On 4/26/2011 3:08 PM, Max Sawicky wrote: > Shemano never is interested in arguing with me, but > for the record, they are the same in terms of value > but not the same in terms of impact on the economy. > Since, duh, one is traded and the other isn't, among > other details.
If I can be sold bold as to chime in as a layperson.... I'd love to see more from you guys on this topic. On one of our local political chat boards I'm in a raging debate with a blue-dog Dem type who claims those bonds in the trustee accounts are a looming crisis: the Treasury is going to have to borrow to make payments on them so the whole thing is an "economic fiction" (his words) created to hide the fact that our benefits are unsustainable and we'll have to borrow to make payments. And therefore we should expect a huge increase in money supply and inflation and/or surging rates Real Soon Now to cover that debt. By his account, the situation is not different than if benefits were paid by the General Fund and Treasury simply sold securities to cover payments. So, I am curious if I am getting the story straight: I've been trying to explain that: 1) Actually SSA trusts' bonds are money loaned form workers to the gov't who arguably used the surplus to do Good Things for the country, things which benefited the workers. As demographics changed and revenues from FICA have fallen, yes, those bonds will have to be cashed in but certainly not all at once. And yes, the Treasury can issue new debt to cover old but the old debt is already baked into the cost of the bonds on the secondary market, so only new debt might impact rates. So the real question is not "what happens when the bonds are cashed in?" but "what can the US do to cover its SSA debt obligations?" 2) So we should be talking about raising FICA's taxmax (best) or increasing FICA rates (better than cutting benefits) in order to make SSA sustainable. Meaning, we can cycle bonds instead of cashing them in. Ideally, we raise them enough that the workers - through SSA - can become again a lender to the gov't who can use that money to do Good Things for the country: SSA buys more bonds than it cashes in. And there is the source for funding the old SSA debt, which won't impact the secondary market (or at least, no more than it is and was). Yeah, we are kicking the can another 50 years down the road but that's OK - we can't predict much about the future world of future us so we just try to deliver them a rational system which they can tweak again. Matt -- GnuPG Key ID: 0xC33BD882 aim/google/MSN/yahoo: beyondzero123 _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
