We can't even lend it out as a conventional bank would. The idea of sending all of our hard-earned dollars abroad and supporting foreign economic development would be ridiculous
Is it? Assuming that's the best return on investment we could get.
Look, I freely admit I'm not an economist or global banker -- I had a few years of econ in college, but it's been a while -- but when we pay interest to creditors, it comes out of revenue. Likewise, if we held foreign debt, the resulting interest would be a transfer of wealth from them to us. We could then sell that debt on the open market when needed to fund domestic investment, could we not?
All very much true, though I honestly see paying down the debt as a very minor issue. Growing the economy faster than the debt grows is a worthwhile plan.Naturally. But if we could grow the economy just as fast with less debt, wouldn't that be a better plan? It seems obvious to me that not all government expenditures contribute equally to economic growth.
Well, there are several issues at work here. The first is that "economic growth" is not the only job the government has to do, and we could arguably grow the economy much faster if we got rid of all those parasitic expenditures like the Department of Defense. I'm not actually suggesting that, just pointing out that the DoD contributes very little to the US economy except as a customer.
Another is that while it's very easy for people to say, as they have upthread, that we can simply eliminate waste in government. In practice, it's much harder, because, hard as it is to believe, there's not that much waste. What there is is a lot of expenditures with which the person speaking disagrees.
So, yes, cutting existing government deficits and retiring existing debt is usually a good idea if there's nothing better to do with the money. But, as you pointed out, that's hard to do precisely because there's someone in government who thinks that every dollar spent is being used for "something better." As a matter of fact, it's usually a majority of the people in government who think that, or it would have gotten cut in the last round.
But that's not a bad thing. Deficit spending is inflationary, but inflation is also necessary for a smoothly running and growing economy. So if you have to have inflation, you might as well use the increased money supply and do something intelligent with it instead of simply giving it to people who happen to hold government debt (by increasing the interest rates).
Raise Social Security age to 70?!?
[Flips desk]
We can't even lend it out as a conventional bank would. The idea of sending all of our hard-earned dollars abroad and supporting foreign economic development would be ridiculousIs it? Assuming that's the best return on investment we could get.
It is. If you think it's politically unacceptable to invest in a US company, imagine how everyone would scream if we invested it in a global competitor.
Look, I freely admit I'm not an economist or global banker -- I had a few years of econ in college, but it's been a while -- but when we pay interest to creditors, it comes out of revenue. Likewise, if we held foreign debt, the resulting interest would be a transfer of wealth from them to us. We could then sell that debt on the open market when needed to fund domestic investment, could we not?
Why not simply do the domestic investment in ourselves? The idea of our providing money for the UK to fix its potholes while our bridges are falling down would not play well anywhere.
Look, I freely admit I'm not an economist or global banker -- I had a few years of econ in college, but it's been a while -- but when we pay interest to creditors, it comes out of revenue. Likewise, if we held foreign debt, the resulting interest would be a transfer of wealth from them to us. We could then sell that debt on the open market when needed to fund domestic investment, could we not?
Also, you're not looking at exchange rates. Taking money out of the US economy to buy debt in a foreign country is inflationary over there and deflationary over here. This means that we're trading cheap dollars for expensive pounds, and then later exchanging cheap pounds for expensive dollars.
Raise Social Security age to 70?!?
[Flips desk]
That's an option. Another is another penny on the payroll tax, and a third is some sort of supplemental funding from a direct appropriation. A fourth is raising the payroll tax cap (e.g. right now I don't pay any social security on the money I make above about $115,000), and a fifth is to means-test retirement benefits.
Any or all of those could help fix the issue, and the sooner they were done, the less significant a change would be needed (because of the miracle of compound interest).
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Or you know, you could fund social security out of the general fund instead of as a regressive tax scheme.
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Better idea, eliminate SS and Medicare and roll those funds into a single universal healthcare system.
Raising the age is a non-starter. Rich people working desk jobs can keep going to 70. Poor people doing manual labor can't.
My back hurts already.
Raising the age is a non-starter. Rich people working desk jobs can keep going to 70. Poor people doing manual labor can't.My back hurts already.
You should go take your "medicine".
I'm currently listening to the Soviet jazz album Comrade Longears posted on WPZO.
In other words...way ahead of you.
[bubble bubble bubble]
You should go take your "medicine".Raising the age is a non-starter. Rich people working desk jobs can keep going to 70. Poor people doing manual labor can't.My back hurts already.
Why? The medicine is better without quotes. Wheeeeeeeeee
Topic? We don't need no steekin' topic....
The whole problem with the Social Security trust fund is that, as you hinted above, it's an accounting gimmick. It's been a higher tax on working people and the money has been used for general revenue. As it's been used it's a horribly regressive tax. Yes, technically that money's been invested in Treasury bills and will be paid back with compound interest, but that's all accounting gimmicks. That money will have to come from out of general revenue somehow: more debt or higher taxes or spending cuts elsewhere.
If it ever gets paid back. Every "Save Social Security by shoring up the Trust Fund" plan I've ever seen has really been all about putting off the day we have to do that. Whatever we use to pay that money back is likely to come off the top end even more than lifting the SS cap would, that's why they don't want that to ever happen.
I disagree that it's an accounting gimmick, any more than the self-funded Post Office or Patent and Trademark Office is an accounting gimmick. I actually like the idea of user fees; people who use the service pay for it.
The issue of pay-now-collect-later is an issue, but I'm reasonably happy with the solution that we've been using, where the money is stored in risk-free investments that returns a reasonable rate. The fact that the government is paying itself that reasonable rate doesn't especially bother me, because the government itself is getting the use of the money in the meantime. The problem -- problems, rather, as they are joint -- are the long-term demographics and the fact that it's easy to deal with a financial crisis now by underfunding SS in the long run. But that's not something confined to the government, as many companies and their pensioners have learned over the past few decades.
I agree that some of the solutions I mentioned are more to my tastes than others, but that's a political question and not an economic one -- from an actuarial standpoint, any of them would work. Eliminating the cap entirely would, according to the numbers that I found, eliminate about 70 percent of the projected shortfall over the length of projections and as a side effect reduce although not eliminate the regressive nature of the payroll tax. Raising the tax by 1% would, by itself, eliminate about 50 percent of the funding gap, so raising the tax by 0.5% and eliminating the cap would be a reasonable solution.
Those particular solutions are also popular -- supported by more than 60 percent of the American population. Yes, unreconstructed "socialists" like yourself might prefer direct appropriations from the Treasury, but given the current political climate,... if you're granting wishes, I'd also like a flying pony that pees chocolate milk and poops Skittles.
Was it Bismark who defined politics as "the art of the possible"? The problem as I see is is that fixing Social Security is not only possible, but there's a well-defined and popular way to do it. And then someone comes along telling right-wing fairy tales -- horror stories, really -- and prevents people from even discussing the issue.
I disagree that it's an accounting gimmick, any more than the self-funded Post Office or Patent and Trademark Office is an accounting gimmick. I actually like the idea of user fees; people who use the service pay for it.
Except this isn't what happens, at all.
You put into the fund , but how much you put in is pretty much irrelevant to how much you get out.
The money is collected, put in the general fund, and spent from the general fund.
Can you tell me how social security would be any different if it were merely a tax on taking a paycheck ?
Was it Bismark who defined politics as "the art of the possible"?
I'm not sure what that stooge of the junkerocracy said, but, IIRC, he had to hand out socialized health care in order to buy off the Socialist-led German proletariat.
Revolt, comrades, revolt!!
I disagree that it's an accounting gimmick, any more than the self-funded Post Office or Patent and Trademark Office is an accounting gimmick. I actually like the idea of user fees; people who use the service pay for it.Except this isn't what happens, at all.
You put into the fund , but how much you put in is pretty much irrelevant to how much you get out.
The money is collected, put in the general fund, and spent from the general fund.
Can you tell me how social security would be any different if it were merely a tax on taking a paycheck ?
Yes. It would be as you describe it above, instead of how it's actually collected and spent. Your description is, I'm afraid, completely off-base.
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Was it Bismark who defined politics as "the art of the possible"?I'm not sure what that stooge of the junkerocracy said, but, IIRC, he had to hand out socialized health care in order to buy off the Socialist-led German proletariat.
Revolt, comrades, revolt!!
Speaking of that, could you lot get back to scaring the powers that be into at least pretending to a belief in egalitarianism?
Speaking of that, could you lot get back to scaring the powers that be into at least pretending to a belief in egalitarianism?
It's harder than it looks.
Rabble rousers looking to rouse rabble this coming Thursday, click here.
Meanwhile, I'm taking notes from the PRD for my campaign in pre-revolutionary Pezzack. What would be a cool monster to fight for a 7th-level changeling rogue compelled to search for her storm hag mom?
I don't have a problem with a separate revenue stream for SS. It's the accounting gimmick of the Trust Fund that I see as the problem. Putting the accounting gimmick aside, for the last 30+ years much of that regressive tax has gone into general revenue to fund basic government services. That's what buying Treasury bonds does.
Granted. But given that there's no real other option for what to do with the SS trust funds, that's actually a very good option. It puts the money to use (instead of trying to build a cookie jar the size of New Hampshire) and provides an additional revenue stream to fund the SS trust fund, one that at this point is pulling in a hundred billion a year or so, so it's a nontrivial sum of money.
Now that the time to start paying that back has come, one of several things will happen:
Some deal will be reached to delay it, raising rates/raising caps/raising the age/means testing or something, in which case at least for a little while the regressive tax continues to flow into general revenue, putting off the problem for awhile longer.
Or money flows the other way: The Trust Fund redeems its notes and money from general revenue is used to pay them off. This means either more borrowing, less spending or more taxes.
Or finally, the government defaults on its obligation to the Fund. This won't happen and I mention it only for completeness.
Well, I'm glad you acknowledge that the Treasury won't default.
The issue of the direction of cash flow isn't really that important, either. The trust fund is there specifically to keep the government from having to raise rates/caps/whatever, because they can tap the stream of money (and redeem the principle). This is factored into the long-term projections, because the accountants aren't incompetent. If for some reason the government were to simply disavow their debt to the Trust Fund, then SS would be bankrupt more or less immediately as the baby boomers start to retire, and I'm not sure that it would be mathematically possible to restructure the system into a pay-as-you-go system based on current inflows and outflows.
What is important is that, yes, the government must eventually pay back the money it borrowed. (Implicit "duh.") But that's not an issue restricted to the Trust Fund. Everyone who bought government securities will want their money eventually -- and by "eventually," I mean "when they come due." There are no more problems with repaying the SS trust fund than there are with repaying Harvard University, or China, or the Fidelity Government Bond ETF, or Grandma.
When I talk about money from the treasury, I'm not talking about special appropriations to make up the projected long term gap between the Trust Fund/SS tax and SS expenditures. I'm talking about drawing down the Trust fund by redeeming or not rolling over those Treasury notes. That's the actual SS crisis we're facing. Not the long term projected one.
Not in the slightest. The Treasury, frankly, doesn't care who owns the notes they've been selling, and they know upfront that they'll have to pay back what's borrowed with the appropriate interest. They're actually delighted that the SS trust fund has $2 trillion in the game because that much interest on the "buy" side decreases the interest rates they have to offer to unload their bonds.
(Actually, my numbers are a bit off. Total debt is now about $18 trillion, of which about $5 trillion is "intergovernmental holdings" like SS).
The "crisis" is exactly the long-term gap. We're going to have to start drawing down the trust fund within the next several years, but that's planned for and not an issue. Whether or not we want to keep borrowing additional money atop the $18 trillion is a political question that Very Serious People could discuss if there were any Very Serious Republicans left in Washington. But money to pay the interest and to retire the bonds as they come due is one of the routine elements of any budget that is passed in Washington, and it will be paid.
The problem is the long-term demographic gap. We have to start redeeming the T-bills more or less today, but there's only $2 trillion in the fund, which is only enough to carry us through for another twenty years or so in projections. Right now, income and outgo are about balanced -- for every dollar collected, there's another dollar committed to some retiree somewhere. These numbers will change as some retires die, some workers retire, and some workers join the workforce, and we have a pretty good idea how these numbers will change. If it looks like we're about $100 billion overdrawn this year, that's not a problem as we can take it out of the fund's principal.
But we can only take $100 billion out of the fund per year for so long. And in 2033 or thereabouts, there won't be any money left to take.
So at that point the government will have to either cut benefits, cut spending elsewhere, or raise taxes. Right now, we don't have to do anything, and the system will continue to run smoothly for another twenty years. But if we wait twenty years to fix it, the fix will be much more severe.
I'm also amused that with your talk of "art of the possible", that you ignored my actual first choice: Shoring up Social Security by fixing the income inequality problem and growing the economy. I guess that's even more of flying pony. Maybe this one pees 30-year old Scotch.
and poops Leonidas chocolate truffles. And that pony doesn't just fly, it teleports.
Also, you're not looking at exchange rates. Taking money out of the US economy to buy debt in a foreign country is inflationary over there and deflationary over here. This means that we're trading cheap dollars for expensive pounds, and then later exchanging cheap pounds for expensive dollars.
As I understand it, people buy our debt for two reasons -- safe harbor, and usually some rate of return. If they need an influx of cash, they can sell our debt rather than going into debt themselves. I fail to see how we can't enjoy the same benefits. Again, I'm no expert, but if investing in foreign debt is such a bad idea, why are so many countries willing to invest in ours? Surely it is better to collect interest, rather than pay it?
As for fixing someone else's infrastructure, I wouldn't suggest buying foreign debt until our infrastructure is in order (which was implied when I said I was assuming we can't get a better return elsewhere). Since we were proceeding from a hypothetical starting point, I simply postulated that we didn't have three decades worth of infrastructure neglect to consider. ;)
No, he's pretty much right. Once you see through the tricks.Yes. It would be as you describe it above, instead of how it's actually collected and spent. Your description is, I'm afraid, completely off-base.
You put into the fund , but how much you put in is pretty much irrelevant to how much you get out.The money is collected, put in the general fund, and spent from the general fund.
Can you tell me how social security would be any different if it were merely a tax on taking a paycheck ?
Nope.
First, what you get out (on a monthly basis) is directly related to what you put in. It's specifically a function of your average indexed monthly earnings during the 35 years in which you earned the most." (Perhaps obviously, they can't control the total amount you get because that's a function of how long you live, and they also can't control when you retire, but they do adjust your monthly payment so that the earlier you retire, the less you get per month so the actuarial expectation is correct.
Second, the money is not paid into the general fund, but into the Trust Fund, so that if there are excess moneys, they're saved and used to cover future payments. This means that if for some reason thirty as many children were born in 1930, then there would have been a huge spike of money collected from 1948 to about 1995, money that had been stored in the Trust Fund, collecting interest the whole time.
Now look at the situation of a person born in 1970, who starts work in 1990. His payroll taxes for 1990 are about the same as they are for 92, 94, and 95. Now, when 1996 rolls around, all of a sudden the payouts from the Social Security fund skyrocket, because the 1930 babies had all retired and started collecting.
But the 1970 baby will not see any increase in his taxes, because the bulk of the money used to pay 1996 benefits will have come from the money earned between 1948 and 1995 and stored in the trust fund.
And that's why it's not a pay-as-you-go system, because the outgoes are paid largely by the trust fund, which in turn is the accumulated excess of revenues over the working lifetime of the retirees.
Yes. It would be as you describe it above, instead of how it's actually collected and spent. Your description is, I'm afraid, completely off-base.
Its not. You do not have a social security account. There is no "your" money. At all. The taxing and spending arms of social security are completely independent.
The government keeps borrowing money from social security. Its effectively in the general fund in everything but name.
As I understand it, people buy our debt for two reasons -- safe harbor, and usually some rate of return.
We can -- that is, you and I -- but the US government can't. The difference is that we (again, you and I) don't control the value of the US dollar, but it does. The idea of the US government as a whole getting "a rate of return" on dollars literally doesn't make sense. If it gets more dollars, that's just an increase in the money supply.
If they need an influx of cash, they can sell our debt rather than going into debt themselves. I fail to see how we can't enjoy the same benefits. Again, I'm no expert, but if investing in foreign debt is such a bad idea, why are so many countries willing to invest in ours? Surely it is better to collect interest, rather than pay it?
Partly because we've got a better economy than theirs (safe harbor), and partly because we're a large enough economy that they're not going to be able to move the needle very much. The entire GNP of Costa Rica is about sixty b-for-billion dollars. We could cut the DoD's budget in half and use the savings to buy Costa Rica's entire economy by the end of July -- literally.
Of course, if we tried to buy Costa Rica's economy -- or even all of Costa Rica's bonds -- we'd have to pay a substantial premium. We'd be bidding against the Costa Ricans, for one thing. Which means that the price we'd pay would be much more than the value the market's put on it. And when/if we tried to sell, we'd have the similar problem in reverse. Essentially, we would be flooding Costa Rica with cheap money, which would inflate their currency (the colon, IIRC) possibly halving its value, and then we'd have billions of already cheap colons that we could only unload for dollars at fire sale prices.
The effect is "buy high, sell low," which isn't exactly a recipe for economic growth.
Now, just as the government can't make money, it can't lose it, either. But the effect would be a substantial increase in the number of dollars available -- basically we'd buy a trillion colons at 1000 to the dollar, taking a billion dollars out of our economy. We'd then sell a trillion colons at 10,000 to the dollar, putting ten billion dollars back in.
If we wanted 1 billion fewer dollars, why not just spend $1B less?
If we wanted 9 billion more dollars, why didn't we just spend them into existence?
A broader term answer to your question about why foreign countries want to buy our debt is because, historically, we've been smart enough not to do stupid economy destroying things in the interests of "fiscal conservatism." You'll notice that as soon as the conservative extremists got into power, they set about enacting "stupid economy destroying things" and the ratings agencies noticed.....
Its not. You do not have a social security account. There is no "your" money. At all. The taxing and spending arms of social security are completely independent.
Yes. It would be as you describe it above, instead of how it's actually collected and spent. Your description is, I'm afraid, completely off-base.
This is simply wrong. I do have a social security account, complete with number and identifying information -- I get paperwork from them on a regular basis about "my" account. While it's true that the funds that I've paid into the system are comingled with other people's funds as part of a general operating budget, that's also true of my bank, and of my insurance company, for that matter. The taxing and spending arms of social security are no more "independent" than the sales, underwriting, and accounts payable departments of my local bank. They all access the same general pile of money.
The government keeps borrowing money from social security. Its effectively in the general fund in everything but name.
Again, this is simply wrong. I keep borrowing from the VISA company; this doesn't mean that the VISA company is effectively me in everything but name. The terms under which the government borrows from the Social Security fund are the same terms under which it borrows from anyone who wants to buy a T-bill, and it's under the same obligation to repay.
. I do have a social security account, complete with number and identifying information -- I get paperwork from them on a regular basis about "my" account. While it's true that the funds that I've paid into the system are comingled with other people's funds as part of a general operating budget, that's also true of my bank, and of my insurance company, for that matter.
If you died tomorrow, how much money would be in that account?
If you were, gods forbid, mangled in a combine accident and on social security for life, and then lived to be 100, how much money would be in that account?
If you reach 1 year into retirement and then drop dead how much money is in that account?
If you died at your retirement party then how much money would be in that account?
Your money is not merely co mingled. Its not your money anymore. Its being used to to fund a government social services program that just might pay you more if you got taxed more.
The payout is more or less unhinged from its method of funding because the government raids the fund at will.
Visa can tell you no. No more money. Social security can't.
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No, the fund purchases Treasury bonds. The government doesn't raid the fund at all.
Your two assertions are at odds.
Just a thought exercise, so no trolling, if you please:
What might have happened over the last 14 years if Gore had become President in 2000?
List your key events by year.
I've heard many theories that 9/11 would not have happened under Gore. Not because Gore is that much of a bad-ass, but because he wasn't. Bush had the balls to respond heavily to 9/11 which is exactly what the terrorist wanted. They live and thrive off violence. It wasn't until Obama's scorched earth policies, that terrorist competency started going down. That said, I feel like these organisations collectively are stronger now than they were on 9/11, even if al-qaeda itself is weaker.
Anywho, the theory is that al-qaeda was waiting for a strong but stupid president.
At this point, the SS Trust Fund has been a giant regressive tax used to fund basic government. If it is paid back as promised, that will be mitigated by the progressive nature of the payouts. To the extent that we raise rates or cut benefits to delay paying down the Trust Fund, it remains a regressive tax.
Well, it's a regressive tax with regressive benefits -- essentially a user fee. What you get out of it is largely determined by what you put into it, and if you put in twice as much, you get twice as much out of it.
I don't consider this to be a problem. If you pay into SS, it gives you a personal annuity. If you don't pay in, you don't get it.
If we do pay it down, that money has to come from somewhere. Higher taxes, cuts in other spending or more borrowing are the only real choices.
Or adjusting the payout scheme.
But, yes, the money does have to come from somewhere. Again, this isn't a problem, since all spending has to come from somewhere, and this is no different than paying for paving a stretch of I-45.
Having established that gnomes aren't going to tunnel into Ft. Knox and leave magical gingerbread that turns into gold at sunset,.... the choice of where the money comes from is fundamentally a political question that should in theory be decided by the political process. I've outlined two popular reforms that would solve the issue for as long as people care to run the projections (with the usual caveat that they're only projections). Both of these are popular reforms with majority support among the American population, and one, in particular, would go a long way towards alleviating the regressive nature of payroll taxes that concerns you so much. (In fact, it's arguably less "fair" than the current system because the tax would be flat, but the benefits regressive.)
Of course, if your preferred course of action is for Congress instead to issue a joint resolution welcoming gifts of magical gingerbread from fantastic beasts,.... I refer you again to Bismark.
East German TV movie I'd love to see: Bebel und Bismarck
I'm not a big fan of WSWS, but they can usually be trusted to do the historical articles:
August Bebel and the political awakening of the working class
Vive le Galt!
Gingerbread gnomes and workers of the world, unite!
SS does actually have a progressive payout structure.
Nope. Lower income people simply don't live as long as higher income people, so they in general get fewer actual benefits no matter what the chart says.
Lifespan discrimination!
Lifespan discrimination!
its possible. Cracked, but possible. Ive certainly had people die on me because they were medically compromised at ages they really should not have been concerned about anything beyond maybe cholesterol at the first job.
The actual calculation of the payout is progressive though. It's not a simple case of twice as much in, twice as much out.
Much like the damage calculation on a two weapon fighting rogue is "the awesome" but the actual performance...
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Lifespan discrimination!
More like pay discrimination. Sitting in an office pays more than breathing in toxic chemicals all day.
Pay discrimination? Maybe the company that pays me to sit in an office values that work more than a guy breathing chemicals?
What I'm suggesting is that many of the Serious plans to Save Social Security are in fact designed to delay paying the Trust Fund down, possibly indefinitely, but at least for the next few election cycles.
I understand that. And I also understand that your suggestion is incorrect; the bond market doesn't work that way.
Well, my commie mentors in the nineties taught me that in addition to the original Social Security laws excluding agricultural and domestic workers, the SS payout age has usually been a year or two higher than the average life expectancy of a black male.
Later, I remember seeing George II going on about it during one of his drives to gut SS or raid it or whatever he was up to, I don't remember, so I assumed it was true.
Which might've been poor logic, I grant you.