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View Diary: Should Americans Forgive the $2.5 Trillion Borrowed From Social Security? (181 comments)

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  •  And this is why no plan to "strengthen SS" that (9+ / 0-)

    causes SS to own more intragovernmental debt should be considered until such time as SS needs the money to maintain promised levels of benefits and keep a 1-year reserve in the trust fund.

    Not that intergovernmental debt is a fiscal problem. It's a political problem. All of the Republicans, and more than a few Democrats, see SS's surpluses as "free money" they can decline to repay with a wave of a statutory wand.

    The best thing to do with SS is go full gridlock and do nothing for 25 or so years, and then make adjustments when the trust fund dips below the 1-year reserve.

    Non enim propter gloriam, diuicias aut honores pugnamus set propter libertatem solummodo quam Nemo bonus nisi simul cum vita amittit. -Declaration of Arbroath

    by Robobagpiper on Mon Dec 03, 2012 at 05:43:17 AM PST

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    •  Thank you. Agreed. It's not like the Republicans (3+ / 0-)
      Recommended by:
      WiddieDawg, ColoTim, DvCM

      don't know what they're doing.  I don't know the details but didn't they require that the US Post Office fund it's retirement benefits to 75 years of solvency (and in the bargain totally F up any chance of profitability - always their real goal.)  The point is, for the political angle, there has to be a happy medium between spending the revenue without a second thought, i.e, no provision for repaying it, and imposing safeguards against risk that create more risk than they mitigate.  

      The Trust Funds own a security type known as a "Government Account Series" almost exclusively.  If needed, the Fed could conceivably purchase them for its account so the risk is minimal.  The sum is too big though to ignore any risk no matter how small.

      "Those who deny freedom to others, deserve it not for themselves." - Abraham Lincoln

      by leftreborn on Mon Dec 03, 2012 at 07:39:57 AM PST

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      •  You know more about a lot of this stuff than I do. (1+ / 0-)
        Recommended by:
        leftreborn

        And this is a really good diary.  

        However, when you make remarks like the above, I keep having a question in my mind....

        What's the upshot considering our monetary system?

        Fiat money?  

        •  The upshot --- (2+ / 0-)
          Recommended by:
          FindingMyVoice, DvCM

          Thanks for your comments on here, btw, and I think you could educate me.  

          The monetary system is apolitical. It just intersects with politics but partisans try to adopt it and use it for their own purposes.  Among conservatives there's a growing chorus about the Social Security funds that were borrowed and spent.  (A panelist who appeared on Chris Hayes over the weekend is one of them.  De Rugy is her name.)  

          The tale they tell is money borrowed, money spent, all gone, whoever wants more will have to borrow it.  You can see this in the context of modern monetary theory and you can also see it as a high-stakes version of an old-time grift.
          The grifter relied on good looks, charm, a $20 bill and a well rehearsed routine at the cash register of any little shop.  In modern monetary theory you know that the money isn't 'gone.'  Money isn't so much created as it is circulated.  I'm careful about referring to monetary policies as creation unless there really is creation.  Before that I think about circulation.  What disappears here, shows up there.

          I think I saw accounting in a comment of yours.  Whenever anyone asks me about modern monetary theory I start with very basic accounting principles.  The credit and debit ledger which must always balance to zero.  There must be offset or there will be problems.

          Let's say the US needs the money that was borrowed and spent to pay beneficiaries because the revenue collected is no longer sufficient.  The Treasury just prints money each month to cover benefit payments. At each printing, there must be a new entry on the ledger.  The entries never pair off to close out the "position" and the balance is never zeroed out.  The creation of new money circulated into economy eventually has an effect of its own unless there is something else to offset it.  

          When you talk about the upshot, the Treasury borrowed $2.5 trillion and its on the ledger.  It must be balanced by an offsetting entry eventually by repaying the amount.  How it happens isn't as important as the need for it to happen.  

          If the Fed got involved in it, which is a very remote possibility, maybe too remote to even suggest.  But if it's necessary to prepare for all contingencies maybe it's worth exploring.  There's no precedent for it.  It would involve a three-way transaction between the Treasury, the trust fund, and the Fed.  

          You can picture this as a spreadsheet with 6 columns, two each for the three participants.  There would be a series of steps, one on each row.  All you do is move the debits and credits around to where they need to be.  The tricky part is rememberiing that the Fed will not dispense any money to pay for its involvement in any transaction.  Instead, it will always rely on positions closing themselves based on the full faith and credit of the United States of America.  When its bond holdings reach maturity it won't be paid the principal due either.  That's how its ledger would finally balance.

          "Those who deny freedom to others, deserve it not for themselves." - Abraham Lincoln

          by leftreborn on Mon Dec 03, 2012 at 10:01:00 AM PST

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      •  The reason they did that to the Post Office (3+ / 0-)
        Recommended by:
        leftreborn, astrogeology girl, DvCM

        (other than to destroy a government agency that was succeeding at its mission - can't have that) was because eventually they want to privatize the whole thing and sell off a huge 75 year pension plan that will then be raided by the purchaser in the way Bain Capital has destroyed many companies through vulture capitalism.

        If the Post Office becomes less and less needed (due to email and other efficiencies) then the staff will get fewer and fewer and that 75 year pension setup will become more money than is needed, so they'll "free up those funds" in the form of bonuses to the bigwigs.  Not that they'll keep funding the pensions anyway - the raiders will be long gone before 75 years is up.

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