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View Diary: Republican Debate Night (Tea Party Express edition) (84 comments)

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  •  This debate gets confusing.. (0+ / 0-)

    .. because it's in nobody's best interest to be completely forthright.

    The problem I have is with attempts to discuss the national debt AND claim there is no money in the trust fund.  

    Agreed, as in, one has nothing to do with the other,, EXCEPT, that the entity that would repay the T-bills, is $15,000,000,000,000 in debt, and running an annual deficit of more than $1,000,000,000,000.. it has NO money to commence the repayment... the act of repaying constitutes new borrowing. (and will throw a wrench into the Super Committee's work)...

    Think back again to my point about it being intra-governmental loans.. and how it wouldn't matter, fiscally, if the bonds were incinerated.. one way or another, the money comes out of the general fund, which of course constitutes new borrowing/debt..

    Or.. in simplest terms.. money collected for SS, has been spent elsewhere.. not invested.. spent, as in gone.

    A useful reference from the CBO:

    Trust funds can be useful mechanisms for monitoring the balance between earmarked receipts and a program's spending, but they are basically an accounting device, and their balances, even if "invested" in Treasury securities, provide the government with no resources for meeting future funding commitments.(32) When those payments come due, the government must finance them in the same way that it finances other commitments--through taxes or borrowing from the public. Thus, assessing the state of the federal government's future finances requires measuring such commitments independently of their funding status

    http://www.cbo.gov/...

    •  really new borrowing? (0+ / 0-)
      Agreed, as in, one has nothing to do with the other,, EXCEPT, that the entity that would repay the T-bills, is $15,000,000,000,000 in debt, and running an annual deficit of more than $1,000,000,000,000.. it has NO money to commence the repayment... the act of repaying constitutes new borrowing. (and will throw a wrench into the Super Committee's work)...

      Does it really constitute new borrowing? The general fund owes money to the social security trust fund. If it makes a payment of X to the social security trust fund than the national debt goes down by X. If it then borrows the money from some other source to cover the debt then the national debt goes back up by X. The end result is that the government debt (the number the politicians discuss) stays the same.

      If alternately you incinerate the bonds the government debt goes down as soon as you do so, and we are well under the current debt limit (as you just defaulted on a loan essentially). Essentially the same from a pragmatic standpoint, you now have to pay the same amount of money over time out of the general fund.

      The problem I have is treating it as if you can incinerate the bonds, roll the obligations associated with the trust fund onto the general fund and NOT reduce the debt by the amount of the incinerated bonds. From the standpoint of the general fund, you either have debt to the trust fund, or obligations that the trust fund is to cover, not both.

      Think of it this way.. If I borrow $1 million from you and then you decide you need the money back for some purpose and I get a $1 million loan from someone else to pay you back I am still only in debt $1 million. If we destroy my obligation to pay you and instead I assume the responsibility to distribute the $1 million from you then I am no longer in debt but I have future obligations which require me to make payments (basically the same as being in debt). In no case does the amount of debt go up.

      Trust funds can be useful mechanisms for monitoring the balance between earmarked receipts and a program's spending, but they are basically an accounting device, and their balances, even if "invested" in Treasury securities, provide the government with no resources for meeting future funding commitments.(32) When those payments come due, the government must finance them in the same way that it finances other commitments--through taxes or borrowing from the public. Thus, assessing the state of the federal government's future finances requires measuring such commitments independently of their funding status

      True, but also the debt is artificially increased by the trust fund (as it shows the balance of the fund as "debt"). Perhaps it would be best to quote a lower debt number (deducting off the amount of the trust fund) and then discuss future social security obligations. However, that ignores the fact that a specific tax was set up and money set aside to pay for future obligations at the same time as massive tax cuts led to the start of rampant deficits. The trust fund does provide clarity with regards to the source of money anyhow.

      •  The point of incineration.. (0+ / 0-)

        .. is just to show that (as stated clearly by the CBO), bonds by intra-governmental lending, are really just ledger entries.. noting that the money was collected in the programs name. They aren't an asset, nor a debt,  when the lender/borrower are one in the same (U.S. Treasury)..  As in.. whether or not those bonds are there, the act of paying SS from them, requires new cash from the treasury, today...  new debt..

        The "fogging" of the issue, is to distract from reality.. that the money collected in the name of SS, was spent elswhere,, caint un-spend it.

        •  but, still total debt stays the same? (0+ / 0-)
          .. is just to show that (as stated clearly by the CBO), bonds by intra-governmental lending, are really just ledger entries.. noting that the money was collected in the programs name. They aren't an asset, nor a debt,  when the lender/borrower are one in the same (U.S. Treasury)..  As in.. whether or not those bonds are there, the act of paying SS from them, requires new cash from the treasury, today...  new debt..

          It is NEW debt yes, but do we agree that the TOTAL debt would not go up as currently whether it is just ledger entries or not the money owed to the social security trust fund is currently included in the national debt?

          •  Here.. (0+ / 0-)

            http://www.gao.gov/...

             

            Only debt held by the public is reported as a liability on the consolidated financial statements of the United States government.. Debt held by government accounts is an asset to those accounts but a liability to the Treasury; they offset each other in the consolidated financial statements.

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