I previously posted the table showing the extent of cash needs for SS, over and above the program's own income, for the next 75 years. The increase from year to year is small.
We will have deficits indefinitely. If there's a question, it's how high they will be. Money borrowed goes to nothing in particular but to everything in general; it's all fungible and will finance all programs as well as any cash needed to pay full SS benefits. This follows in reverse too; the Trust Fund surpluses went into general revenue, doing both good things and sucky things. You might ask your friend why the financial markets are so dumb, since their assessment of U.S. debt shows no effect of expected hyperinflation or interest rate spikes. By day's end, the markets totally ignored the famous S&P comment about US debt. Now if there was an expected increase in projected borrowing in order to finance liquidation of the Trust Fund bonds -- replacing Trust Fund bonds with tradable bonds -- that could affect interest rates. My view on funding any shortfalls is to wait until they appear and use general revenue (mainly income tax), just as we would do to repay the Trust Fund in the interim. On Wed, Apr 27, 2011 at 4:45 PM, Matt Cramer <[email protected]> wrote: . . . > 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 >
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