Here's A Depressing Thought... Love Him Or Hate Him... Alan Simpson May Be Right...

[WillyT]

he has said over and over in the past, that Congress has already spent the Social Security Trust fund...

Maybe THIS explains why our own Democratic Defenders may just sign off on a fucked up deal.

We shall see.

:shrug:

[gateley]

1. He's been correct on some things, and you're right, he may

be right about this. :shrug:

[dkf]

6. What is the "may" about this?

Did we use it to fund regular government operations or not?

[Honeycombe8]

51. Bush took the SS funds years ago. This is part of the Republican Plan.

Don't forget that Simpson views things as the Republican former politician that he is. He can't help it.

But the funds were taken ("borrowed") years ago. The SS trust fund is separate from the federal budget. The SS trust fund is now a debt that the U.S. is obligated to pay (part of the debt for the debt ceiling).

Other Presidents have borrowed from the SS trust fund before.

Simpson, I think, sees a window of opportunity here to privatize Social Security. He would be foolish not to take advantage of the conditions right now. They are ripe to end Social Security.

He's right about some things. He's wrong about this.

[philly_bob]

52. Remember how they ridiculed Gore and his SS "lockbox?" (nt)

[dkf]

2. Yes they did. And if they raise the cap more will be raised and spent...

And our kids will be obligated to pay it all back.

[Guy Whitey Corngood]

3. I do hate

his smug fucking face:

[marmar]

4. If true, it's time.......

[Kaleva]

5. It's my guess that Congress does not want to pay back what it took from the Trust Fund.

[roamer65]

7. Simpson is a moron.

He acts like it is spent and cannot be repaid.

The SS trust fund will be repaid in full...with freshly created dollars. You will get your benefits, but you'll be lucky if they buy you a loaf of bread.

Simpson has no idea how fiat money works...lol.

[girl gone mad]

12. Hyperinflation is not a serious threat.

But let's just consider SS right now. The funds are currently accounted for on the balance sheet. It isn't exactly new money creation when the bonds already exist and the people who own them have planned their finances in advance accordingly.

[roamer65]

18. The real inflation rate...in 1980 terms...is around 10 plus % right now.

Keep creating fiat money and its value keeps dropping. Supply and demand.

[girl gone mad]

27. Money supply has been relatively stable.

Private debt deleveraging is still the dominant force in our economy. Our government isn't printing fast enough, which is why we've got high unemployment and asset deflation. I think you're mistaking a few bubbles in commodities for inflation. It may have the same of effect on the consumer's bottom line, but it isn't the true demand-driven price inflation indicative of a growing economy.

[originalpckelly]

38. The value of assets (in various areas) has deflated because it was too high.

Not because it was genuinely higher. That's the problem.

We have high unemployment because money is not being used to create jobs, just to consolidate companies with actual cash on hand instead of using leveraging as was done frequently and excessively in the last decade.

You're seeing resource hoarding, not an actual lack of money.

If the companies were cash poor, I'd agree, but they are cash rich. People are not receiving the benefits of their labor, so they don't have enough money to go out and buy something. The money is going to the people at the top of the economy, the problem is that they are not spending it on things that "trickle down" to the middle class and poor.

[originalpckelly]

23. Hyperinflation is a huge threat when you consider the unfunded liabilities of these programs.

We obviously can't cut them, but we can't just print money, it will cause hyperinflation. It is a threat.

[roamer65]

28. ...and people wonder why two boxes of Triscut wheat thins...

...and a jar of Cheez Whiz costs $15 nowadays. Wake up people. They are destroying your country and currency as we sleep.

[girl gone mad]

34. Blame Nabisco and Kraft.

Wheat prices have fallen almost 20% since May. Dairy is also down big.

[girl gone mad]

29. We just "printed" $13 Trillion and gave it to Wall Street.

Where's the hyperinflation?

[roamer65]

33. It took nearly 10 years for the Vietnam War money creation...

to fuel the late 1970's stagflation. Don't worry, its coming.

[girl gone mad]

35. Maybe it's time to rethink your economic models if the cause and effect take decades..

to establish.

[roamer65]

37. Maybe you need to bone up on history.

Go look at the charts.

[dkf]

26. Are you talking about these bonds?

$2.5 trillion in Social Security bonds stored in filing cabinet in downtown Parkersburg, W.Va.

PARKERSBURG, W.Va. (AP) -- The retirement nest egg of an entire generation is stashed away in this small town along the Ohio River: $2.5 trillion in IOUs from the federal government, payable to the Social Security Administration.

It's time to start cashing them in.

For more than two decades, Social Security collected more money in payroll taxes than it paid out in benefits - billions more each year.

Not anymore. This year, for the first time since the 1980s, when Congress last overhauled Social Security, the retirement program is projected to pay out more in benefits than it collects in taxes - nearly $29 billion more.

Snip

Gore lost the election and never got his lockbox. But to illustrate the government's commitment to repaying Social Security, the Treasury Department has been issuing special bonds that earn interest for the retirement program. The bonds are unique because they are actually printed on paper, while other government bonds exist only in electronic form.

They are stored in a three-ring binder, locked in the bottom drawer of a white metal filing cabinet in the Parkersburg offices of Bureau of Public Debt. The agency, which is part of the Treasury Department, opened offices in Parkersburg in the 1950s as part of a plan to locate important government functions away from Washington, D.C., in case of an attack during the Cold War.

One bond is worth a little more than $15.1 billion and another is valued at just under $10.7 billion. In all, the agency has about $2.5 trillion in bonds, all backed by the full faith and credit of the U.S. government. But don't bother trying to steal them; they're nonnegotiable, which means they are worthless on the open market.

http://www.dispatch.com/live/content/local_news/stories/2010/03/14/social-check.html

[girl gone mad]

41. All of the SS liabilities are counted as assets on the other side of the ledger.

This is money that is owed to the American people. Payees receive an annual statement notifying them of the amounts they can expect to collect based on their reported earnings to date. Most people fully expect to receive this money, and plan out their finances and retirements based on that expectation. It's no different that a savings account in that respect.

The government paying these obligations to the American people as expected is not going to cause a hyperinflationary event.

[originalpckelly]

45. But the problem is that there is no there there.

That's why we're in trouble, because even if we do "print the money" there's not enough actual growth to support people actively working and the new retirees.

And there's no way to privatize it either, because this would act as a tax on workers in the economy. There is really no way out of this situation, except growing our way out.

But we can't do that with our native population, so we have to bring in new workers from other countries to back fill the lack of workers.

[girl gone mad]

47. We have 15% real unemployment now.

We do not have a lack of workers and we have plenty of room for growth.

[OHdem10]

8. There are IOUs starting with Reagan's Military Build UP.

Both parties have borrowed and apparently do not
want to have to pay the Fund back.

[MilesColtrane]

17. self deleted because I'm a moron

[originalpckelly]

24. But even then, it still wouldn't matter.

Even if you saved the money away, and you did not have economic capacity to back up the money released into the economy, it would actually cause inflation that way too.

[girl gone mad]

9. No, he's not right.

There is no reason for a sovereign currency regime to "save up" its own fiat money. You can complain that you're not happy about how the government spends, but in terms of basic economics, Simpson is dead wrong on this one. Our government is fully capable of meeting all of its financial obligations.

[originalpckelly]

13. Even your proposals are not worth a continental.

[girl gone mad]

14. Uh, ok.

:shrug:

[originalpckelly]

19. So, I have to explain?

In the early days of this nation we had a currency called the "Continental". The Congress printed too much of the damn stuff, and it devalued the currency. Basically.

If we did what you said, we'd be creating so much new money that it would cause, perhaps, hyperinflation.

Hence, the reference to the Continental, and the old phrase, "not worth a Continental."

We really have to find a way to grow out of this situation.

[girl gone mad]

46. Only the government and the banks can create dollars.

All of the money you have in your pocket came into existence because the government decided to spend or a bank decided to loan. The banks aren't loaning so the government has to spend or we won't grow.

I wasn't familiar with the expression "not worth a continental", thanks.

The reason the continental currency failed was because there was no effective means of retiring these bills after they were printed. The states collected few taxes (with lax enforcement) and the Continental Congress refused to accept continentals for payment of taxes, despite the efforts of Ben Franklin. The modern equivalent might be Zynga money, which will also eventually deflate away to nothing since there is no real way to destroy it.

[dkf]

16. So what was the purpose of the social security surplus?

[girl gone mad]

20. It would serve no purpose under a fiat system.

If you had a lemon tree that grew lemons whenever you clapped, would you keep a refrigerator full of lemons?

[dkf]

31. So would you agree then that it was an effort to flatten taxes?

It simply added a regressive tax on to a progressive tax system using the payout of social security as bait?

[WillyT]

22. Oh I Agree... But That's NOT What Is Being Sold, By The Leadership Of EITHER Party...

:shrug:

[originalpckelly]

25. The poster knows not how the economy works.

If you just print up money without goods/services to back it up in the economy, it will cause inflation. There will be too little supply for the increased demand.

But this too, is also the reason why "investing" doesn't work, because you'd basically be sapping productivity off of the economy, just to pay retirees another way, through a private system. It is no better for those who are still working and have to support those who are retired.

[girl gone mad]

39. Milton Friendman was a failure.

The correlation between government "printing" and inflation is indirect, at best. I know this is dogma for many now, but the hard data doesn't support Friedman's relentless assertion that "inflation is always and everywhere a monetary phenomenon".

We have tremendous slack in our productive capacity and double digit unemployment. As long as these factors exist, inflationary forces will remain at bay. In a healthy economy, inflation might become a threat, but the government has effective means of combating inflation.

Inflationistas have been giving Japan the same spiel for decades, yet Japan still experiences deflation, despite their massive government "printing".

[originalpckelly]

43. Are you high?

If I give you ten dollars out of nowhere, and you go spend it, it unbalances the supply/demand ratio, and a price will naturally rise unless there is a new amount of supply added to account for the $10. That's how it works. It's not a theory, that's reality.

And inflation is not always a monetary phenomenon. That I agree with.

In any price we are unfortunately linking two different things:
supply/demand of the good and supply/demand of the money.

We basically treat two variables as if they are one in our system. It's basically our big problem.

It basically works out that the denominator (which should be one), were it a fraction, varies after a given time. Sometimes it's more than one, sometimes it's less. That's monetary inflation.

If you change the numerator, or the price of the actual good over time, that's just price inflation that is a result of either non-monetary demand increases or a supply shortage.

The slack in our productive capacity comes from an inherent inequality in wealth distribution. I could go through this with a game, but I won't because I'm tired. But I could post it as a thread sometime tomorrow, maybe in the evening. It should really be a YouTube video to properly explain it. But alas, I don't have a way to do that, so I'll have to come up with some kind of crappy ass way to do this.

But it does explain why you basically don't need to create new money and that in fact it's all a matter of wealth distribution.

In fact, if we are to expand the money supply now, it's like creating nitroglycerin, because once demand comes back, you'll see all this money come to life off of the sidelines and get back into the game. It will dramatically increase the amount of money actively bouncing around the economy (aka velocity), and we'll have massive inflation.

The real problem now, if you look at the numbers, is that there is a lack of money being used, not a lack of money. The velocity of money has dramatically fallen off.

[girl gone mad]

48. We're not really talking about printing up new money when we're talking about paying back SS.

The money is already accounted for. It's no different than the savings account you keep at your bank, in that sense. Bank of America doesn't have a 100% reserve ratio for these savings accounts, the fractional reserve requirement is just 1%. However, I don't see people running around with their hair on fire claiming Bank of America is broke and you'll never get your deposits back and if the FDIC were to make depositors whole, we'd have hyperinflation.

If we were talking about telling everyone they just won the lottery and handing out million dollar checks, you might have a point. Spending money that is already expected and already accounted for, however, is not going to cause hyperinflation.

[Kablooie]

10. Of course they did! The money was just sitting there for the taking.

These guys are politicians. How could they NOT spend it all.
It's not like they are working for the people or the country or anything like that.
They are in it for their own ego and spending everything in sight is part of what makes them proud of themselves.

[originalpckelly]

11. Oh he's most assuredly right. The government has Enron accounting.

Now, that doesn't mean the seniors who need it should be left out in the cold. But the government has been lying to us for years now.

We haven't run a surplus for a long damn time, even during the Clinton administration.

They have considered taking on debt tax revenue. It was only revenue if they never planned to pay it back, which is not what the law says.

The social security trust funds automatically give their surpluses to the federal government. That was used to help keep the debt we have to sell lower. But we were still, in reality, taking on debt.

The only hope we have is to get a bunch of immigrants to come to America and help support the seniors. We have no hope of growing the economy that fast to support people, if we encourage the population to grow, then we're going to have to wait 18+ years for the new kids to enter the workforce. It's just not going to happen.

But if we bring in new people, we might be able to keep a strong growth rate going and grow, to some degree, out of our debts.

[roamer65]

15. Here is a very sobering reality.

Most of the SS trust fund is US Treasury paper. So what happens if Congress decides not to repay those bonds. That is called a default and the bond vigilantes will not ignore that fact. The American dollar could ber worthless in a matter of days, if not hours.

[originalpckelly]

21. We are really fucked.

We may get past this debt ceiling, but when we hit that it's going to be like one of those snake who eats a cow. A big ass bulge.

[pa28]

30. Just refer to Bush's SS privatization effort for clarity on the trust fund.

We've all heard the rhetoric about "worthless IOU's", how it's already spent and the public just needs to deal with and move on.

However, in 2005 Cheney acknowledged that over the transition period of years in which that money would be moved to private accounts in financial institutions that it was a "cost". Notice the change from "worthless IOU's" to "cost".

When the time comes to privatize and Social Security the Republicans and maybe even the Democrats will find the money and they'll call it a "necessary cost" again.

[dkf]

40. The cost would have been because the incoming money goes to buy stocks and bonds

So the treasury would have had to pay out present beneficiaries.

Current payers into the fund would have had their own account that the government could not have touched that couldn't be reduced or confiscated beyond the market value of that investment. If you pass away at a younger age, your beneficiaries would get it even if they are over 18.

[peace4ever]

32. so they dont need to be paid back?

contracts and all... it works for everyone else... shouldn't they make a lot of noise at least before they cave :shrug:

[dkf]

50. They are a bookkeeping entry that will be "used" if the payout as dictated by current legislation

Requires it.

If they change the formula leading to more inflows or less outflows it may never be touched.

[TheKentuckian]

36. Of course that is true. The debate is getting the fuckers to pay it back.

[ozone_man]

42. How is that different than spending money lent by the Chinese?

They are a big creditor, allowing us to deficit spend. Why should they be paid off before those who have paid into the SS fund all of their working lives?

I would say to default on those IOU's to China, Japan, etc., before ever touching SS.

If we need to reduce the deficit (I think we do), take an ax to the defense budget. How obvious is that? We can't afford these mindless wars, so end them. If Obama doesn't have the guts to do it, get rid if him, and replace him with someone who will.

[originalpckelly]

44. That's precisely correct there!

And if they don't pay the people back, investors should be weary of treasuries.

[Honeycombe8]

49. The SS fund is a debt owed by the U.S. If the debt ceiling isn't raised...

I guess that ensures SS will run out of funds? Part of the Republican Plan?

SS is separate from the federal budget. It is a debt for the U.S. that the U.S. is obligated to repay. It borrowed the SS funds years ago (Bush took the funds to fund his wars).

The SS trust fund has been robbed...i mean "borrowed from" before, and then repaid.

This is my understanding. Simpson is right about some things, wrong about others. He has had a special axe wielded above the SS plan for some years, now.

Don't forget that he can't help but view things from his ideological viewpoint. He's a Republican former politician. That's how he views things. This is the man who recently said people need to get off feeding from the Social Security tits.