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View Diary: Fiscal cliff discussions break down after Republicans demand Social Security cuts (249 comments)

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  •  Please explain... (0+ / 0-) Social Security was "raided" to pay for military activities.

    The trust fund has the same assets as it would have had without any of our military expenditures in the past twenty years. (That is of course assuming that people who had jobs building planes and weapons would have had jobs in other sectors of the economy so would have, as employed persons, still been paying into Social Security and gaining benefit credits).

    This "raided for wars" meme is getting so tiring.

    •  weeeeellll (1+ / 0-)
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      it was never put inti an Al Gore style lockbox, so it was borrowed against.

      Too many IOUs now in the fund

      •  And those IOUs are what the idjit rethugs (1+ / 0-)
        Recommended by:

        rail against all the time, although you have to listen closely to understand just what they are saying.  But it isn't the LOAN but the having to pay it back!

        American Television is a vast sea of stupid. -xxdr zombiexx

        by glitterscale on Sun Dec 30, 2012 at 08:44:27 PM PST

        [ Parent ]

      •  The trust fund... (0+ / 0-), by law, invested in (special) US Government Securities.

        The portion of the fund that isn't needed for day to day operations is invested in something (else inflation would just eat away at it). (You don't suppose that they have a mattress somewhere stuffed with Trillion Dollar Coins do you?). It just happens to be that the gold standard for safe investments is (was?) US Securities so that's what the trustees must invest in.

        Sure, we could have allowed the trustees to invest in Enron, Solyndra, AIG,,, GM, Toyota, or a number of other things and the Federal government would then had to borrow more from Chinese investors (at higher interest rates as a result of increased supply of bonds), but that would be speculation and too risky for a pension fund.

        If the US defaults on its debt (in a real, and permanent, way that requires restructuring as in Greece) then we have a problem. If that happens due to excessive debt caused by wars, or stimulus, or bailouts, or cash-for-clunkers, or first time home buyer credits, it really doesn't matter -- we are all (to use a technical term) screwed -- and Social Security is screwed along with us.

        The amount of US debt has NO effect on the trust fund unless it causes a default. Indeed, having some of our debt invested in by the Social Security Trust Fund actually gives us a last ditch way to save from collapse (the trust fund might be able to finagle a way by if we default and can't fix it for six months, investors in China WON'T).

        The claim that the Social Security fund was raided for wars is identical to saying that it was raided for extending unemployment benefits or paying the POTUS.

        Where would YOU like the trustees to invest the excess funds?

        Why don't people bother to understand this? Those who don't bother just don't care I suppose.

        •  No it's not the same. (0+ / 0-)

          The AMOUNTS are different and it is the amounts that cause the problems (as in Greece) and its the AMOUNTS we use in war that completely dwarf UI benefits and (??? can't believe you mentioned this) the presidents 400K annual salary. Are you goiung to talk about how we raid SS for NPR now? Ridiculous.

          Numbers count in discussions of fiscal policy. And it's the numbers that make it difficult to pay our debts to ourselves.

          So, we understand. The GOP wants us to think we don't so they can say that SS is in trouble. But we understand.

          •  NO expenditure... (0+ / 0-)

            ..."raids" the SS Trust Fund.

            The Trust Fund invests in US Securities. If that's a bad idea, we just need to change the law so they can invest in other things (perhaps the next AIG, or the next WebVan, or Apple, or Zynga) and can't invest in US Securities. The Treasury will just put those bonds up for auction on the open market to be bought by other investors (yes, it probably will cost us a bit higher interest -- resulting in us have to temper expenditures somewhat).

            It wouldn't impact the debt one bit except to the extent that the increased cost of servicing the debt due to higher interest rates would cut into funds available for various government programs. If US Securities are a bad investment due to risk of default, it's probably too late to save our economy anyway and we need to go to China to ask for their help and see if perhaps we can merge SS with their old age retirement system in exchange for letting them appoint a supermajority to the House and the Senate.

          •  BTW, it doesn't matter... (0+ / 0-)
            the numbers that make it difficult to pay our debts to ourselves.
            ...if we have to pay it to ourselves or Chinese investors. We still have to pay it or face the collapse of the US economy and accelerating the decline of our position in the world economy. We really can't expect anyone to bail us out and it doesn't matter much who we borrowed from.
            •  I agree mostly, however (0+ / 0-)

              you seem to be discounting the considerable effect of higher interest rates. And...a collapse due to massive debt starts with that and happens in slow motion first.....then becomes exponential.

              •  Indeed, interest rate increases... (0+ / 0-)

                ...can create a problem due to the debt. Interest rates will go up (and, probably, inflation as well). I think about 6% of our federal budget goes to paying interest. If the average interest rates on outstanding treasuries doubles, that number would increase to about 12% and so on. Of course, if inflation were to also go up by a similar amount, the principal is being devalued so the net effect (over an extended period of time) is much less significant in real dollars.

                However, I don't see how this relates to Social Security in particular. If interest and inflation rates run neck-and-neck, it wouldn't have much impact on SS (the trust fund would, over time, get more interest but benefits would also go up due to inflation). If interest outstrips inflation, SS wins because as they roll over their special issue treasuries, they get higher interest rates but benefits grow at the slower inflation rate. And, if inflation outstrips interest rates, SS loses. But this is true no matter what they were investing the surplus in.

                If there is a problem, it's the debt, not Social Security.

                The debt over $50,000 per resident (adults and children alike). This is $200,000 for a family of four which is approximately the median house price in the United States. It's roughly (albeit very roughly) like "the median family" having a second house (or, for those who rent, a first house) which stands vacant with a mortgage for 100% of its value and with the attendant monthly mortgage payment (sans the mortgage deduction on their income taxes and sans paying off any principal).

                The Social Security trust fund and benefit levels are completely separate from the debt unless we discard the whole idea of Social Security being "self supporting" and treat it more like a traditional welfare program funded out of general funds. Until/if we reach that time, attempts on either side of the fence to mix the two is disingenuous and distract from the real issues of Social Security as it works today - those issues of course require that Social Security raise more revenue and/or cut benefits.

                •  I have already explained how they are related as (0+ / 0-)

                  well as I am able. Trying to discount the mixing as disingenuous is to live in an imaginary world devoid of politics. Treating it as a welfare program is EXACTLY what the REPublicans did during Bush (and it was a massive fail). As I said before. Politics happens in the real world, despite what is in the actual spreadsheets.

                  Thanks for the discussion.

        •  I think what people mean by this is that Bush (2+ / 0-)
          Recommended by:
          squarewheel, IM

          acted like SS was revenue instead of a trust fund that had to be paid back. At the same time he treated the Iraq war as extra budgetary, and the GOP would rail about paying back SS.

          Fuzzy math and spin, but I see your point that it has devolved into a soundbyte and the nuance is lost.

          •  One can fault the wars... (0+ / 0-)

            ...without dramatizing it by dragging the SS trust fund into it. Just as one can fault the debt without dragging the SS Trust Fund into it (except, if one desires, to note that it should be allowed to invest in Enron, Apple, GM, WebVan, etc. because that is so obviously a better idea.)

            Yes, the debt is too high (IMHO). The wars are a partial, but certainly not the sole, cause of that.

            The only reason this might impact the SS Trust Fund is if the US defaults on its debt. It really didn't matter if Chinese investors or the SS Trust Fund had invested in the defaulting debt -- the big problem is that we defaulted.

            The common view here is "the debt isn't too high, revenues are too low and that's easily fixed by [insert favorite solution here]". If that's the case, the SS trust fund is at no risk.

            All that money the SS trust fund invested in US Securities counts in the debt -- it's not hidden to investors who are still willing to take an (inflation adjusted) loss in exchange for safety.

            •  I get all of that (0+ / 0-)

              What you seem to be ignoring is that a major Republican solution to debt is to reduce the size of Social Security....the entity we owe. THAT is the raid.

              The history linking wars and SS- cutting was written during the Bush administration.

              You cannot just look at the economics and ignore the politics. It is unrealistic. We are unable to cut the Chinese. SSI....yes, it was attempted and will be again. It is indeed an attempted raid and is slimy.

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