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First some definitional points.
Total Public Debt = Debt Subject to the Limit. Or more properly the two track precisely (Green and Blue lines in first figure).
Total Public Debt = Federal Debt = National Debt (as shown as topline number on the National Debt Clock) When you Google any or all of those terms you are likely to come up with the same $16.4 trillion.

With that settled I want to talk some policy implications below the fold, particularly as all this relates to Social Security and the Debt Limit.

The second screen shot is from the Treasury's Debt to the Penny web application. This application tracks to the literal penny Total Public Debt and its components up to the close of books the last day but one, that is the most current data available today (Friday) is from the 2nd (Wednesday).

The first thing of note is that 'Total Public Debt' is simply the sum of 'Debt Held by the Public' and 'Intragovernmental Holdings' or roughly $11.6 trillion plus $4.8 trillion = $16.4 trillion. Now 'Intragovernmental Holdings' are mostly made up of assets of the nineteen or so Federal Trust Funds of which the largest are the two Social Security Trust Funds (OAS and DI, often tracked together as OASDI), Medicare Part A (HI) plus Federal Civil and Military Retirement Trust Funds. And specifically something more than half of that $4.8 trillion is made up of the $2.6 trillion combined in OASDI.

My appointment just showed up so I will have to take this up in comments later. But let me leave you with this. Any increase in net income to Social Security whether than comes in the form of cap increases (to increase revenue) or means testing or Chained-CPI (to reduce cost) has the result of increasing Trust Fund balances. Which means increasing the investment in Special Issue Treasuries. Which increases overall Intragovernmental Holdings. Which added to Debt Held by the Public increases Total Public Debt. Which adds to Debt Subject to the Limit.

Put that series of identities together and the fatuity of dragging Social Security into a discussion of raising the Debt Limit becomes apparent. To the extent that folk want to maintain the Debt Limit as is rather paradoxically the only way to have Social Security contribute to that is to pay down the Trust Fund. Which can only be done by decreasing FICA or increasing benefits. Which to say the least are not the policy options being put on the table.

It is not true to say that Social Security doesn't contribute to the deficit or the debt. But as my previous post shows it currently serves to reduce the former and as this post shows any attempts to cut benefits actually increases the latter. So exactly why is it even on the agenda for the Debt Limit negotiations?

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Comment Preferences

  •  Tip Jar (7+ / 0-) - SocSec.Defender at - founder DK Social Security Defenders group - (hmm is there a theme emerging here?)

    by Bruce Webb on Fri Jan 04, 2013 at 09:35:21 AM PST

  •  Thank you (3+ / 0-)
    Recommended by:
    714day, tardis10, whaddaya

    I was wondering about this the other day.  

    Cutting SS benefits increases the revenue in the SS Trust Fund.  Since monies in the SS Trust Fund are loaned to the US Treasury, seems that would increase the amount of US debt.  

    The secret to reducing federal debt lies in raising revenue outside of the SS Trust Fund and/or reducing spending.

    As the recent IMF report shows,austerity alone actually hampers economic growth and makes it more difficult to pay down debt.  

    So, the best way to reduce the deficit is to stimulate economic growth and put people back to work in good paying jobs - a strategy that has the greatest multiplier effect.

    Krugman, Stiglitz and others said this back in 2009, when the economy went to hell.

    Democratic Leaders must be very clear they stand with the working class of our country. Democrats must hold the line in demanding that deficit reduction is done fairly -- not on the backs of the elderly, the sick, children and the poor.

    by Betty Pinson on Fri Jan 04, 2013 at 09:47:21 AM PST

    •  More Jobs! At Better Wages! (1+ / 0-)
      Recommended by:

      Everything gets better then.

      I spend a certain amount of time butting heads with fellow progressives who have bought into the idea that the 'solution' to Social Security 'crisis' is just to make the revenue stream more progressive: "lift the cap!" "tax the rich!". As if the problem is just one of redistribution.

      But that is the wrong way about, it tends to concede that the initial distribution is just set by what economists call the Iron Law of Wages which just makes any attempts to redress income inequality by wage increases just an appeal to charity. When from the perspective of labor history we are instead seeing wage levels as being set not primarily via some neutral law of marginal labor productivity but instead by pure power imbalances.

      One of the earliest attempts to fix wages in England was the Statute of Labourers of 1351 in the wake of the Black Death. The plague had shifted the supply of labor sharply downwards which by the law of supply and demand should have served to drive the price of labor up. Instead the Statute simply froze wages at pre-plague levels and forbid both workers and employers from breaking the freeze. And in one form or another the Statute and its successors remained in force right through the 19th century and was used time and again by employers to repress any organized attempt to improve wages via the use of State police and even military power. That is collective bargaining was illegal and rigorously prosecuted. On the other hand collusive wage fixing by employers was also illegal and yet over the hundreds of years the Statute and successors were in effect there were no successful prosecutions for that violation. And precious few gestures even in that direction.

      Yet employers continue to piously 'explain' that wages just seek their natural level via the operation of natural law all while ignoring the fact that the Invisible Hand often wields the All Too Visible Sword of State Power.

      Labor doesn't need the charity of capital. And we don't even need to go to the extremes of asserting the equally fanciful Theory of Labor Value. What workers need is a recognition that the various inputs to productivity are not being rewarded in proportion to their actual contribution, mostly because the gatekeepers of wages are the contributers of capital and whose self interest rests in maximizing their own  share. In fact if pressed the Randians would insist that such self-interest was both natural and virtuous. As such their insistence that there are no power based distortion in wage setting is ridiculous on its face.

      More Jobs at Better Wages. Enforced via the ballot box if need be. Social Democracy doesn't have to and ideally isn't purely equivalent to State Socialism. Labor doesn't need the means of production to be owned by the State, history doesn't show that we get a better deal from appartchniks than capitalist managers, what we need is the thumb of the State being removed from the scales where it operates in the interest of the wage setters at the expense of wage takers.

      Take away that Thumb and Social Security and lots of other things will be just fine. - SocSec.Defender at - founder DK Social Security Defenders group - (hmm is there a theme emerging here?)

      by Bruce Webb on Fri Jan 04, 2013 at 10:53:38 AM PST

      [ Parent ]

      •  Odd, isn't it, how reducing benefit payments (0+ / 0-)

        actually increases the total national debt instead of reducing it. Just one more example of how common sense can produce results that are the opposite of what was sought. Thanks for this excellent diary. Whaddaya

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