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View Diary: Failing To Respect The Third Rail (290 comments)

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  •  That's not exactly so (22+ / 0-)

    The Social Security Trust Fund balances are projected to grow until 2020, even under the Trustees’ pessimistic economic assumptions, because interest earnings will exceed trust fund asset redemption.  After that date, some of the Treasury securities in the trust funds would be redeemed each year to ensure all scheduled benefits could be paid.  The Treasury would  have to raise taxes or borrow additional money to redeem these bonds.  In all likelihood, they would borrow the funds.  However, that doesn’t mean the country would be taking on more debt.  Treasury would merely be exchanging one creditor for another.  The debt  on the books which was owed to the Social Security Trust Funds would be paid off, replaced by bonds purchased by individuals, banks, insurance companies, or other countries.  So debt wouldn’t be increased, just the creditors changed.

    •  In balance sheet terms it's an even swap (11+ / 0-)

      but the cashflows will be going to SS beneficiaries instead of defense contractors, corporate welfare, or tax cuts for the wealthy.

      And the SS bonds are debt Congress didn't have to sell - the proceeds were collected from all of us. To swap in new debt, they'll have to sell bonds to other people in addition to "normal" government debt, or raise taxes.

      I'm not sure about the Trust Fund balances now - one poster upthread says collections are exceeding outlays and you're saying it's interest covering outlays. Collections don't affect the budget, but paying interest does.

      At any rate, if the government honors its obligations to beneficiaries (moral, not legal) and doesn't cut benefits, then who benefits from the Federal budget is going to change in coming years. I think in addition to wanting to get access to SS funds, those changes in the budget - expenditure shifts or increased taxes - are what Wall Street, Peterson, Simpson, Bowles, et al are concerned about.

      There's money out there they want to get their hands on, and cash flows they don't want to lose. Either way, they want to screw the American people if they can get away with it.

      Modern revolutions have succeeded because of solidarity, not force.

      by badger on Wed Apr 10, 2013 at 05:09:35 PM PDT

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      •  but the interest is paid whether SS is in surplus (1+ / 0-)
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        or not.

        As you said, when SS draws down the trust fund by selling bonds (in about 10 years), other people are happy to buy those bonds. The rest of the budget isn't affected.

        In other words, SS doesn't affect the budget. (Other than being a convenient buyer of bonds.)

        •  But again, in terms of cashflow (1+ / 0-)
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          if collections exceed outlays, the government is paying interest to itself - it's an accounting entry, more or less.

          If the interest is instead paying benefits, it's paid to beneficiaries, and that's a real outflow.

          It's the difference between an accounts payable entry and actually writing a check. Either has the same effect on the value of the enterprise, but in reality their effects are a lot different.

          Viewing the budget as a financial document, the distinction maybe isn't significant, but in one case the Treasury is cutting checks and in the other case it isn't.

          Modern revolutions have succeeded because of solidarity, not force.

          by badger on Wed Apr 10, 2013 at 08:28:26 PM PDT

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        •  The interest is being paid with more securities (0+ / 0-)
          In addition, interest on debt held by the public is paid in cash and represents a burden on current taxpayers. It reflects the amount the federal government pays to its outside creditors. In contrast, intragovernmental debt holdings perform an accounting function but typically do not require cash payments from the current budget or represent a burden on the current economy.

          They have been doing it going back at least to 2003. From 2003 to 2007 Bush spent nearly a trillion dollars in interest that should have gone into SS. There reasoning is that we don't need to pay it since we owe it to ourselves.

          Some people have short memories

          by lenzy1000 on Thu Apr 11, 2013 at 01:41:26 AM PDT

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