patrick.net

Bap .... thanks. Coming from you (someone I respect) is a real compliment.

Bap33 says

@Ray America, great line of posts on this thread.

RayAmerica says

Bap …. thanks. Coming from you (someone I respect) is a real compliment.

Awww. Could it be,... another bromance blossoming on Patrick.net ?

Don't worry Bap, I mean that in a COMPLETELY hetero way.

marcus spelled backwards is suc ram .... suprized? me either.

Bap, I'm sure you want to keep Ray's respect, so keep in mind, to him there is nothing more important than proper spelling and syntax in your post. That's why you might want to change that to "me neither." There are some logic issues with some other recent posts of yours, but don't worry about those. Ray won't even notice that.

I still say you're a good guy Bap, and I think if it weren't for the whole Guns, Gays and God thing, you would be a "liberal."

Without Guns or God there would be nobody in America able/willing and charged with the duty to protect the rights of deviants to enjoy a safe life, free of illegal prosecution from such persons as found in the Iranian Gov.

Marcus ... thanks for keeping the discussion on track with the topic. I realize my points don't resonate with yours, but yours don't with mine either. You may or may not agree with my positions, but at least most people probably understand what I'm saying. However, I'm often confused by yours as illustrated by the following:

marcus says

The trust fund is invested in US debt, which is why some might think of it as debt. There is a debt there, and assets offsetting it.

Try to give a detailed, specific explanation as to what this actually means. If you can't explain it, I'll understand why. I'll bet everyone else that reads this twisted post is scratching their heads too.

Ray--

Do you understand the difference between an unfunded liability and debt now at least?

tatupu-

Can you explain the following at least?:

marcus says

The trust fund is invested in US debt, which is why some might think of it as debt. There is a debt there, and assets offsetting it.

RayAmerica says

Can you explain the following at least?:

Since the 1980s, the SS and Medicare programs have overtaxed SS and medicare contributors by almost $2T and bought special US Treasury debt issues with the excess revenue. They also have another $1T in accrued interest, dating back to 1983.

From the perspective of these programs, they own US treasury debt as an asset, just as the Alaska Permanent Fund has part of its portfolio invested in US Treasury debt and counts it as part of their assets.

From the perspective of the US taxpayers, we are on the hook for the full debt owed to all holders of Treasury bills & bonds (minus the Treasuries held by the Fed because they just give the interest the Treasury pays back to the Treasury).

Debt is backward-looking and unfunded liability is future-looking. Social security and Medicare are not in debt, they are net creditors and are in fact the largest sovereign wealth funds on the planet with their $3T in holdings.

Looking forward, to keep SSI revenues above expenses we need to raise FICA contributions up to 2%, but since SSI has built up its $2.3T in Treasury holdings we really don't have to do anything with SSI right now. In 10-15 years the drawdown on SSI's treasury holdings will be such that we should start thinking about phasing in raises to the FICA contribution (and perhaps other program changes) to avoid falling under the 100% statutory requirement (that SSI have 1 year's worth of payouts saved up).

Here's a graph that demonstrates how the SSI trust fund will be depleted over the next 30 years:

RayAmerica says

tatupu-

Can you explain the following at least?:

marcus says

The trust fund is invested in US debt, which is why some might think of it as debt. There is a debt there, and assets offsetting it.

There I was talking about what is debt albeit one that the government owes itself (what could be called funded liabilities).Funded because we know how they will pay the SS recipients, by redeeming bonds. If you had read my later post you might understand Ray. Here it is again.

marcus says

The trust fund is invested in debt securities. So the government owes itself money that will be paid out in the future to SS recipients. But the amount it owes itself (the fund) is only equal to what had been paid in to it.

Unfunded liabilities refer the amount that will be needed which exceeds what is in the fund (what the government owes itself) plus future incoming payroll taxes. That is, the total of the debt to future SS recipients plus future payroll taxes at some point will be less than enough to cover pay to recipients. The unfunded liabilities refers only to this shortfall.

The debt part of it, the ious so to speak, are part of the funded liabilities.

Maybe Troy's later explanation of the same thing is more concise:

Troy says

Yes, the general fund owes social security $2.6T as of now, $1.5T in FICA over-taxation and another $1.1T in accrued interest.

This is not an unfunded liability, which is the gap between scheduled benefits and what resources the program is expected to have to pay them.

Troy says

Social security and Medicare are not in debt, they are net creditors and are in fact the largest sovereign wealth funds on the planet with their $3T in holdings.

So what you are saying, in effect, is that the money that was removed from the SS & Medicare surplus, which was then spent through the General Fund, and then replaced with special IOU bonds that cannot be sold on the open market magically becomes a "wealth" fund ... right?

Nobody ever said that debt isn't debt. Only that unfunded liabilities are not debt. You're like a politician (are you one ?).

You change the subject around making an argument where one doesn't even exist, and don't even know it.

Wouldn't it be easier to just be corrected (FOR ONCE!!).

RayAmerica says

So what you are saying, in effect, is that the money that was removed from the SS & Medicare surplus, which was then spent through the General Fund

The surplus was invested in bonds right away. The sort of theft from the future occurs though when the budget figures (which represent spending minus taxes) include that surplus. It's an accounting issue. The surplus didn't have to be accounted within our yearly budget. That made it easier to cut taxes for the rich.

Had Al Gore been elected, not only would have have done everything else differently, he would have accounted for the surplus differently (or tried), which is what he meant by a "lock box."

marcus says

The surplus was invested in bonds right away.

LOL !!! The surplus money was removed and applied to the General Fund in every administration since LBJ. You can call it an investment if you want. In my world, I call it what it is, a THEFT.

marcus says

That made it easier to cut taxes for the rich.

I'll try asking you again; what exactly do you mean by the term "rich?" Be specific. Thanks in advance for your non-answer. LOL

RayAmerica says

marcus says

The surplus was invested in bonds right away.

LOL !!! The surplus money was removed and applied to the General Fund in every administration since LBJ. You can call it an investment if you want. In my world, I call it what it is, a THEFT.

If I buy a 30 year treasury, then is the US stealing my money too?

tatupu70 says

If I buy a 30 year treasury, then is the US stealing my money too?

First, the treasuries are special IOU Bonds that CANNOT be sold. They are basically promisory notes. Second, why was the surplus money taken in the first place and used in the General Fund? Why didn't the General Fund just utilize the IOUs, being that they represent "money?"

Zlxr says

is that it’s more like if you borrowed your 401K and put an IOU in it’s place

The four generations of taxpayers paying into the system between 1985 and 2035 is nothing like 401Ks and IOUs.

FICA payers have been overtaxed $1.5T and have another $1T of accrued interest from this forced savings.

Now that it's time for the general fund to pay back FICA payers there's all this talk about IOUs and the money being spent already.

But that's just smoke. The money was supposed to be spent, that's how debt works.

Then you take the money and just spend it on things you don’t need or at least you don’t spend it in a way that will take care of you in the future.

that's not Social Security's problem, that's our government's problem. But this country is far from broke, the problem is simply that the top 10% has 90% of the wealth in this country, and they're getting pretty good about 'playing poor' by simply buying the media and telling it what to say.

Zlxr says

I think what Ray is saying - is that it’s more like if you borrowed your 401K and put an IOU in it’s place. Then you take the money and just spend it on things you don’t need or at least you don’t spend it in a way that will take care of you in the future.
What good is the IOU when you retire in the future? Now you’ll have to borrow to cover the IOU and it will be debt you cannot pay for.

Very good illustration. There is a difference; government can do what all good counterfeiters do in the future; replace the IOUs with more printed (counterfeit) money. We don't have that option if we remove funds from our 401K.

RayAmerica says

First, the treasuries are special IOU Bonds that CANNOT be sold. They are basically promisory notes. Second, why was the surplus money taken in the first place and used in the General Fund? Why didn’t the General Fund just utilize the IOUs, being that they represent “money?”

So it's the fact that it can't be sold in the bond market that makes it stealing?

Because your second point makes no sense. All treasury notes go towards funding the general business of the US. What exactly does "utilize the IOUs" mean?

Zlxr says

What makes it stealing is that they didn’t ask our permission to take our money - they just took it.

You're one of those that thinks all taxes are stealing then?Zlxr says

So when it comes time to cash in the bonds to pay for SS and Medicare - and nobody steps forward with any money - where do you think it will come from?

Probably the way they do it now. Via taxes and cuts to benefits. Raise the retirement age and eliminate the cap on SS. Medicare will take a little more work.

Zlxr says

purchase worthless treasuries

lol--you're in the extreme minority there.

RayAmerica says

First, the treasuries are special IOU Bonds that CANNOT be sold.

This makes my head hurt. As long as SS's treasuries can be redeemed for cash they are money good. Just because SSA can't sell the bonds to somebody else doesn't mean they lose their value to SSA.

The SSA gets real benefits from having these special bonds -- a bit higher interest rate and greater flexibility in rolling them over.

They are basically promisory notes.

Well, if they were promissory notes issued by the US Treasury then they would in fact be negotiable and money-good.

Second, why was the surplus money taken in the first place and used in the General Fund?

This is an interesting question. To earn interest the FICA surplus had to be invested somewhere. We could have made a more diversified portfolio, like Norway's Permanent Fund that has $500B in the market. Problem with that though is that SS is just so damn big -- it'd be 5%+ of the total global equity, almost.

The US Gov likes to borrow money so investing FICA payers' money in US Gov't debt is the safest and sanest place.

Unless you have any better suggestions.

Why didn’t the General Fund just utilize the IOUs, being that they represent “money?”

Well, for one, you might need to understand that IOUs ARE NOT NEGOTIABLE INSTRUMENTS.

A paper saying "I owe you $500" is NOT the same as having a piece of paper saying "I agree to pay the bearer $500 on demand anytime after January 1, 201X.". THAT is a "promissory note".

This isn't that complicated, Ray.

Since 1992 SSA has been collecting more money via FICA taxes than it has been paying out in SSI benefits. This is by design, such that SSI will have the resources to pay out future benefits when the baby boom hits retirement age.

It could have just sat on this cash and have it earn nothing, a loss of $1T to the program. Instead it bought government debt with it.

A promissory note is only issued upon EXCHANGE OF CONSIDERATION. SSA gave the US Treasury $1.5T, and the US Treasury gave SSA $1.5T in Treasury bonds.

The US Treasury cannot print money willy-nilly. It has had some authority to do so, but only $300M of total issue.

^ that's what US Notes looked like, btw.

tatupu70 says

Raise the retirement age and eliminate the cap on SS.

I disagree with this. Since people exceeding the cap are the ones who are living longer, just raising the cap will solve much of the future shortfall. We should be LOWERING the retirement age not raising it for FFS (and raising the FICA contribution to pay for this added retirement cost).

Whatever happened to the idea of fucking progress in this country?

Medicare will take a little more work.

Understatement of the epoch.

Troy says

I disagree with this. Since people exceeding the cap are the ones who are living longer, just raising the cap will solve much of the future shortfall. We should be LOWERING the retirement age not raising it for FFS (and raising the FICA contribution to pay for this added retirement cost).

I actually agree. It makes no sense to me to force seniors to keep working longer and longer, taking jobs away from younger people. That can't be maximizing effiiciency of the US workforce. I'm just not sure this idea can get passed in Washington.

That was Bush's argument for cuts that went mostly to the rich. (you know what I mean by rich Ray).

from CBS article on Bush in 2001

President Bush said Saturday that the most important number in the budget he sends to Congress next week is the $5.6 trillion
surplus it projects over the next 10 years.

That huge projected surplus provides the underpinning of all the administration's tax-cut and spending plans, Mr. Bush said in his
recorded weekly radio address.

"A surplus in tax revenue, after all, means that taxpayers have been overcharged," the president said. "And usually when you've
been overcharged, you expect to get something back." The surplus figure "counts more than any other" in the budget, he said.

Democrats cautioned that surpluses projected over so long a period can turn into elusive fool's gold. And they continued to insist
that as it stands the Bush tax-cut plan unfairly favors the wealthy over those of more modest means.

http://www.cbsnews.com/stories/2001/02/24/national/main274334.shtml

This is what I mean when I observe that the SS security surplus, in part was justification for the Bush tax cuts.

Mission accomplished.

Bush said

“A surplus in tax revenue, after all, means that taxpayers have been overcharged,” the president said.

So, the excess payroll taxes, that should have been somehow accounted for differently, Bush decided should be given to the people, mostly the high income people. Guess that was the ultimate way to flip off Al Gore and his "lock box" idea. Oh, but it gets better. Bush turns around right after basically giving this (our) SS money to the rich, and says he's worried about SS and wants it to be privatized, ie invested in the stock market.

AND EVEN NOW the republicans still give us the BS argument that raising the highest bracket back to Clinton Era levels would hurt the economy, when everyone knows it costs us 700 billion.

I think that the problem is this. There is class warfare going on, but so far it is the republicans that really see it as war. I think they see it as all out war on so many things going back to FDR.

I believe that if the tax cuts for the rich don't end, many of us, myself included, will finally realize what this war really is.

Zlxr says

Money spent in the General Fund is money spent doing regular business. It’s not an investment. Just like when you pay your rent/mortgage and buy food - you pay for it with your money if you have it and you borrow or steal it if you don’t. But you don’t borrow it and call it an investment when you pay your bills - bills are expenses and one should not be in the habit of borrowing to pay for expenses.

If all our SS money had been saved or invested properly - there would be plenty of money to pay with. As it stands - we use the new money coming in and borrow the remainder.

Actually, you're not quite seeing the dynamic here. The investment aspect came from the fact that TAX RATES ON HIGH INCOME EARNERS were lowered thanks to the government being able to borrow from FICA payers instead.

And these high income earners have DONE VERY WELL, THANK YOU since 1985.

THAT'S the theory behind the Greenspan Commission's -- and supply side economic in general. Free the money and let the upper class capitalists multiply it with all their wonderful wealth-creating investments.

But now, 25 years on, it's getting time for all these Galtian Wealth Creators to pay back us FICA slobs. But instead of ponying up they have their propaganda mills going 24/7 putting out lies about IOUs, no more money, it was spent already, theft, ponzis, etc.

Yet the rich have MUCH more of the pie now than they did 25 years ago.

2.6% more of a much bigger pie -- since 1990 private assets have grown from $12T to over $40T, so that 2.6% difference is worth a trillion right there.

And that's just the top 1%. The top 10% -- the FICA cappers -- own 70% of the wealth in this country.

We could force everyone to cough up the money to pay for the IOU’s (except why should we when we already paid the money).

In 2006 the top 1% cleared 20% of the income in the US. The top 20% cleared 60%.

So when (if?) tax rises go up, the top 20% will be shouldering most of the burden. That was the Greenspan deal. FICA earners overpay more 1985-, and the Big Guns pay them their overcontributions back, 2020-2040.

The existence of the FICA cap means there's a difference between FICA payers and the captains of industry who make all the money and pay most of the taxes in this country.

If you want cash - where do you think it will come from?

"In 2006, the latest available year from CBO, the top 20 percent of income earners paid 86.3 percent of all federal income taxes"

http://www.heritage.org/research/reports/2009/05/the-rich-pay-more-taxes-top-20-percent-pay-record-share-of-income-taxes

Zlxr says

The Baby Boomer pot of money was probably the biggest pot of money in the history of the world and if you want to think there could be a conspiracy - then someone just pulled off the heist of the century.

No, the heist is going to be the boomers (or their children) not getting the benefit from the $1.5T in FICA overtaxation.

We're not quite there yet. The important pea to watch in this shell game is what happens to the current $4T in trust funds. To the extent these aren't run down to $1T or so by 2050, that will be the theft.

Or if the Fed prints the money instead of taking it back from the general fund. Right now we don't have much of an inflation problem but if that $4T is inflated down to $1T in today's money or something by 2030 then yeah, QE will be a big part of the theft and all the people complaining about it will have been proven right.

did he make an agreement in writing that spelled out how it would be paid for

The plan was to only make cuts from the surplus. Of course, he cut too far and too fast, so they became an attempt at stimulus instead.

Zlxr says

We need to prove to ourselves that “YES WE CAN” do something. Don’t wait for the Gov’t - by then it will be too late.

Maybe like minded people getting together in a grass roots movement to change the government might be better, in the sense that it would help us all. Once the class warfare becomes increasingly obvious, that might be possible. But then again, the rich and the corporations have done a much better job mobilizing (you know getting many middle class and lower middle class on their side with the issues about Gays, immigrants, guns etc. ).

Marcus ... what Milton Friedman had to say about "Soaking the Rich." Check it out. You might learn something:

http://www.youtube.com/watch?v=Wi-D24oCa10&feature=related

marcus says

I’m still waiting to see whether I have to give up on Obama, if the tax cuts for the rich don’t expire.

Hey Marcus .... have you given up on Obama yet?

RayAmerica says

marcus says

I’m still waiting to see whether I have to give up on Obama, if the tax cuts for the rich don’t expire.

Hey Marcus …. have you given up on Obama yet?

Two years is a good compromise. $140B to the wealthy is peanuts these days.

Let the 2012 elections be about making these silly tax rates permanent.

Troy says

Two years is a good compromise. $140B to the wealthy is peanuts these days.
Let the 2012 elections be about making these silly tax rates permanent.

Nice to see you're still lapping up the Kool-Aid. If the "silly tax rates" are so silly, why didn't Obama put up a fight now?

RayAmerica says

Hey Marcus …. have you given up on Obama yet?

I'm more than a little disappointed, with him and with this, what is it, oligarchy the US has become.

marcus says

RayAmerica says

Hey Marcus …. have you given up on Obama yet?

I’m more than a little disappointed, with him and with this, what is it, oligarchy the US has become.

It's a tough call. He knows Dem control of the Senate is largely ceremonial now that the new House majority's got the ball as far as legislation goes.

The fact is the Dems got thrown out of office last month. The House *is* the seat of government. The Republicans have every right to hold middle class tax cuts hostage for the top 2%.

That's what the people voted for, and if they're too stupid to see it (or worse, agree with it) that's their funeral.

The cold hard fact is that the rich can handle the 3% tax rise in their top marginal rate better than the middle class -- losing the $1000 child tax credits &c. So any showdown over this is going to end badly, as far as the macro situation goes.

Thanks to the 60% electorate not showing up last month, we're f---ed.

Troy says

So any showdown over this is going to end badly, as far as the macro situation goes.

Okay, but putting up a fight would have been politically good, because the people weren't for this(continued cut for the rich), and I'm pretty sure that the people don't understand. I've heard people here say, "what do you call rich," as if to say, hey 250K isn't that high. But what I'm pretty sure many don't understand it's only the income over that that is taxed higher. If they had ended the tax cut for high income earners, a household that makes 260K would have had to pay only $400 more in taxes. It's the truly rich that would have felt it ( a little ), and who can easily afford to pay more.

Trade deficit and national debt is too high, and both have to be resolved with probably tariffs and cuts. But this is a nation where almost noone wants cuts or want to make less money. They'll just kick the can down the road and hope to not be present when it all crashes down (a mistake Bush made when he stuck around long enough to see mistakes of his administration materialize)

marcus says

It’s the truly rich that would have felt it ( a little ), and who can easily afford to pay more.

Sounds like a good thing to run on in 2012.

2010 didn't end up so well, thanks to 60% of the electorate not bothering to vote.

Don't vote, pay the man.