More Social Security Scare Stories

[Hannah Bell]

February 15, 2010


The Chicago Tribune may have laid off many of their reporters but it still has a Social Security fearmonger position. Greg Burns told readers that: "As of this year, Social Security will be running in the red for the first time in a quarter-century."

Wow, that's really really scary.

Except Social Security was always supposed to shift from surplus to deficit. That is why the Social Security trust fund accumulated a surplus of more than $2.5 trillion over the last quarter century. Rather than being some extraordinary crisis, the shift in 2010 actually means almost nothing to the financial health of the problem.

The fact that Social Security ran into the red this year is one more result of the failure of policymakers and economics reporters to notice an $8 trillion housing bubble.

The article also raises the possibility that the United States might see a declining birth rate and stagnant population. While the article implies that this is bad news, in fact the opposite would be the case for the vast majority of the population. A stagnant population would likely imply a labor shortage and therefore higher real wages. It would also reduce crowding, emissions of greenhouse gases and other forms of pollution.

A competent economist would have provided this information to readers.

http://prospect.org/csnc/blogs/beat_the_press_archive?month=02&year=2010&base_name=more_social_security_scare_sto

[Jim__]

1. The Social Security surplus was used as general fund revenues.

IOW, Social Security funds were used to fund tax cuts for the rich; and the rich are now demanding that we eliminate Social Security.

[DJ13]

2. The wealthy have spent the money, now they want to cover their tracks

The new catch phrase for theft is "austerity programs".

[damntexdem]

6. But that would mean reneging on Fed government bonds.

And that would destroy the world economy.

[DJ13]

14. No, they'll go back to the dumb idea of Social Security "investment accounts"

Technically the money would still be there, the theft takes place on the management fees to major investment brokers (Goldman, Bear Stearns, etc) where they can s l o w l y siphon off a good portion of the funds invested.

Its the same plan Bush wanted to enact, only now the government will use the treat of reducing Social Security outlays to "fix" the deficit or people can accept a plan to "allow people to manage a portion of their SS to help improve their retirement income for their golden years" as an alternative.

You might say the "fix" is in.

[Igel]

21. It wouldn't have to mean that.

And if it did, it wouldn't destroy the world economy. Well, I'm sure that if you tried hard you could manage to find a way to do it so as to severely ding some portion of the world's economy, but I doubt that's what you meant.

The only holder of Social Security bonds, at least as of last year, was the US government (not the Fed, the US government). If the US government reneges on social security, the only entity affected is itself.

But it could just as easily pay them back while altering the law so that the money returns to the general fund. You can do that kind of thing when you're your own creditor and decide how the books are to be kept. You owe yourself $1000 dollars, you can either cancel the debt to yourself or write out a check to yourself for $1000 and pay it back to yourself. Works out the same in every sense but what's on paper.

[NoNothing]

3. Yes, we need to distinguish between "cash" and "assets"

There is indeed a huge Social Security trust fund with a large amount of "assets." This is true. However, those "assets" are special Treasury bonds, which were sold - for surplus cash collected in taxes - by the Treasury to the trust fund. Okay, great, so now we need to sell some of those assets. Well, that means that Treasury has to buy them back, with cash. Problem - where is Treasury going to get the cash? Maybe they kept some of the cash they got from selling the bonds to the trust fund? No, that cash was counted as general revenues and spent long ago. No, the only place Treasury can get the cash is from *tax* revenue or by selling *other* bonds to *other* people, at higher interest - in other words, borrow the cash. But who is going to lend the Treasury that much money?

[Hannah Bell]

7. The cash comes from rescinding the Bush INCOME tax cuts on the top 5%, which will produce about 1

trillion in new revenues over 10 years, 3 trillion over 30 years, enough to pay down the TF quite nicely & keep SS in the black until about 2040, by which time most of the boomers are in their graves.

[dkf]

8. 1 trillion doesn't balance the budget for one year.

Rescinding the bush tax cuts will take over 3 years to balance just this years budget? How much do we need to raise taxes to balance the budget and then how much more to pay back the social security trust fund? I'd be interested to see the types of rates we would need to achieve this.

[Hannah Bell]

16. WTF does "balancing the budget" have to do with anything? You asked me where the money to pay off

the SS TF would come from, & I told you. The budget isn't out of balance because of SS. Rather the opposite.

And "Balancing the budget" = sure road to further depression & deflation.


"With one brief exception, the federal government has been in debt every year since 1776. In January 1835, for the first and only time in U.S. history, the public debt was retired, and a budget surplus was maintained for the next two years in order to accumulate what Treasury Secretary Levi Woodbury called “a fund to meet future deficits.” In 1837 the economy collapsed into a deep depression that drove the budget into deficit, and the federal government has been in debt ever since.

Since 1776 there have been exactly seven periods of substantial budget surpluses and significant reduction of the debt. From 1817 to 1821 the national debt fell by 29 percent; from 1823 to 1836 it was eliminated (Jackson’s efforts); from 1852 to 1857 it fell by 59 percent, from 1867 to 1873 by 27 percent, from 1880 to 1893 by more than 50 percent, and from 1920 to 1930 by about a third.

Of course, the last time we ran a budget surplus was during the Clinton years. I do not know any household that has been able to run budget deficits for approximately 190 out of the past 230-odd years, and to accumulate debt virtually nonstop since 1837.

The United States has also experienced six periods of depression. The depressions began in 1819, 1837, 1857, 1873, 1893, and 1929. (Do you see any pattern? Take a look at the dates listed above.) With the exception of the Clinton surpluses, every significant reduction of the outstanding debt has been followed by a depression, and every depression has been preceded by significant debt reduction."

http://www.nakedcapitalism.com/2010/02/wray-the-federal-budget-is-not-like-a-household-budget-%E2%80%93-here%E2%80%99s-why.html

[dkf]

27. Balancing the budget means not creating new debt. That doesn't begin to pay it down.

Seeing Greece should give people pause but no one cares. The Chinese are cutting down on buying our debt. Then the bond vigilantes will run roughshod on us like they are attacking the Europeans. I guess I should personally prepare for it and forget this country or trying to get people to see what happens when debt burdens are out of control. People think we can robin hood our way out of this. But it's too big for that.

[galileoreloaded]

11. Hannah, taxing is NOT collecting. Unless there is a secret account out there

with a ridiculous amount of money in it, the system IS a sanctioned Ponzi. There is no account with the money in it, only promises to pay heaped on top of each other in a world of default. They aren't even assets, instead the UST's held are government LIABILITIES.

Not how it should be, but how it is.

[Hannah Bell]

17. When people say SS = Ponzi, it tells me they don't know what a Ponzi scheme is, or they don't know

how SS works. So which is it?

Please explain to me, with specifics, how SS = a ponzi scheme.

Betcha can't.

[galileoreloaded]

19. It requires future payments to be made from future revenue.

More and more payers. But, here is the kicker. The accounts MUST be segregated. Of course they are not, and fungible as money is, it gets swept to the bottom line. The sad reality is that the bottom line is......we're broke.

Where is the account, with the money in it. Where is it?? Don't say UST, because that will cause a whole different discussion.

[Hannah Bell]

20. Ha! Knew you couldn't do it.

"It requires future payments to be made from future revenue."

So does your mortgage.


"More and more payers"

Wrong-o. SS doesn't require more & more payers; the number of payers is mostly irrelevant to the soundness of its financing.


Ponzi is an "investment" scheme in which no investment occurs. A "invests" with the financier, who uses the subsequent "investments" of B & C to pay off A. The D,E,F & G have to "invest" to pay off B&C. Etc.

The distinguishing features of a ponzi is precisely the lack of actual investment that generates productive returns. For example, if I invest $1000 in building a house, I then have an income-generating property. If I invest in a company, the company produces income. Etc.

In a Ponzi scheme, A gets B&C's $$, B&C get DEF&G's, etc.

This is why the whole thing collapses when there are no more suckers left. THERE WAS NEVER ANY PRODUCTIVE INCOME GENERATING INVESTMENT, just a transfer of cash.


Let's compare this to SS.

A ponzi starts with a small number of initial "investors" who give their money to a con man. The con man pockets their money & looks for more suckers to pay off his first bunch of "investors". Nothing is "invested," & nothing is produced.

SS starts out with a large pool of workers. They are are working & producing food, houses, clothing, entertainment, machines, cars, factories, bridges, knowledge, healthcare, children, etc. -- i.e. they're "investing" their labor & thereby increasing the future productive power of the US economy.

Meanwhile, a percent of their wages are transferred to their parents, who use the cash to buy some of the food, housing, clothing - "stuff" - their children are producing.

Years later, the original workers become retirees -- but in a more productive economy, the economy their labor helped to create. In the economy they were born into, maybe it took 10 workers to produce a pound of corn. Now it takes 2. Etc.

Their children are now the workers. Because of their parents' labor, they are healthier, better educated, etc., & laboring in a more productive economy.

Thus there's no "requirement" for "more & more" workers. What matters is how productive the economy is, & how much of this productivity is returned to labor as wages.

SS could be financed quite adequately with a declining number of workers, so long as there were still productivity improvements.

Your entire conceptualization is in error.

Furthermore, the SSTF & the general budget ARE separate, & you can see that they are in every damn Trustees' report as well as Federal Budget Reporting.

Furthermore, the US is not "broke", & cannot be "broke" in any sense that matters, so long as it has resources & workers, both of which it is well-blessed with.

Furthermore, per your definition of "broke", the US has been "broke" (in debt) ALMOST EVERY YEAR SINCE ITS FOUNDATION.

Somehow it managed to muddle along for over 200 years without turning into zimbabwe.


SS financing is perfectly solid. The only problem is that there are certain interests who wish to kill the program & steal the last 30 years' worth of contributions (the assets of the TF).

YOUR NARRATIVE FURTHERS THEIR WISHES.

[galileoreloaded]

22. Ok. Good, now we are getting somewhere.

You wrote: "So does your mortgage." Mortgages, social systems, and currencies default and implode/explode. Always, Every Time, Period. You really think we are that different from history?? Look around. How many people are defaulting on their mortgages?? Let me tell you that it is enough to wipe out all the money in the world, had it not been for coordinated money supply expansion from the FED, ECB, and the Asians. The world, including the social safety net, already exploded, but like an astronomer millions of light years away, we haven't seen the bright flash of light yet.

Argument over, and with your own words. The rest of your statement is a gross rationalization. The mortgage analogy is golden, though.

Your assumption, is that the systems exists in a linear paradigm. False.

You are assuming that the linear progression of economic structures is infinite. Unfortunately, you haven't accounted for sovereign default, which is both possible AND probable. Things are until they aren't anymore.

[Hannah Bell]

23. Your post is gobbledygook, sorry.

[galileoreloaded]

24. OK, OK your right. SS will be there forever. But according to this IMF document, what will it buy??

I thought religion was the last refuge of the scoundrel, but apparently reasoned analysis and insights that don't lockstep with brother Karl are.


http://www.zerohedge.com/sites/default/files/IMF%20Calvo%20Devaluation.pdf

[Hannah Bell]

25. i never asserted anything close to "SS will be there forever." It won't if people follow your type

of gobbledygook, factless, reasonless, non-insightful, non-analysis.




You started out by claiming that unless there was a "secret account" filled with "money," (by which i assume you invision a vault filled with dollar bills), SS had no assets - a ridiculous claim, economically. There's no difference between a vault filled with government iou's & a vault filled with government dollar bills, though i suppose you don't get it.

Now you move on to an imf document speculating on how to reduce the debt through inflation. Big news: debt is *always* reduced through inflation. It's immaterial. More material: do wages keep up with inflation.


PS: SS is indexed for inflation. Just one of its many merits. Though the IMF document you link has no bearing on anything at this juncture, as we're currently fighting deflation rather than inflation.


You're all over the map, & seemingly can't follow a single line to its conclusion. Challenged on one thing, you move on to another irrelevant item.

[Hannah Bell]

18. dupe

[galileoreloaded]

12. And distinguish between assets and liabilities. n/t

[NoNothing]

13. They're assets to the trust fund

Liabilities to the treasury. I thought I made that clear.

[galileoreloaded]

15. I felt it necessary to clarify. Also, I agree with your greater fool theory. n/t

[Enthusiast]

5. Social security funds gave

the wealthy two enormous tax cuts, one under Reagan and one under Dubya. And social security is paying for two wars. The money is owed to social security recipients. Fuck these greedy MIC wealthy assholes. They owe us!

[madrchsod]

4. oh well...at least twice a year some dumb fuck writes the same crap...

a vain attempt to scare the geezers like me....sorry we ain`t that stupid.

[Samantha]

9. The CBO lists this debt of the government to the SS trust fund

in the 12 trillion debt Obama is blamed for. The cost of the Iraqi war, previously kept off record by Bush*, the SS trust fund debt, and Medicare Part D are among the main components. So when people say everything is on the table, our first response should be to ask where's our 2.5 trillion the government owes the fund.

Sam

[ThomWV]

10. Plus, consider the "illegals" who pay into it and will never get to draw benefits.

[troubledamerican]

26. Reagan/Greenspan spent it, then Saturday Night Live mocked Al Gore's "Lockbox"

Ha ha ha that was so funny

Thanx Saturday Night Live