 with another crisis.
So you see, there is a lot more to US inflation, than meets the eye. Here’s a toast to mud in your eye, for the remaining gibberish that occurred overnight on James’s post and blog, of which I am a long standing member.
Mike Perry has already said pretty much everything I was going to say myself. I will just add that when our children and grandchildren look back to assess our performance during this time, they will bitterly note that during a time when we should have been aggressively expanding public investment to employ all of our many unemployed people, launch bold projects for national renewal and progressive development, and light a rocket under our massively underutilized productive capacity to build a prosperous future for our progeny to live in, we instead chose to get bogged down in ridiculous and priggish bean-counting, budgetary hand-wringing and austerity-mongering. We are the generation that chose stagnation and blinkered bookkeeping over national progress – a weak, cowardly and unimaginative people – the Lamest Generation.
Repeating failed initiatives will not solve current account deficits. Again, the best time to grow an economy, is when energy prices are low and there is certainty about it. We are far, far from that, and signing contacts in the name of jobs at precisely the wrong time, is what helped lead to today’s fiscal fantasy funny farm fiasco. why still preach that growth is the only answer, and throwing money at the problem is always the solution. Other than then preying on the emotions of the public to seemingly come to their senses and resolve the issues of a weak, cowardly, and unimaginative people.
It was a nice try, but what of the increasing 16.5 trillion dollar national debt? And the 3 times that of personal debt, and another 2 and a quarter times that of unfunded liabilities, which are coming on the books each and every day from here to q infinity. That is what is so lame about today, who cares what future children and grandchildren think about their elders, probably the same things we think of our parents and leaders. The elders have always sent the youth off to war, created war in the name of money and national defense, because its their way or the highway. Can you see the failure of the past? And still recommend growing into it as the solution? No, it’s get out of debt now, or there is hell to pay, from here on out.
Kwak skates entirely around what many feel is effectively impact of Social Security on the national deficit. It isn’t that sometime in the 2030s there will be a call to increase revenues into Social Security because the Trust Fund is empty, but rather that between now and then net trillions of dollars need to come out of general revenues and redeem the Trust Fund. That’s exactly what Peterson and the like do not want to do because those revenues are generated in a much more progressive manner than the original excess contributions were when the Trust Funds were strongly expanding their holdings of Treasury debt. Guess what? If a decade ago SS was sending $90B to the Treasury and 5 years from now the Treasury is net redeeming $137B, the pressure on general revenues (and/or spending) has gone up by $227B. Of course that was the arrangement that was intended when Reagan/O’Neill et al reformed the finances of SS 30 years ago and Kwak is kind of techincally correct that this redemption doesn’t grow the deficit, but that’s idiotic thinking, because if the Trust isn’t redeemed the deficit shrinks accordingly. Many powerful interests do not want to redeem the Fund (or at least significantly stretch redemption out into the far away future) because they feel it costs them money very soon, not in 2036 or whenever.
I just animated the CBO’s long-term budget outlook. It clarifies the situation. Social Security flattens as a percentage of GDP. The only real problem is long-term medical spending. The budget hawks are using the short-term debt to scare people about the long-term spending, but these have different causes, and this is a dishonest tactic:
well, i agree with one of the commenters above that the comments and post here are largely ill informed… including, sadly, his.
i will say again that paying back the money borrowed from the Social Security Trust Fund does not increase the debt, it decreases it. If you don’t understand that, throw away your credit cards, you are not smart enough to be trusted with money.
i went back and re-read the comments. most of them were better than i thought at first. some good could come out of sitting down and thinking and talking carefully.
though some people, the ones who talk about “Ponzy”, probably can’t be reached.
If Kwak is sufficiently embarrassed by what he said here, i could send him a pdf and spreadsheet that ought to start him out in the right direction.
for those who would point out to me a distinction between “the debt” and “the deficit”, i would say, “i get it, i think.” but it is not a useful distinction if you look at the whole picture.
while paying back the Trust Fund in any given year would increase “the deficit’ if, and only if, you shut your eyes and pretend the Trust Fund is not a debt, and if you pay it back by borrowing money you have to enter on one of the two sets of books you are keeping, this is just a way to confuse the public and yourself about the actual role and effect of the SSTF.
meanwhile, i calculated once that paying back the SSTF would require about a 3% increase in the INCOME tax on income over 100k. The way of fixing SS by increasing the payroll tax one tenth of one percent at a time would eliminate most of this… at least as a visible income tax increase. Strangely enough, increasing the payroll tax a tiny amount keeps the principle now in the Trust Fund from ever being touched. It just becomes part of the normal SS reserve… money in the bank that is never actually spent. The interest on that money would be spent.. become part of the income to SS. not a lot of money in the whole budget scheme of things, but enough to hold the payroll tax down about a percent from what it would be.
Deficit and debt are largely fig leaves for the SS ‘crisis’ crowd. Their beef is simply that now that the Trust Fund has reached the stage where net redemption is taking place (or about to) it is bad news for their taxes if the 1980s program of building up the TF to pay it down in the 21st century is allowed to go forward. So they would like to kill the pay down part of the arrangement – or push it another quarter century into the future so that it is other rich dudes’ problem.
@Dan Kervick – it is FAR from being too late to do something about it!
We are actually in the key moment of time – aren’t we? One can even jump on the delusional bandwagon and say the *end time* is here – LOL.
Oops, sorry, I put the URL of my little video, and instead of just showing the link to click on, it is showing the video in the comments, with YouTube’s linking system incorrectly formatted. I do not know how to fix this…
Hope someone posted a comment better than mine on this subject.
This caught my eye:
“The first question is: Which one do you think is more likely in the real world? Do you really think that Congress will sit by and let Social Security benefits be cut by 25% overnight? Or do you think that Congress will amend the law, essentially inserting the GRC, to preserve full benefits for seniors?”
This was what I thought about the gwb proposal to add private accounts to SS. Would congress sit idly by when the market tanked. My though was no, if the drop was big enough.
We don’t know what any future Congress will do about any significant issue, including any potential deficit in Social Security funding. So let’s not speculate on what should be done if this or that happens and the gov’t. does something in response. Such thinking is akin to an assumption squared. It doesn’t get any bigger. It only becomes less reality based.
Several commenters have already made it clear that Kwak has taken a simple issue, albeit one sorrounded by lies and obfuscation, and made it complicated and having guess work solutions. Hell of a science that makes his brand of economics. Social Security has its own dedicated funding stream, FICA deductions. For the past 25 years (give or take a couple) those deductions have exceeded benefits paid resulting in a Trust Fund that now is a major creditor of the USofA. The deductions are now not covering benefits paid, which was expected. That’s why we have a Trust Fund filled by those excess FICA deductions. To repeat, there is no connection to the deficit and the connection to the debt is that the Fund is one of many creditors.
******Aside, To the fool who suggested that the Fund’s contents are just so many IOUs: How about we ask the Congress to simply cancel all the T-Bills held by individuals, corporations, retirement plans, etc.?*******
‘…when the trust funds run out money, Congress will have choices. It could: (a) increase taxes to pay scheduled benefits; (b) reduce other spending (like on aircraft carriers) to pay scheduled benefits; (c) borrow more money to pay scheduled benefits; or (d) cut benefits….’
Which is exactly what Congress is facing TODAY, and gets worse with every passing day. The trust fund is irrelevant.
‘******Aside, To the fool who suggested that the Fund’s contents are just so many IOUs: How about we ask the Congress to simply cancel all the T-Bills held by individuals, corporations, retirement plans, etc.?*******’
You mean those ‘special’ SS bonds that are, by law, not marketable?
Patrick R Sullivan
your comments are among those i called ill informed. i realize that will not give you the slightest pause.
Congress is not facing the trust fund running out of money today. if you think the trust fund is irrelevant remind me not to lend you any money.
it turns out SS could keep on going if the Trust Fund were stolen by a passing space ship, but that is not the same as irrelevant.
Congress ought to increase the payroll tax today, not the income tax, by one tenth of one percent per year to avoid a sudden need to raise it 2% in 2033 or so, but even that is not a big deal.
As for the “non marketable” special Bonds, why does that make any difference. Do you think having the price of the Bonds subject to the market would make them any safer?
Kwak seems to suggest that the hard choices will need to be made when the trust fund reaches exhaustion.
Those hard choices are to raise taxes, reduce spending , or increase the debt held by the public.
Guess what? These same 3 choices are occurring today, because cash outflow exceeds cash income. To make up for the cash shortfall, we make the same choices today that we will have to make at trust fund exhaustioin. The reality, is that from a cash flow perspective, the trust fund is exhausted today.
Don Levit
Levit
it’s too bad i am still around. even i get tired of reading my comments. but yours is… well, typical Don Levit.
The Trust Fund is not exhausted today. It is idiotic to claim the choices are the same as if it were. The Congress does not yet have to raise the payroll tax, though it would be wise for it to do so while tiny increments will still do the job.
But if you are talking about the actual “budget of the United States,” then of course Congress “has to” increase taxes, or reduce spending, or borrow more. That’s what a budget is. that’s what budgeters do. irrespective of Social Security.
One more time, though, paying back the money you borrowed is not a catastrophe you get to blame on the person you borrowed it from. You do not, morally at least, have the option of not paying… forcing the lender to eat cat food.
There are people who just don’t know about Social Security, people too brilliant to bother to think about it (Kwak), and people like you who seem to have an organic brain failure who keep coming back to the same meaningless pattern of words. Oh, and the people who lie about it, who are only too glad for your help muddying the waters.
My God! Everyone I know thought Patrick R Sullivan was dead! And his avatar Roland Patrick! Or perhaps reborn as Krasting or Levit. But no here by return engagement back from his ‘triumphs’ defending the Bush Administration on all economic and military fronts on what econoblogs existed back in 2004-2005 we have the One! (but never the Only!) PRS!!
The guys back at Angry Bear will be thrilled! If by ‘thrilled’ you mean ‘reloading the fact firing machine guns against the known RNC shill.
Who said the good times were gone?
PRS the “retirement funds” referenced above are NOT to be read as Social Security, but instead various organized pension funds and individual IRAs/401(k)s that as part of a typical balanced portfolio have asset allocations including MARKETABLE treasuries. And so NOT the Special Treasuries of the Trust Funds.
As usual your ignorance and lack of reading skills and reliance on third party talking points puts your attempts at snark in the same situation as they did back in the day: endless targets of fact-based and linked mockery. Bring it Roland! I need the yucks.
Wow, a lot of frustration and some hostility here!
I believe that most here miss the point of being able to print your own money. The point is that the US Gov’t is not like your or my household budget. No where on my personal balance sheet does it say that i can pay my debts by printing all the money I want. Think about it! All of the debt of the US Gov’t is the money that it has created for the private sectors use. Every dollar bill in your wallet, every dollar in your retirement fund, every dollar invested in the economy is a dollar that is accounted by the US Gov’t as its debt!
If we pay off the national debt, we would be left with nothing for ourselves! Our wealth is the debt of the US Gov’t! That is an accounting fact. Pay off the debt and you destroy personal wealth! I believe enough wealth has been destroyed over the last 4 or 5 years that uselessly destroying more by attempting to pay down the debt is a fools errand (look how well it has worked in the EU, paying down the debt in Greece, Spain, Ireland, etc. has caused their GDPs in each case to decline more than the amount of the debt cancelled).
I say again, the US Gov’t could have just printed money for its use and not accounted for it as debt, but it purposely does so because congress determined in 1913 (at the time we were on the gold standard and it made more sense then) that a fractional reserve system (the accounting system the US uses where money it creates is accounted for as a deficit to its account) made the most sense at the time. Perhaps it doesn’t make as much sense today to use a fractional reserve system, but hey, there it is!
As far as the Soc Sec account, it doesn’t matter a bit about how it is accounted for (again, the Soc Sec account is just a credit account under the US Gov’t, the same as the defense account or the employee payments account), all Soc Sec payments are considered the debt of the US Gov’t. Section 4 of the 14th Amendment to the Constitution requires the US Gov’t to pay ALL of its debts (Actual wording is, “The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.” Again, with the monopoly power to print US Dollars comes the responsibility to pay your debts. My whole point here is that it doesn’t matter whether there is an account or no account, whether there is money in an account or no money, the debt must be paid according to the constitution. Now, the Defense department does not have a separate account to pay its bills, but they get payed each and every year, and the labor dept. doesn’t have a separate account, but it also has all of its bills payed. The Soc. Sec. debt of the United States will be paid, whether it is by a separate account or considered part of the general account. By the way, the reason the Soc. Sec. account uses special debt issued by the US. Gov’t itself is that there is no less risky investment available in the world today (remember the 14th amendment and the right to print money).
Finally, someone stated that inflation caused by other than cost-push (the type created by continuing to print money when the economy is running at full capacity), usually referred to as demand-pull (the type caused by increased cost of critical resources, like oil in the 1970s) could cause hyper-inflation. Having reviewed the critically acclaimed “This Time is Different” by Reinhard & Rogoff, while there are numerous accounts in history of gov’ts overprinting their currency (primarily during a period of war or after a period of war), there are no accounts of hyper-inflation due to demand-push situations. We pay for all of our oil contracts in US Dollars, again I say, as long as the US Gov’t has the right to print US Dollars as it deems necessary, energy is a minimal problem to society today and for the foreseeable future (although this creates some real heartburn for China and Russia who would like oil contracts to be denominated in anything but the US Dollar).
Finally, the true problem facing us today is an economy running at a fraction of its full capacity. The goods and services that we fail to produce each year means a reduced standard of living for our selves and in reality for much of the world. WE must find the fortitude to jump start this economy and we will solve the problems that so many have enumerated here.
Thank you for your kind consideration-
Mike Perry, In 13 Bankers, Simon Johnson points out that the bond market will increase the cost of lending money to us when our debt gets too big, and at a certain level other nations will move away from the dollar as the world reserve currency. And it is a great benefit to be able to borrow in our own currency. His figures indicated we had plenty of fiscal space to do the stimulation you suggest. But some countries are already trying to move away from the dollar. One of the reasons we attacked Iraq was that it was pricing its oil in Euros, and we didn’t want that to catch on. Will our government have to fight other wars to keep the dollar the world’s reserve currency if it deflates the dollar by willy-nilly printing? Might it not be better to keep the debt under a reasonable percentage of GNP, say 50 to 75% when the economy is considered fully employed, so that the government doesn’t need to force countries to retain dollars as their reserve currency, and the payment on the debt isn’t a hindrance in budgeting for our national needs?
coberly said, “paying back the money borrowed from the Social Security Trust Fund does not increase the debt, it decreases it” This assumes the gov’t is not robbing Peter to pay Paul. And if you buy into that assumption, I’ll give you a great deal on some (subprime)mortgage backed securities. But they’re Triple A, really, I’m doing God’s work.
Speaking of Kwack, he said “I generally count myself as a liberal…”. He’s in good company, J.P. Morgan CEO Jamie Dimon is a self described liberal Democrat. Anyone who buys into the left/right divide and conquer paradigm, might as well get a shovel and start digging their own grave. Before long, some left/right fascist will come along and throw you in the hole, along with your last Social Security check.
Kwack’s alternate universe GRC is missing a few letters. It should be GREECE. But don’t worry about those bond vigilantes at PIMPCO, Neil Cashcarry will be looking out for your Social Security benefits.
Since the beginning of the Industrial Revolution, industrial economies have dominated the world’s economy. Nothing has changed, with the exception that Western economies are expected to “compete” with virtual slave labor in emerging markets. Gee whiz Gomer, I wonder how that’s going to work out for the West? Could it lead to a catastrophic economic contraction, which could be masked by a subprime bubble, until it burst causing TRILLION dollar Federal deficits into the forseeable future, resulting in the “managed decline” of the West. No way! You’d have to be a conspiracy nut to believe that. Right? No, left, no, right……………..
http:www.standupforyourrights.me
http://www.standupforyourrights.me
JS, the Fed has the ability to assure that the Treasury can set whatever rate it wants to set for its debt, and also to guarantee that there will always be a market for that debt. So long as the Fed signals a willingness to buy up government debt on the open market at some markup over its purchase price, there will always be people willing to buy the debt to profit on the arbitrage. There can only be a bond vigilante attack if the Fed permits and encourages one to occur. And even if the Fed is so inclined as to stage an attack on Treasury spending, Congress always has the option of stepping in directly and taking more assertive charge of the the central bank and US monetary operations.
Can you provide any evidence to back up your theory that Congress or the Fed are willing to protect the U.S. domestic economy? We have QE to infinity and U.S. GDP growth is near zero. Where do you think all that capital is going? It’s going to emerging markets where the public tit still has lots of milk for the parasites on Wall Street.
And Congress is aiding and abetting Communist China’s currency manipulation, intellectual property theft, and proliferation of nuclear/chemical weapons to Iran, a state sponsor of terrorism. China arms Iran who then arms Hezbollah and Hamas. And yet, Obama refers to China as a “partner”. This is a great strategy for the Globalized Military Industrial Complex because it guarantees perpetual war. Don’t take my word for it. Check out these links to a Senate hearing on China.
http://www.c-spanvideo.org/clip/4062076
http://www.c-spanvideo.org/clip/4062088
http://www.c-spanvideo.org/clip/4062073
http://www.c-spanvideo.org/clip/4062080
http://www.c-spanvideo.org/clip/4062085
http://www.standupforyourrights.me/?p=115
To Mike Perry (November 29, 2012 at 9:35 pm),
You are mistaken. Here is just one part of your mistake.
You write: “the Soc Sec account is just a credit account under the US Gov’t, the same as the defense account or the employee payments account), all Soc Sec payments are considered the debt of the US Gov’t. Section 4 of the 14th Amendment to the Constitution requires the US Gov’t to pay ALL of its debts”.
The Social Security Trust Fund is not a a public debt of the US, and need not be “repaid” except as a political decision.
CBO: What Are Trust Funds?
The bonds in the Social Security Trust Fund are promises, not assets. They are as good as other government bonds, which are also promises but not assets. The taxing power of the government is in doubt. The promises of the government are so large that it may not be able to pay back the debts which the bonds represent, including the bonds in the Social Security and other “funds”. The bonds are a promise, but they don’t help to pay for themselves.
Don’t take my word for it. Here is a statement by the Congressional Budget Office – October 2002 [edited from the Summary]:
== ==
The money that the government owes to itself has no impact on the economy because it represents debt owed from one Treasury account to another, mostly held in federal trust funds.
Trust fund holdings are not assets of the government and do not represent money owed to program recipients individually. Payments to Social Security recipients (like other social insurance programs) are based on rules set by law unrelated to trust fund holdings.
A federal trust fund is an accounting device that measures the difference between the income designated for a program and the expenditures made to its beneficiaries. The accumulated balance often represents the future “spending authority” for the program, but it is not a reserve of money for making payments.
== ==
So, it is just as hard to meet the promises of Social Security as any other promise made by our government. Those promises are backed only by current tax revenue. There are no savings. The amounts represented by the social security trust fund “surplus” were collected and spent long ago. The trust fund bonds are only a note from the government to itself, to find the money [real resources] somewhere in the future.
Also, the future promises of Social Security far exceed the notations of the trust fund bonds. Those promises total about $15 trillion (net present value), above the value of Social Security taxes at current levels.
JS- Yes, I totally agree with your statement. There is certainly enough money to stimulate the economy to full capacity (near full employment and near full production), and when that is done, the debt situation will reduce to more reasonable % of GDP, just as it did after WWII when it was considerably higher than it is today.
As to Simon’s statement in 13 bankers, I don’t agree. The amount of interest paid on our debt is determined by the FED through the open market operations as determined by the Fed’s open market committee. If Simon suggests that bond vigilantes will bid up the price of Treasuries, he doesn’t understand how the system works. The Fed has the ability to buy up treasuries or sell treasuries as needed to hit the Fed’s targets. Currently the target is just above ZERO, and it will stay there until the Fed determines it wants to change that. Also, see Dan Kervick above.
As to the need to go to war over someone pricing their oil in euros over dollars, I’ve never heard that presented as a reason we went to war by any of the powers that were responsible for it with Iraq (Office of the President, Congress or the Intelligence Agencies). If it is a fact that we invaded a country because we didn’t like the way they priced their oil, we have a lot bigger problem than Soc. Sec. or the national debt.
Andrew Garland- I have certainly been mistaken about many things, but I’m not mistaken about the responsibility for Soc. Sec. payments. Congress set up the Soc. Sec. program and determines benefits under the program. See my statement above about the 14th amendment, Sec 4 where it SPECIFICALLY mentions pensions. I think you’ll find that anyone knowledgeable about programs set up by Congress under its authority in the constitution would find Soc. Sec. benefits to be guaranteed by the US Gov’t. That is not to say that Congress can’t change the benefits or cancel the program if it sees fit, or raise the FICA taxes, but it must fund all benefits that it awards regardless of what is in the Soc. Sec. account. This is the same as Congress passing a Defense Bill, it doesn’t matter whether there is a separate account for the spending or not, the 14th amendment demands that the US pay it’s bills.
Finally, many here say that the US Gov’t can only get funding through taxation or borrowing and suggest that we should “Balance” our budget. If this was true our economy would have come to a complete stop hundreds of years ago. The US Gov’t must spend more than it takes in each and every year for the economy to remain healthy. If it does not, there will be insufficient capital to allow expansion of the economy as it grows (you know the 2% to 3% growth that you hear so much about, it requires 2% to 3% more money in the system each year). Want to start a recession or depression tomorrow? Reduce Gov’t spending below receipts from taxation, etc. You will quickly starve the economy into a contraction. That is exactly what has happened over the last 4 or 5 years (and it is what happened when Pres. Clinton and the Congress of that time created a surplus in the late 1990s, the recession of 2000-2003).
Our monetary supply has been choked off until it is incapable of sustaining full employment and full production. Economists refer to this as a reduction in aggregate demand. Nearly all of Keynes work after the depression revolved around this problem. Basically he states that the only way to stimulate aggregate demand is by deficit spending by the gov’t. Without it, you’ll be in the same situation as Japan. Debt over 200% of GDP and still unable to get full employment and full production. If they had made the commitment 20 years ago to stimulus spend the necessary amounts to reach full production their debt would be 25% of what it is today- and if we continue to worry more about Soc. Sec., the deficit, and austerity programs than how to get the economy back on track, I believe we will follow them down the exact same road.
Mike’s theory’s are purely inflationary ones. We don’t need debt to have a thriving economy. You need good laws and business practices over a long period of time, to establish this base. When inefficiency’s result from various reasons (usually living beyond your means) you then risk your company or gvt by taking out loans to further your agenda(s). It used to be that you had to put up collateral worth the same amount as the loan, usually the land and or building it sits on, or the car you were driving, ect. Today your good word and side work, can get you that same loan, but the risk of losing your side work is enough to throw you in default with nothing but time and talent to back you up. The gvt decided to act on it’s own behalf, and establish it’s good faith and credit, as a tool to use when borrowing money. This is a false belief, as soon as you begin to lend outside your own domain, or external interest debt, and it eventually leads to higher prices from foreign competition. The perfect example of an economy that thrives from no debt, is Saudi Arabia. All gvt spending is paid for with a commodity, and should that commodity be reduced in value, they must reduce the services they offer their citizens, that is their law.
Our laws are much different, we issue debt and don’t back it with anything physical, but with the good faith and credit of the US (which is nothing more than it’s ability to collect taxes). Then we pass laws to ensure that that debt (the bonds) are the first to be paid from gvt revenue, before cops, fireman, teachers, ect. No one mentions those 30 E-bonds of 14%+ that helped cause the crisis, and the need to create more borrowed money. Or that the best time to raise and collect taxes, is when the economy is strong, as it was during the housing boom. But the looming effects of outsourcing jobs and turning our economy into a financial emerging mkt economy, has stressed our domestic needs. And tapped our resources so any domestic growth is not only costly, but inefficient, as prior failed policy’s can no longer guarantee growth, but can only guarantee the promise of the good faith and credit of the US as a lever to borrow more money to grow the economy, so we can now broaden the tax base, which is all they have left on their plate. No Mike, we have enough inflation already, $1700 gold, >$80/bbl of oil, and now higher food prices. From poor legislation leaving the consumer holding the bag, to the farmer getting paid from the never ending insurance monetary flow, it all raises the cost of living further separating the classes which has only one result, class warfare.
But that’s where you came from Mike, so you like it. I just wish you could remove that ring around your collar issue BEFORE you pray on the emotions of weak.
@GG – “….Could it lead to a catastrophic economic contraction, which could be masked by a subprime bubble, until it burst causing TRILLION dollar Federal deficits into the forseeable future, resulting in the “managed decline” of the West. No way! You’d have to be a conspiracy nut to believe that. Right? No, left, no, right….”
That’s the craziest part of all of this – in the past, you used war to steal the booty for yourself. Now, this heist is about stealing ALL of the fruits of labor (via usury) and then DESTROYING the fruit in front of the *losers*! WTF, right? Pure Nihilism.
It was written earlier that the SS benefits are guaranteed by the government. That is true, for the current year only. Any future benefits are not guaranteed; they aren’t even considered as liabilities.
The FASAB is the accounting advisor for the federal government. In a paper entitled “Accounting for Social Insurance, Revised, Oct. 2006:”
Page 8 “The Alternative View (the present view) is that social insurance programs comprise two separate nonexchange transactions – the compulsory payment of taxes during an individual’s working life and the Government’s payment of benefits after the individual has satisfied all eligibility criteria. The Alternative View is that benefits beyond the due and payable amount are not present obligations of the Government and should not be recorded as expenses or liabilities in the current period.”
Page 85 “Social insurance is not an employee benefit. The accounting methods for employee retirement benefits reflect the fact that the employees voluntarily exchange lower wages during their working years in order to receive certain future benefits. Such an exchange does not occur in connection with social insurance benefits.”
Page 87 “Social insurance benefits are a form of nonexchange transaction, similar to other eligibility-based benefit programs. The Government finances these programs through nonexchange, compulsory taxes, including earmarked payroll and beneficiary income taxes. Although financed by earmarked taxes, the benefits paid are nonexchange; the Government gives value to beneficiaries without receiving value in return. The fact that benefits paid are not based on the amount of taxes paid confirms the nonexchange nature of the social insurance transactions.”
http://www.fasab.gov/pdffiles/socialinsurance_pv.pdf.
Don Levit
Thanks for a very interesting post. Social security is indeed a topic which highlights the ideology of each one of us. I believe that the social security should be a state driven program since it is necessary to maintain the money flowing into it. Why? Because our population shares the same risks and those who currently have money should be participating in order to support those who don´t have. It sounds fair and it has nothing to do with socialism nor altruism. It is just what it is. Social security. Nothing more and nothing less. I think that in the global economic crisis, nobody can be so sure that he would not lost his job or become sick.
Don Levit cites the Financial Accounting Standards Board (FASB) as the federal government’s accounting advisor. “Creative accounting” led to the collapse of Enron. As a result, Congress and FASB put new accounting rules in place to prevent another Enron. The new “mark to market” rules required large companies to mark assets on their balance sheets to maket value. But after the 2008 crisis, FASB was pressured by Congress to relax mark to market rules.
http://www.marketwatch.com/story/fasb-approves-more-mark-market-flexibility
Why would Congress want a return to Enron style accounting? Well, Congress had become the proud new owner of Fannie and Freddie’s 6.3 TRILLION of toxic assets/debt and the Fed began buying TRILLIONS of toxic MBS. If the Fed and Congress had to mark thier toxic “assets” to market value, gov’t debt would already exceed 21 TRILLION. Relaxing mark to market allows banks to post fraudulent capital reserves, and allows a Congressional cover up of taxpayer liabilities resulting from Wall Street fraud. The following links are Neil Barofsky saying fraud by the nine largest banks caused the crisis and William Black laying out the evidence of fraud.
http://www.c-spanvideo.org/clip/3343248
http://onpoint.wbur.org/2011/10/18/prosecuting-wall-street/player
Kwak wants to discuss the solvency of Social Security without mentioning the effect of toxic assets on the gov’t balance sheet. He’s aiding and abetting Obama’s criminal cover up.
http://www.zerohedge.com/article/obamas-budget-has-one-small-missing-piece-63-trillion-dollars
http://www.reuters.com/article/2010/01/05/us-usa-housing-bailout-idUSTRE6044YU20100105
Simon Johnson testified before the Senate Budget Committee and said another financial crisis represents a short term budget liability equal to 40% of GDP (5.6 TRILLION). Simon said CBO rules require this liability be scored in the budget. Ranking Republican Judd Gregg replied, “We don’t score a lot of things around here”. Here are the links:
http://www.c-spanvideo.org/clip/3343395
http://www.c-spanvideo.org//clip3343212
The CBO estimates it will cost taxpayers 8.6 TRILLION to prop up failing banks. http://www.c-spanvideo.org/clip/3343308
This is in addition to the short term budget liability represented by another crisis. But none of this is part of Kwak’s discussion of Social Security’s solvency. Hmmm??
I’m so uncomfortable with your argument. Here’s a different view:
SS is a huge fund entirely paid for by workers and benefiting retired or disabled workers and their families. It’s not really an “entitlement” at the national scale, since workers en masse are just getting their own money back.
Not only do our workers pay for this program — with the burden heaviest on the lowest paid — but they even subsidize the Treasury by buying its bonds. (I take issue with your footnote that says this means the Treasury can borrow “less from the public.” We workers are the public, and it is borrowing from us.)
Given that the aging population will eventually deplete the fund, what is to be done? Since SS pensions are already inadequate, I reject reducing them or raising the eligibility age. Therefore:
1. Raise more money by raising the wage ceiling, and/or make the payroll tax at least slightly progressive.
2. Let SS improve its investment yield by allowing options other than T-bonds. They say Canada does this.
Neither of these strategies increases the deficit.
“Creative accounting” led to the collapse of Enron. As a result, Congress and FASB put new accounting rules in place to prevent another Enron. The new “mark to market” rules required large companies to mark assets on their balance sheet to current market values. But after the 2008 financial crisis, Congress pressured FASB to relax mark to market rules.
http://www.marketwatch.com/story/fasb-approves-more-mark-market-flexibility
Why would Congress want a return to Enron style accounting? Well, Congress had become the proud new owner of Fannie and Freddie’s 6.3 TRILLION of toxic assets/debt and the Fed had begun buying TRILLIONS of toxic MBS. If the Fed and Congress had to mark their toxic “assets” to current market value, gov’t debt would already exceed 21 TRILLION. Relaxing mark to market allows banks to post fraudulent levels of capital reserves, and allows a Congressional cover up of taxpayer liabilities resulting from Wall Street fraud. The following links are Neil Barofsky saying fraud by the nine largest banks caused the crisis and William Black laying out the evidence of fraud.
http://www.c-spanvideo.org/clip/3343248
http://onpoint.wbur.org/2011/10/18/prosecuting-wall-street/player
Kwak wants to discuss the solvency of Social Security without mentioning the effect of toxic assets on the gov’t balance sheet. He’s aiding and abetting Obama’s cover up of Wall Street fraud.
http://www.zerohedge.com/article/obamas-budget-has-one-small-missing-piece-63-trillion-dollars
http://www.reuters.com/article/2010/01/05/us-usa-housing-bailout-idUSTRE6044YU20100105
Simon Johnson testified before the Senate Budget Committee and said another financial crisis represents a short term budget liability equal to 40% of GDP (5.6 TRILLION). Simon said CBO rules require this liability be scored in the budget. Ranking Republican Judd Gregg replied, “we don’t score a lot of things around here”. Here are the links.
http://www.c-spanvideo.org/clip/3343395
http://www.c-spanvideo.org/clip/3343212
The CBO estimates it will cost taxpayers 8.6 TRILLION to prop up failing banks. http://www.c-spanvideo.org/clip/3343308
This is in addition to the short term budget liability represented by another financial crisis. But none of this is part of Kwak’s discussion of Social Security’s solvency. Hmmm??
Sorry about the duplicate posts. The original was “awaiting moderation”. Other posts awaiting moderation have not been approved, this one seems to be the exception.
@GG – “….The following links are Neil Barofsky saying fraud by the nine largest banks caused the crisis and William Black laying out the evidence of fraud….”
For crying out loud already, let’s go round them up and throw them in the hookow…how about on December 21, 2012 and celebrate their capture as the prophecy of “end times” fulfilled?
Scheesh.
I warned long ago about try to juggle the numbers, you and everyone else, gets lost in them. Going dizzy trying to cook or balance the game, is not the most efficient thing you can do with your life, unless games are your life!
‘Andrew Garland- I have certainly been mistaken about many things, but I’m not mistaken about the responsibility for Soc. Sec. payments. Congress set up the Soc. Sec. program and determines benefits under the program.’
Which is exactly what Mr. Garland was telling you. It is merely a political decision whether, or what, to pay to SS beneficiaries.
‘See my statement above about the 14th amendment, Sec 4 where it SPECIFICALLY mentions pensions. ‘
The 14th Amendment refers to Civil War debts and pensions. It has nothing to do with SS.
‘The guys back at Angry Bear will be thrilled! If by ‘thrilled’ you mean ‘reloading the fact firing machine guns against the known RNC shill.’
I’d certainly be disappointed if any of them were, even at this late date, capable of understanding elementary economics. You certainly don’t display any evidence of it.
@Paddy – “…Which is exactly what Mr. Garland was telling you. It is merely a political decision whether, or what, to pay to SS beneficiaries….”
You delusional cretin! Fine – then it’s a fnk POLITICAL DECISION to GET BACK IN ONE FELL SWOOP A CHECK for every single red cent TAKEN OUT OF THE PAYCHECKS from the Boomers since their summer jobs at age 15 with the COMPOUNDED interest. We’ll take the lump sum and THEN you go shut the door on the SS.
No? Didn’t think so.
Andrew Garland
That 15 Trillion in present value you say is the “future promises” to Social Security… is actually “20.5 Trillion over the infinite horizon.”
It turns out this means that an increase in the payroll tax average one half of one tenth of one percent per year over the next seventy years would pay for ALL of those promised benefits.
That’s about forty cents per week per year. And by the end of the seventy years, the rate of increase is closer to ten cents per week per year or less, maybe a lot less.
[ Since infinite horizon is a hard concept to grasp, begin with the other “present value” of SS “promises” 8.6 Trillion over 75 years. A little simple arithmetic (don’t worry it works out the same as “present value”) ought to enable you to break this down to the amount required per week for each of the 200 million taxpayers over the 75 years, and just a little more insight would enable you to recognize that that’s an “average” cost and can be approached by paying 1/37 of it the first year and adding another 1/37 each year over the 75 years. and yes the forty cents per week is “present value.”]
The trouble with the Social Security “debate” is so many people who don’t know anything think they know everything. You read something that is essentially a lie… basically a “fact” taken out of context and twisted to seem to imply a scary falsehood… and you “reason” (free associate) around your pathetic set of facts and personal emotions to come up with another round of nonsense. And the Big Liars smile and smile. All they need is to keep the public confused, then taking away their Social Security will be like taking candy from a baby.
Patrick R Sullivan
re “elementary economics.”
yes, that’s the trouble. if you had gotten past elementary economics you would have learned that the world is more complicated than that.
in any case Social Security has no more to do with “economics” than putting your money in a bank and taking it out later.
except that the government is in a position to guarantee your money against inflation, and pay a modest interest by using the principle of pay as you go financing with wage indexing.
whether or not you can trust the government with this is not a question of economics, its a question of politics.
Ladies and gentlemen, boys and girls, please stop all this inane babbling! Herman got it exactly right at the beginning of this string. REMOVE THE CAP!! Do any math you choose. Use any assumptions about anything you chose. It always comes out the same. Remove the cap and Social Security is off the table for longer than anyone you know will be alive.
And there is an extremely important reason for doing this. Fixing the “Social Security Problem” is just that simple we and need to get it off the table so we can focus on the real problem, e.g., healthcare costs. Currently we spend about double the amount that any other developed country spends, and we get worse results. One example, infant mortality in the U.S. ranks right up there with third world countries.
Secondly, healthcare costs are growing roughly twice as fast as inflation and are on track to bankrupt the country in a little over five years (depending on your assumptions, sooner or later).
And healthcare costs are a damn hard problem!!
‘The trouble with the Social Security “debate” is so many people who don’t know anything think they know everything. ‘
The SS actuaries, for instance?
‘except that the government is in a position to guarantee your money against inflation, and pay a modest interest by using the principle of pay as you go financing with wage indexing.’
‘I can call up spirits from the vasty deep.’
‘Yes, but do they come when you call them?’
Mr. Sullavan- Please reread Section 4 of the 14th Amendment. I believe the 14th Amendment, the rest of the amendments and the Constitution itself refers to all government activities.
The statement is simply that any debt encumbered by Congress shall not be questioned, it will simply be paid. It does not simply say debts from the civil war will be paid, or do you think that the first ten amendments simply applied to people in the 19th Century? Or, that slaves were only Emancipated for a specific time period? Foolish logic in both cases.
Mr. Coberly ( November 30, 2012 at 5:06 pm ),
Let’s trade links. Here is mine.
An 81% Payroll Tax Increase would pay for government’s promises on Social Security and Medicare.
05/15/09 – Forbes by Bruce Bartlett [edited summary]
Bartlett does the Social Security tax math for us.
=== ===
The payroll tax rate would have to rise 1.9% [1.9 percentage points] immediately and permanently to pay all the benefits that have been promised over the next 75 years for Social Security and disability insurance.
But many people alive today who will be drawing Social Security benefits more than 75 years from now. A way of calculating the program’s long-term cost is to do so in perpetuity, adjusted for the rate of interest, called discounting to present value.
Social Security’s unfunded liability in perpetuity is $17.5 trillion (the trust fund is meaningless [See the article -AMG]). Social Security would need that much money today [real resources] in a real fund outside the government, earning a true return [3%] to pay for all the benefits that have been promised over and above future Social Security taxes. We don’t have that fund. Alternatively, the payroll tax rate would have to rise by 4% [4 percentage points, from 15.3% to 19.3% of payroll].
=== ===
4% of payroll is much greater than the “forty cents per week per year” (per year?) that you claim. How do you get your amount?
To Mike Perry,
You are determinedly, insistently, and forthrightly mistaken.
Social Security’s Sham Guarantee
05/29/05 – Cato by Michael D. Tanner [edited extract]
=== ===
Social Security benefits are not guaranteed legally because workers have no contractual or property rights to any benefits whatsoever. In two landmark cases, Flemming v. Nestor and Helvering v. Davis, the U.S. Supreme Court ruled that Social Security taxes are not contributions or savings, but simply taxes, and that Social Security benefits are simply a government spending program, no different than, say, farm price supports. Congress and the president may change, reduce, or even eliminate benefits at any time.
As a result, retirees must depend on the good will of 535 politicians to determine how much they will receive in retirement. And what could be less guaranteed than a politician’s promise? In fact, Congress has voted to reduce Social Security benefits in the past. For example, in 1983, Congress raised the retirement age.
=== ===
And, see my comment above, the trust fund holds only promises which can be changed at any time by Congress. There are no assets in government trust funds. They contain only special, unmarketable bonds (political promises) which may or not be redeemed by actions of Congress. They are not covered by the constitutional guarantee to repay the debts of the United States.
‘ Please reread Section 4 of the 14th Amendment’
Be my guest;
‘…debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any state shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.’
As I said, it’s about Civil War debts.
The title of Kwak’s post is “Social Security and the National Debt”. I’ve not read one comment, including Kwak’s, that specifically mentions the TRILLION dollar plus annual deficits blowing up the national debt. A few comments mentioned the deficit but then wandered off to gorge on pie in the sky. There must be magic mushrooms in that pie. Either that or this site is infested with trolls.
Kwak’s attempt to have a credible discussion about Social Security, without adressing TRILLION dollar deficits to infinity, is absurd.
Goldman Sachs says 15% unemployment is the new normal. That means there will no economic growth to increase gov’t revenue. The austerity policies in Europe will come to America, the economy will contract, and fewer people will be paying into Social Security. All the talk about promises, removing caps, redeeming bonds, etc. will be thrown into the trash bin of history. This is not cynicism, this is reality.
The fatal flaw in the trolls argument is, it assumes US financial and political leaders want the U.S. economy to grow. They don’t. George Soros cites data from the Bank of International Settlements (BIS), which says EU and US banks are the largest supplier of credit to emerging markets. So banks bailed out by Western taxpayers are financing China’s 8% growth while EU and US economies are stagnant or contracting. Wall Street and the Fed are subsidizing China’s brutal authoritarian regime with U.S. tax dollars because they favor China’s command and control economic model. This is treason.
http://video.cnbc.com/gallery/?video=3000046947
http://www.standupforyourrights.me/?p=115
This is a another prime example of why the constitution is out of date and in need of repair, I can give you more. The gist of the 14th amendment is the gvt can spend as they please and the citizens can not question where the money is going or what it is to be used for. It imply’s that it will be used to suppress rebellion from external or internal sources and that any money paid to anyone (including the military) will not be questioned in stopping the insurrection. This just gives the politicians more power, and then they share it with the upper class in the form of defense contracts. The 19th century was planned to be a warring one, and proved to be so, aiding the individuals who financed it and then insisted the debt be paid back in gold. This only lead to more wars and debt, which then turned into bad feelings simply waiting to go back to war. As the century turned, you opened the cockpit for anyone to enter, so you can begin it fresh again.
With a new century of peace pipe smokers, who did want to go war, but naturally you insisted again that they did, leading to more debt, and this time a financial crisis, which he resolved with more debt after having claimed for so long that deficits don’t matter.
Well folks they do, and he simply wants continue this abhorrent, behavioural monstrosity of pride in the middle east, he refuses to yield to even Nato’s wishes.
And Glenn, China is a bit more than an emerging mkt. They are an established growing economy competing for worldly goods. Brazil, India, Africa, are emerging mkts, where the financiers hope to add on to their trades.
Which is why if you want good paying jobs here in the US, you must work overseas, for a US company who is trying to establish themselves over there. We only have service jobs here left, unless you can make a go of yourself, in today’s not so healthy climate.
“…All they need is to keep the public confused, then taking away their Social Security will be like taking candy from a baby….”
Not quite…
@GG – “…Kwak’s attempt to have a credible discussion about Social Security, without adressing TRILLION dollar deficits to infinity, is absurd…”
It’s also not *science* :-)
Profit has a LIMIT that is tied to a man-land ratio.
Also, “…So banks bailed out by Western taxpayers are financing China’s 8% growth while EU and US economies are stagnant or contracting. Wall Street and the Fed are subsidizing China’s brutal authoritarian regime with U.S. tax dollars because they favor China’s command and control economic model. This is treason….”
Which takes us back to the bankster fraud (what else would *treason* be?) that has been documented up the wahzoo.
So much for politics and rule of law.
Granted most people who have the *numbers* dominated brain are incapable of imagining where this global monkey-ing around is taking the planet – the big picture vision, if you will – but sometimes you can plant just one visual to get there – so here you go – like shooting fish in a barrel – 2 billion times a day:
http://www.huffingtonpost.com/2012/11/27/lei-zhengfu-sex-tape_n_2197516.html?utm_hp_ref=world
Mirthless, stripped of idividuality, hungry, exhausted slave labor billions aggressively expanding through insect survival skills – charming “soft power”…and the pollution! Yikes!
The Siberian permafrost is melting. Go figure out how to adapt to the situation in your backyard – command and control economies *survive* better, right?
Only 1% of USA population are bullet catchers. That’s 1% too much. Let the billions in the emerging economies deal with crowd control in the Middle East….
Superstorm Sandy was a tipping point because it added to the non-recovery of Katrina and then the fraudclosures that ensued….of course the *politicians* are going to not only flow any money back to Main Street, they’re going to take that 2K through BRUTAL FORCE. At least I will be proven correct – The Patriot Act was all about having the power to TAKE IT ALL.
Just War.
‘The gist of the 14th amendment is the gvt can spend as they please and the citizens can not question where the money is going or what it is to be used for. It imply’s that it will be used to suppress rebellion from external or internal sources and that any money paid to anyone (including the military) will not be questioned in stopping the insurrection. ‘
Which is loony…and entirely in character for this blog’s comment section.
The 14th Amendment is one of the three post Civil War Amendments dealing with the problems left over from that war. ONE of which was that it was suspected, by the loyalist union states, that if the rebellious states were allowed back into the Union they might have the votes to; 1. Disown the debts the North incurred to fight, and defeat, the South. 2. Stick the taxpayers of the North with the South’s war debts.
That is what the 4th section of the 14th Amendment is addressing. This is a matter of historical record.
filbt says, With a new century of peace pipe smokers, who did want war…leading to more debt, and this time a financial crisis…”
filbt, you think war caused the financial crisis? War is a contributing factor, but haven’t you heard of the subprime bubble?
Phil Angelides, former Chairman of the Financial Crisis Inquiry Commission (FCIC), said this about the crisis: “Nearly 26 million Americans are out of work, cannot find full time work, or have quit looking for work. ELEVEN TRILLION dollars of household wealth and retirement savings has been wiped away, vanished like some day trade gone bad”. The FCIC hearings and final report did not mention war as a cause of the financial crisis. http://fcic.law.stanford.edu/hearings
And the CBO estimates it will cost taxpayers 8.6 TRILLION to prop up failing banks. http://www.c-spanvideo.org/clip/3343308
And Simon Johnson says another financial crisis rerpresents a short term budget liability equal to 40% of GDP (5.6 TRILLION).
http://www.c-spanvideo.org/clip/3343395
http://www.c-spanvideo.org/clip/3343212
Patrick Sullivan keeps babbling about the Constitution as if the tyrannical criminals in DC and Wall Street give a damn about the rule of law. Listen to what Democrat Brad Sherman says about Wall Street and the executive branch (Obama), regarding the Constitution.
http://www.c-spanvideo.org/clip/3343222
Oohh so I miss a word here and there, sorry. And so now he wants to double down on expensive growth as his last line of defense to save the economy. It simply can not work, there is too much UNcertainty about the future to play that card.
Obama appointed a Wall Street criminal to run the US Treasury. Now Geithner wants Congress to eliminate the debt ceiling, thereby giving the executive (Obama), unlimited and unchecked power to spend.
This would mean unlimited bailouts for Wall Street, unlimited funds for drones and extra-judicial killings….you know, the typical priorities of a “Rockefeller Republican in black face” whose policies are “crypto fascist”. So says black activist and scholar Cornel West
http://www.democracynow.org/2012/11/9/tavis_smiley_cornel_west_on_the
I’m sure Kwak believes Obama would use his dictatorial spending powers wisely. But what if an evil warmongering Republican were President? Oh the horror, the horror. Weeping and gnashing of teeth would consume the “liberals”, because mass murder is only acceptable when a Democrat is the perpetrator.
What uncertainty? You got 2 billion slaves to protect your Middle East.
Pat, you don’t want to fight this war. Civil war interpretation goes beyond your ability to understand or comprehend it’s meaning. Any federal debt incurred during the civil war was brought about by the warring party’s, for the sake of those same party’s, and the emancipation of the slaves of course. You might want to study it further, for you yourself, could become a slave to money and want to war against it!
Glenn, I said many years ago, like 2007, that the sub prime bubble was going to burst, it was only a matter of time, thank’s fer lettin me know of your loss though, sucker.
Apparently I was wrong. The simple mathematics that solve the Social Security “problem” are beyond the capabilities of the contributors here. (Except for Herman, of course.) However, Andrew at least tried. His problem is that he got Social Security and Healthcare Costs all mixed up and that is a fatal flaw in reasoning (and budgeting). They are completely different animals with completely different solutions.
Anyway, it is becoming increasingly clear that Congress has no intention of solving either problem simply because members of Congress do not HAVE either problem. This is from the Business Insider. Check the AVERAGES!
“It’s no secret that members of Congress are much more wealthy than the rest of the country. The average net worth of a Senator is more than $14 million, and the average net worth of a member of the House of Representatives is nearly $6 million.
Thanks to analysis from The Hill, we’ve put together the richest of the rich, looking at the top 15 members of Congress and how they’re worth.
We also look at how they made the money and — most of all — where they keep it.
We count them down from No. 15 to No. 1. All facts and figures come from The Hill’s analysis.
Check out the richest of the rich >
Read more: http://www.businessinsider.com/richest-members-of-congress-the-hill-2012-8?op=1#ixzz24QK6Mm7k”
We have got to find a way to stop re-electing that ship of fools (rich fools, nevertheless) again and again. Cycle after cycle, 95% of those who stand for re-election get re-elected.
But on the other hand, if I had $14 Million I am not sure I would care what anyone who reads The Baseline Scenario thinks.
Don’t be so certain of that. My father said he knew of a guy that would give me a million dollar a day. But I had to be able to spend a million dollars a day, to receive the next million. I cheated and saved that million a day, and now I have about 18 trillion dollars which the gvt wants to go to war about. So here is some more war fer ya.
ttp://www.youtube.com/watch?v=JXdFTh1yX2c
Hey!
James Taylor says, “The simple mathematics that solve the Social Security “problem” are beyond the capabilities of the contributors here”.
James, if by simple mathematics you’re referring to math that exists only in Kwak’s alternate universe, you’re correct. Math untethered from reality has a magical ability to solve all the world’s “problems”. I put problems in quotes because, as we all know, there are no problems that your simple mathematics cannot solve.
If we would just apply Taylor’s simple mathematics to the “problems” of poverty, sickness and death, everyone could enjoy infinite wealth, health and life. You know, like the simple math underlying the Fed’s QE to infinity and DC’s TRILLION dollar deficits to infinity.
no one is worth 18 trillion – right there is why the whole game is delusional
no one is worth 17 trillion – delusional
Wrong again, a company called CeDe claims to have over a quadrillion dollars in holdings, of which I was a pardner, and still hold some old stock. I don’t carry all the money on my back. As a matter of caution, I tend to carry not more than 50 bucks in cash with me at any one time. I find I spend less that way, and avoid the hungry armed varments.
Dear Glenn, you pretty well make my point about confusing mathematics with emotion. Here is the simple math that seems to escape you. Now, everyone pays 6.2% of their incomes into the Social Security account, up to the point where you earn $106,800. So here is how you do the simple math. Go the Census accounts and make a list of the number of households that have incomes more than $106,800. You will most likely have a series of income levels so that a median income (or anything you wish) is fine, then multiply it by 6.2% for all the households in the group. Then do the same thing for the next highest group, etc. etc. Then add it all up. Viola!!! Social Security is off the table PERIOD!!
This has absolutely NOTHING to do with poverty, sickness or death. That comment is absolute silliness.
Here is my favorite example to make the point. Jimmy Cayne, the head of Bear Sterns, whose incompetence triggered the 2008 Wall Street debacle was paid $61.3 Million that year. He paid exactly $6,621.60 into Social Security, exactly the same amount you paid if you earned $106,800.
But if there were no cap, he would have paid $3.8 MILLION!!
If that example does not make issue clear for you, I doubt there is any hope.
http://www.zerohedge.com/article/enter-cede-co-ii-fed-now-backstopping-25-trillion-dtcc-cleared-credit-default-swaps
So WTF else do you want, filth? You got it all.
I guess without letting everyone know that you are god, what fun is there in the whole game?
And Filth the God is Deliverance Boyz genetics – “….squeeeel like a pig, Annie…”. We all knew that, though, by now. Must have been the army of ass-kissers that made it clear – they actually like being on the receiving end of your brand of fun.
Since I was still on the fence about my next move, if nothing else, I do need to thank you for all the personal attention and freely given (your version of charity?) public and misogynistic psychobabble attempts to climb inside where you were informed by your goon Patriot Act spy brigade of psychos and whores that my head was at because it sure helped me make up my mind!
Simply waiting for the queen is what I want, moral standards you see. Tricking the queen into doing what I know is right,-vs-what she will perceive to be correct in her own mind, can be two different things. If she gets it right, we all win. If she does not, we can mostly, all lose. I didn’t make the rules or timers, I just play by them. And since I can’t afford to lose, and no one else has provided for her complete needs to date, all we can do is wait. It is at this point in time where patience is a virtue.
James Taylor, I understand your emotional attachment to the simple math that could resolve the Social Security issue. However, your calculations are based on false assumptions, The same false assumptions that have imploded Greece’s social safety net, I believe you know this, but like Kwak, your objective is to lure unsuspecting citizens into a dark alley where they will be mugged by bond vigilantes.
Then, the same fraudulent narrative used to explain Greece’s meltdown will pollute the US media wasteland. It will go something like this: Fat, lazy, stupid Americans, who are unable to do SIMPLE MATH, have lived beyond thier means and driven the Federal gov’t into insolvency. Along with Social Security.
But there will no mention of the Fed’s QE to infinity, the 8.6 TRILLION to prop up failing banks, the 11 TRILLION of household wealth that vanished due the subprime bubble, or the underlying Wall Street fraud that caused the financial crisis and resulting TRILLION dollar Federal deficits, which are driving the explosion of debt. All of these policies/consequences precede Social Security’s 2030 day of reckoning, but somehow, they don’t factor into your simple math.
Dear James Taylor, in my previous comment, you may have noticed I used commas where there should’ve been periods. Just think of it as “simple grammer”, i.e., grammer that ignores all previously established and accepted grammatical rules.
Dear Glenn
Just what, exactly, would those “false assumptions” be?
Perhaps we should drop the “social security” misnomer and refer to the Federal Insurance Contribution Act. (You may have noticed the FICA deduction on your pay stub.) Note the term “Insurance” which is something you contribute to and — on the basis of those contributions — ultimately collect a retirement payment. (Actually, the payments one receives are not investment returns, but calculations by Congress.)
There was good reason for trying to keep the FICA Trust Funds insulated from the pols. Unfortunately, it was not successful, so the Trust Funds are sitting on a bunch of special Treasury IOUs. When the current outflow exceeds the current inflow, the Trust Funds will cash in those Treasury IOUs.Lots of Luck!
James, I’ve given specific examples of false assumptions in previous posts. They’re all wrapped up in the false assumption that current structural deficit and debt issues, have no impact on what would otherwise be a simple mathematical fix for Social Security.
Structural problem #1 is free trade. Free trade is designed to transition the U.S. industrial economy to a low wage service economy. By definition, this means a catastrophic contraction of the U.S. economy. This contraction was temporarily masked by the subprime bubble. A coincidence? I think not. Pat Mulloy is a member of the U.S./China Economic and Security Review Commission. Listen to his and Rep. Sherman’s comments on trade policy.
http://www.c-spanvideo.org/appearance/600148025
http://www.c-spanvideo.org/appearance/571769246
Structural problem #2 is the institutionalization of Too Big To Fail (TBTF) banks and TARP. The following links are to a Congressional hearing on Dodd/Frank’s Resolution Authority.
http://www.c-spanvideo.org/clip/3343218
http://www.c-spanvideo.org/clip/3343227
The CBO estimates it will cost taxpayers 8.6 TRILLION to prop up TBTF banks. http://www.c-spanvideo.org/clip/3343308
Dodd/Frank was supposed to end bailouts of TBTF banks. But in the following links, Simon Johnson said another bailout represents a short term budget liability equal to 40% of GDP. This is in addition to the previous 8.6 TRILLION bailout.
http://www.c-spanvideo.org/clip/3343395
http://www.c-spanvideo.org/clip/3343212
Structural problem #3 is systemic fraud. Neil Barofsky says fraud by the nine largest banks caused the financial crisis. William Black lays out specific examples of fraud, which have not been prosecuted.
http://www.c-spanvideo.org/clip/3343248
http://onpoint.wbur.org/2011/10/18/prosecuting-wall-street/player
Look at the cards on the table, Cowboy.
You can’t push me out because I’ve got the nuts – the ROYAL FLUSH.
You lose.
Fairly and squarely. Don’t even think about reaching for the gun, ambushing me on my way home, or going to get advice from a psychic, or prophet – or whatever else your insane little brain believes…
It’s nothing personal – unlike what YOU are doing….
You lose.
Another structural issue undermining the solvency of Social Security is the Patient Protection and Affordable Care Act, a.k.a., Obamacare.
Like Dodd/Frank, Obamacare is another Orwellian monstrosity. The “private” healthcare industry gets more than half its revenue from State and Federal gov’t. And yet, thanks to Obamacare, the industry makes profits double that of the S&P 500. In other words, the health care industry makes profits double that which the market can bear because Obamacare is a massive subsidy.
Jim Chanos founded Kynikos, one of the largest investment firms specializing in short selling. In the interview posted below, Chanos said after looking at Obamacare, his firm covered all its shorts in the healthcare industry because the bill was going to drive up profits. He spoke about the industry’s excessive profits relative to the S&P500 (thanks to Obamacare) and suggested this will have to change if run away healthcare costs are going to be brought under control. His comments on Obamacare come at 13:05 into the interview.
President Obama claims his policies represent a clear change from those of President Bush. This only true if he means his policies are a more extreme version of Bush policies. No President has done more to rob the middle class, and enrich the 1%, than Obama. President Obama is a walking talking CRIME AGAINST HUMANITY.
Looks like we are both calling the bluffs today at the tables :-)
Every pro Texas Hold ‘Em poker player will admit to it being a *sick* game because they know that in each deal, if none of the players look at their 2 cards until the *river* card is revealed, someone IS holding the REAL *nuts* every time. So all the betting and bluffing is the *sickness*.
But the extraction is FINITE, not infinite, because it is all set up to continue to allow for the unfettered extraction of every single last bit of oil. Like, duh.
The thing is, we have to end the infinite extraction now in order to stop the actual extraction of the finite because that is the suicide bullet and I’m not suicidal :-)). I hold on to the IDEAL, not the *idea*, of being a dutiful steward of the *freely given* life supporting life web of planetary resources. The sun shines on the just and the unjust. Why should not the just manage that resource for awhile and see how that goes? Why should not those who can keep it in their pants be in charge of man to land ratio?
TRAGICALLY, not only has USA stopped its commitment to progress through science – standing on the shoulders of discovery instead of stepping on its toes – it has succeeded in assassinating science through shenanigan money MATH.
Think about it.
BTW, it was not *stupid* to share the epiphany about MATH doing nothing to solve the real problems of life maintenance commerce when MATH is used as the means of fraud – separating the fruits from the labor that produced the fruits.
Indeed, someone is still doing double-entry bookkeeping (sarcasm).
It all ended up in CeDe’s column – ALL of it – to infinity and beyond…go figure…
Even I can ride a unicycle, and juggle 31 balls. And I ain’t even a registered certifiable city clown!
Dear Glenn, I even agree with most of what you call assumptions (but not all of them), but they have absolutely nothing to do with Social Security. That’s right, NADA, ZIP, NOTHING what so ever. Why you would think they do is beyond my pay grade.
But I have one final question; Do they have visiting hours where you are now?
James, why would I think false assumptions have something to do with Social Security? Simple logic + simple math = inconvenient truth. Think of yourself as Al Gore, who after 16 years of NO global warming, is faced with the inconvenient truth of his false assumptions. But like Al, you don’t let the facts interfere with your agenda.
http://wattsupwiththat.com/2012/12/01/18-annual-climate-gabfests-16-years-without-warming/
Earth to James Taylor, come in please…..yes we do have visiting hours here on earth. What what are the visitation protocols like on your planet?
http://www.upworthy.com/video-watch-the-big-powerful-bankers-get-schooled-by-a-wicked-smart-12-year-old?g=2&c=ufb1
You set up a false dichotomy in your first question, and only later on mention other alternatives. My major complaint about the social security cash flow situation is that this dichotomy is so pervasive that even people like yourself who can recognize that alternatives exist still often reason as if the question were to cut benefits or pay out of the general fund. Why is eliminating the social security cap (i.e. making it a flat tax instead of a regressive tax) never mentioned? Why is applying the social security tax to non-wage income never mentioned?
Dear Earl, welcome to the club. There is you and me and Herman, and Bernie Sanders (the senator from Vermont), Robert Reich (former secretary of labor), Laura Tyson (former member of the president’s economic council), Michael Hiltzik (Los Angeles Times columnist), and a couple of others. Now if we can just figure out the answer to your question,we can get Social Security off the table and we can all start worrying about healthcare costs, the real problem facing the country, which, incidentally, nobody wants to talk about either.
Nobody wants to talk about the real problem facing our country? Kwak recently co-authored a book with the following subtitle, “The Wall Street Takeover and the Next Financial Meltdown”. But two years later, Kwak himself will not talk about the hostile takeover or the threat of another financial meltdown. Based on Kwak’s posts, one would think the hostile takeover didn’t occur and there is no threat of another financial crisis. Are we supposed to believe that the Wall Street criminals who’ve seized and robbed the U.S. Treasury are going to fully fund Social Security? That would analagous to expecting a mugger to care about your physical an financial needs.
Those aiding and abetting the cover up of Wall Street’s crimes are setting taxpayers up for the next crisis. Reminding citizens of the cost and cause of the last crisis is essential, so here’s a link to Phil Angelides, former Chairman of the Financial Crisis Inquiry Commission.
The other news of the day.
http://www.al-monitor.com/pulse/security/01/10/turkeys-dreams-of-entering-damascus-could-lead-to-nightmares.html
And how it could affect our economy.
I haven’t read all of the comments, but I do agree with Bill Ridge (above). We should be focusing on the debt EXCLUDING Social Security, because the Social Security surplus is already spoken for in helping to reduce the Social Security deficit as more and more baby boomers retire. Pretending that the government doesn’t owe as much money because it borrowed from Social Security is a fiction. For all of his failing’s Al Gore’s idea of a “lock box” was the right one. I never understood the concept of “total indebtedness to the public,” because it mixed up general revenues with those designated for Social Security. I believe we should fix Social Security by raising the cap, but remember that when you do that, you also have to raise the top end benefit (at least by a little), or else the whole thing becomes not a progressively funded insurance pool, it becomes welfare for the poor elderly. That changes the entire nature of the program, and it exposes it more legitimately to the anti-“welfare entitlement” crowd that want to slash it.
@GG, “…Are we supposed to believe that the Wall Street criminals who’ve seized and robbed the U.S. Treasury are going to fully fund Social Security? That would analagous to expecting a mugger to care about your physical an financial needs….”
I thought “we” don’t negotiate with terrorists?
Annie:
Wall street did not rob the U.S. Treasury. The Treasury seized the excess FICA taxes and paid for current expenses. Any changes to Social Security must have the trust fund as a lock box that Al Gore described. Of course, we need excess FICA taxes for that to happen, and without legislative changes, the excess is not expected to occur.
Don Levit
Don Levit, the Congressional Budget Office estimates it will cost taxpayer 8.6 TRILLION to prop up failing banks.
http://www.c-spanvideo.org/clip/3343308
If you can think outside Kwak’s alternate universe for a moment, could you explain why the CBO estimate does not equate to Wall Street robbing the Treasury?
Don Levit, do you buy Johnson and Kwak’s assertion on the cover of “13 Bankers”, i.e., “The Wall Street Takeover and the Next Financial Crisis”? If so, do you believe the takeover included the Treasury?
Harvard economist Jeffrey Miron says Dodd/Frank’s resolution authority “institutionalizes TARP for bank holding companies”. If this true, would you acknowledge that TARP funds come from the Treasury? The following links are Miron’s testimony before Congress.
http://www.c-spanvideo.org/clip/3343218
http://www.c-spanvideo.org/clip/3343227
I am not familiar with the details of those transactions. I can only say that the U.S. Government has consistently demonstrated over the last 4 years that it is beholden to the big banks and the top 10% of household income.
They are not for the average American. The way the SS trust fund has been handled (as well as 28 other trust funds) indicates while the accounting may be separate, the funding is all part of one pot. The Government is unable and or unwilling to set aside funds for expenses beyond the current year.
Don Levit
It’s absolute malpractice how the unemployment report is being handled today – who massages the numbers, the CIA?
Total of around 35 million first time applicants for unemployment since 2008 – at least 20 million off grid now out of 200 million working age and 480 hold a collective worth of 2.08 TRILLION.
The *government* is doing nothing more than protecting 480 people. I guess that does translate to being “unable and or unwilling to set aside funds for expenses beyond the current year”…
Basically, USA is a Dickens-style economic prison for 99% of 200 million adults of working age and 100 million children and elderly just watch the misery along with the 480 smiling ones.
Happy holidays!
Social Security is easy to fix — take the withholding cap off. Problem solved. Everyone could then move on to solving the myriad of other problems that we have that don’t present an obvious solution.