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

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  •  Laundered, not a wash (0+ / 0-)

    You're right, of course, that if you use the total outstanding debt, the special issue bonds are included.

    My point, probably made poorly, was that the original borrowing from SocSec was a kind of financial sleight-of-hand that resulted in the Treasury having essentially borrowed from its left pocket in order to pay out from its right, creating the illusion that it could spend the money while still retaining it. Both at the time of the borrowing and the special bond issuance and up to the present moment, no deficit has been recorded in the budget. At some future point, when the SocSec bonds need to be paid off, all of a sudden it will turn out that there is a previously-unaccounted-for hole that will form a significant part of that year's budget. [As a side issue, in addition, there are/will be no further use of SocSec as a source of invisible budgetary funding].

    So, to my mind it's not really a wash. There is no accounted-for debt to exchange. The failure to properly book the debt in first place has in reality pushed its true accounting forward to the time when we will need to issue ordinary Treasury debt to pay off SocSec recipients from general tax revenues.

    In a time of steadily rising deficits at all levels of government, and given a probable 20+ years to recover from the present recession, 2023 looks to be a foreseeable disaster coming straight down the pike. And we haven't even mentioned the issue of what sorts of interest might be demanded for those T-bills in the future.

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