dagblog - Comments for "I've seen the Trust Fund and it is"

Thanks. Some of the following

Flavius — Thu, 23 Dec 2010 17:39:32 +0000

In reply to Flavius, this is from Angry

Thanks. Some of the following comments were also interesting.

Flavius, this is from Angry

we are stardust — Thu, 23 Dec 2010 15:53:05 +0000

In reply to I've seen the Trust Fund and it is

Flavius, this is from Angry Bear:

Posted by Ken Houghton | 12/22/2010 05:27:00 PM

I'm late to seeing this, and Bruce has probably already covered it, but Doug Elmendorg at the CBO inadvertently gives away the game on the Administration's approach to—let alone opinion of—the Social Security "Trust Fund":

The balances in trust funds have accrued because income associated with those programs has exceeded the expenses; when that happens, the surplus cash flow is used to finance the government’s ongoing activities, and the trust fund is credited with a corresponding amount of Treasury securities. Although trust funds have an important legal meaning, in that they may constrain the amount a program can spend, they are essentially an accounting mechanism and have little relevance in an economic or budgetary sense. The value of Treasury securities held by trust funds and other government accounts measures only some of the commitments the government has made, and it includes some amounts that may not represent future obligations at all. [emphases mine]

Pay particular attention to that last; it's the closest you'll find to an acknowledgement from a government official that There is No Crisis.

As Bruce has noted, only by distorting the worst-case and median cases does the Administration produce scenarios under which the Social Security Trust Fund—if credited with its accruals as the Greenspan Commission intended (see "Off-Budget" Again-"; h/t PGL here)—does not have the funds to pay its obligations in perpetuity. (As Dean Baker once observed, if you take those scenarios and apply them to the equity markets, the case for privatization disappears even more quickly.)

Doug Elmendorf's admission that there may well be a perpetual Social Security surplus, even if it is phrased as "some amounts that may not represent future obligations, stands in stark relief of the most notable "unforced error" of the Obama Administration.

He called it "CBO sleight-of-hand".

The retiring of the Baby

Flavius — Thu, 23 Dec 2010 13:34:10 +0000

In reply to One of the reasons I always

The retiring of the Baby Boomers will certainly be a demographic factor . Using the word crisis may be crying wolf.

Whatever the growth of the economy -and I agree 5-6% might be the best we should expect- it will only be loosely linked to the growth or even decline of the work force. It will also reflect the growth in productivity.

But since for 80 years our working population has been contributing to the Social Security Administration enough to not only pay retiree benefits but also provide a sweetheart loan to the Treasury it seems it would be a fair exchange if the Treasury for a while subsidizes enough of the retiree cost to ensure it's not an unacceptable burden on the current working population. Turn about is fair play.

For decades the Right has complained about the burden of entitlements when in fact it was the Treasury that was entitled helping itself to the excess withholdings of the current workers..

BTW I'm aware that there might have been an actuarial basis for that excess . But factually more money was being withheld than was required to be paid out as benefits.

One of the reasons I always

Deadman — Thu, 23 Dec 2010 04:24:00 +0000

In reply to Excellent point about work

One of the reasons I always chuckle (or cringe, if its Lou Dobbs) when the right wing rails on about illegal immigration and border security - not only do most illegals do jobs most Americans consider beneath them, but the fact that we are a nation open to immigration (at least for most of our history) and attractive to immigrants (at least of most of our history) is the one possible savior for what will most certainly be a demographic crisis as the Baby Boomer generation retires en masse.

And um, there's no way the economy will be able to do much to help but on the margin with that demographic crisis. Even the healthiest developed economies can't probably grow much more than 5-6% a year, and while I don't have the demo stats in front of me, I'm pretty certain the change in Americans retiring from the work force vs those entering will be significantly greater than that.

Providing for the

Flavius — Wed, 22 Dec 2010 22:17:00 +0000

In reply to Excellent point about work

Providing for the aged combines existential importance with an astonishing paucity of objective academic comment . Seems to me it's a bad sign when I'm considered any sort of an authority on any subject. And a really terrible one when it's on a subject of such importance.

Excellent point about work

Michael Maiello — Wed, 22 Dec 2010 20:44:04 +0000

In reply to And there is no denying the

Excellent point about work force vs. economy. And, of course, if number of workers becomes a problem we can import them. Just open the borders.

And there is no denying the

Flavius — Wed, 22 Dec 2010 19:22:32 +0000

In reply to ugh. i love when the word

And there is no denying the fact that at some point in the not-too-distant future, the demographics will become such so that covering for the liabilities of the program will be a significant drain on our GDP.

I question whether those liabilities should become so significantly more a drain than now.

There are at least a couple of intellectually disreputable arguments which are sometimes trotted out to substantiate that thesis.

One, poplular among at least among some sub section of the 'viewer with alarm'community is that this putative increase in the SS burden is somehow connected with the erosion of the Trust Fund. But that potemkin Trust Fund has never been used to defray Social Security's current costs since has never been a store of value, but merely an historical record. So we're not going to miss something we never had. academic. .

Another is that SS benefits for the retired are have to be borne by a declining work force. More slight of hand. They have to be borne by the economy. And no one predicts a declining econmy. At the worst they predict it will increase less rapidly than the SS benefits. That seems to me like a problem whose solution is not beyond the wit of man.

ugh. i love when the word

Deadman — Wed, 22 Dec 2010 18:04:02 +0000

In reply to I've seen the Trust Fund and it is

ugh. i love when the word conspiracy is thrown around. there's no conspiracy - there are people who believe social security is an unworthy expenditure and those that believe it is the least a country as wealthy as America can do for its citizens. Unlike with the DOD, or most other government expenses, Social Security was designed to be a program paid for by its citizens, though it didn't take long for the budget magicians to bastardize the intent of the program by using the 'Trust Funds' to pay for current costs. And there is no denying the fact that at some point in the not-too-distant future, the demographics will become such so that covering for the liabilities of the program will be a significant drain on our GDP.

I believe that surveys show

Oxy Mora — Wed, 22 Dec 2010 12:23:43 +0000

In reply to or...fix it now, as in

I believe that surveys show resounding suppport for "lifting" the cap.

The real kicker here is who

Beetlejuice — Wed, 22 Dec 2010 06:31:00 +0000

In reply to I've seen the Trust Fund and it is

The real kicker here is who is the Social Security Administration protecting...the people who contribute (unwillfully by some remarks) or to the government? If it's the people's trust then the public has a right to know exactly how much their trust is worth as well as who's hands are in its' cookie jar, for what reason, how much and when will their loan be repaid with interest. Without that simple knowledge, if the fund were to be dismantled, the public wouldn't have the slightest clue how much money was siphoned off...kinda like water under the bridge. Dismantling social security would be like the government not paying bond holders their due on the treasury notes they purchased in good faith expecting the government to honor their commitment to payback the loan at an agreed interest rate. It makes me wonder why GOPer's are so intent on pulling the plug on it, especially if they use it to shore up their cash flow because taxes they take in aren't enough to meet the governments spending habits. Now the trust fund was substantially increased under Reagan because projections at that time indicated it would go broke once us baby boomer started to draw on it. Could it be that all those tax cuts since Reagan was why they needed to create it instead? Claim an insolvency issue so as to increase individual taxes, but not on businesses, for a social payment program then rape the fund to cover for the lack of government operating expenses the tax cuts he gave created? It makes me wonder how much money is suppose to be in there and how much money was lended to whom and if any loans have ever been repaid and if any interest was paid. Unfortunately, the people we have to rely upon to answer the questions are the same ones who are responsible for the internal government shadow bank.