I Presume He’ll Accept My Offer

by Don Boudreaux on March 21, 2011

in Budget Issues, Myths and Fallacies, Social Security

Mr. Larry DeWitt

Dear Mr. DeWitt:

Arguing in today’s Washington Post that the U.S. Treasuries in Social Security’s Trust Fund are genuine assets that the government can redeem to help it meet its future Social Security obligations, you proclaim that “The Treasury owes the workers of America the value of the funds in the same way it owes the debt held by the wider public.”

I’ve got a great deal for you, Sir!  In exchange for $10 million in cash from you today (every cent of which I’ll burn through over the next 12 months as I treat myself to lavish, extravagant high-living) I’ll promise to repay you $15 million in one-year’s time.  That’s a fifty percent rate of return – and it’s guaranteed!

Now I must tell you that my current net worth, including the income that I’ll earn over the next year, is less than even $1 million.  But don’t you worry, for upon my receipt of your $10 million in cash I’ll write an I.O.U. to myself, promising to pay to me $15 million in one-year’s time.  My redemption of that I.O.U. will enable me to repay you, principal and interest, in full.

So you see, with your $10 million loan to me secured by my solemn promise to pay to myself $15 million in one-year’s time, you need not worry that I’ll not have sufficient funds on hand to pay to you what I owe you.

Please make your $10 million check payable to “Donald J. Boudreaux,” and mail it to me at the address below.  When I receive your check I’ll send you a copy of the I.O.U. in which I promise to pay myself enough to enable me to repay you.

Sincerely,
Donald J. Boudreaux
Professor of Economics
George Mason University
Fairfax, VA 22030

P.S.  On second thought, I think I’ll make my I.O.U. to me worth, not $15 million, but $150 million.  The extra cash will come in handy.

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{ 157 comments }

Terry Noel March 21, 2011 at 2:07 pm

You’re killing me, Don. Good one…

Jay March 21, 2011 at 2:10 pm

Sorry to be off topic, but the statistically ignorant fools at the EPI prove once again they do not understand the difference between mean and median. They state the following without proving productivity gains have had a normal distribution…

“While (average) productivity grew 80% between 1979 and 2009, the hourly wage of the median worker grew by only 10.1%”

http://epi.3cdn.net/3b7a1c34747d141327_4dm6bx8ni.pdf

Bill March 21, 2011 at 2:15 pm

“The Treasury owes the workers of America the value of the funds in the same way it owes the debt held by the wider public.”

“And the Treasury will use the same methods to acquire funds to repay the “Trust Fund” as it does to repay the debt held by the wider public: Increased taxes and more borrowing.”

muirgeo March 21, 2011 at 2:16 pm

Point #1 Social security has NOT added a single penny to the debt held by the treasury.

Point # 2 This arguement is only being made to shill for tax cuts for the wealthy to pay for unfunded wars and corporate subidies and to hide Reagans massive deficits on the backs of the working class who paid into social security.

This coming from a middle class Professor is weird because Don is basically saying yes please cut my benifits for social security that I have paid into my whole life so that we do not have to raise taxes on billionaires. BRILLIANT!!!

I am perfectly fine with using YOUR social security to help fund billionaires but the rest of us are going to be requesting and GETTING back our fair share based on what we paid into it. But I am suure the Koch brothers thank you in mroe ways than one.

Ike March 21, 2011 at 2:26 pm

muirgeo…

I’m glad that you feel empowered to demand your “fair share” based upon what you paid into the system.

You do, however, realize that Congress has been lying to you.

There is no big vault, and no big pile of money (like Scrooge McDuck cannonballs into from his diving board.) There is a big pile of IOUs.

And those IOUs are backed by the full faith and confidence that the Federal Government can stick a gun in my grandchild’s face and make him pay for your dinner.

muirgeo March 21, 2011 at 3:26 pm

“There is a big pile of IOUs.”

Yes and the general fund owes the social security fund. It’s no big deal.

The people holding a gun to our grandchildrens head are the irresponsible ones who cut taxes and destroyed reciepts in destroying the economy. Super wealthy people are demanding wars and Wall Street bailouts and tax cuts and billions of dollars in other subsidies. THEY hold the government power with all their new wealth and THEY are holding the gun to our childrens future and YOU are backing them.

Otherwise here we could all decide to pay off the debt now. Should we do that? How would we do that? Each pays ther equal portion or how about each pays their portion based on their wealth. This is OUR responsibility… do’t blame it on the government… We are the ones who need to hold our government accountable. We have not done that.

Ike March 21, 2011 at 4:41 pm

…and you must be right because not a single person ever complained about the illegitimacy of Social Security until after the TARP.

CalgaryGuy March 21, 2011 at 11:17 pm

muirgeo March 21, 2011 at 2:16 pm
Point #1 Social security has NOT added a single penny to the debt held by the treasury.

muirgeo March 21, 2011 at 3:26 pm
the general fund owes the social security fund. It’s no big deal.

Ummm, how do you reconcile these two statements? If social security has NOT added a single penny to the debt then what exactly are the IOUs the general fund owes?

If worker contributions actually funded social security (like they do in other countries), then tax cuts “for the rich” (how one cuts taxes for the 50%+ of people who already pay no taxes is beyond me) would have no affect on the ability to pay.

brotio March 21, 2011 at 11:27 pm

Ike,

Your exchange is with the same muiron who doesn’t understand that Tip O’Neill’s liberal House of Representatives first authorized every dime spent during Reagan’s terms-in-office.

vikingvista March 23, 2011 at 1:55 pm

He also believes Gingrich shut down the government, and Clinton balanced the budget.

Bill March 21, 2011 at 2:43 pm

“Point #1 Social security has NOT added a single penny to the debt held by the treasury.”

I believe Social Security had an annual deficit of $37 billion in 2010. Larger deficits are projected for the future.

muirgeo March 21, 2011 at 3:27 pm

And currently it has a suplus of reciepts over expenditures of about $2.6 trillion dollars and has never missed a payment to any benificiary.

Bill March 21, 2011 at 4:24 pm

But the “suplus of reciepts over expenditures” has been spent on other things and is represented only in IOUs. Didn’t you understand Don’s point?

If I establish a college fund for my kid, but borrow money from it to buy cars, furniture, vacations, etc., leaving only IOUs to show that I’ve been there to raid the fund, what good does the fund do me when it comes time to pay for my kid’s tuition?

tkwelge March 21, 2011 at 10:13 pm

muirgeo is devolving before our very eyes!

Bruce Krasting March 22, 2011 at 8:02 am

For the record, the cash shortfall as SS in 2010 was 48.9b. And yes, larger deficit are in the future.

Bill March 22, 2011 at 10:48 am

This is my source for the $37 b figure. http://www.cbo.gov/budget/factsheets/2011/5-oasdi.pdf

kyle8 March 21, 2011 at 6:22 pm

You are absolutely full of crap. Social security has added enormously to the debt of the government because it represents unfunded demands upon the US government. They are unfunded, idiot, there is nothing (literally) there to fund it except taxes and borrowing,.

Leave it to an FDR worshiping idiot to be proud of a bankrupt Ponzi scheme. My old Dad is 84 years old and has paid into social security all of his life, he didn’t start drawing until he was 68. Now he gets a little bit each month.

I crunched the numbers on that and figured out that at his lower middle class income from after the Korean war till he retired, If his money had been invested in certificates of deposit at the prevailing interest rate compounded semi annually , He would have over 640,000 in cash right now, plenty enough to fund his last years in style and leave some to me, or my sister, or whoever he chose.

Social security is a huge rip off of the public, from the beginning to the end. and you are a jackass for defending it.

Ted March 22, 2011 at 12:55 am

Capitalizing random WORDS doesn’t make them ANYMORE important!

See?

Daniel Kuehn March 21, 2011 at 2:19 pm

If your IOUs were traded in a multi-trillion dollar international market characterized by strong demand, and you had a history of good credit going back 221 years I would take that in a heart-beat.

The difference – and the reason why this is a bad comparison – is that they aren’t and you don’t.

Daniel Kuehn March 21, 2011 at 2:19 pm

I don’t mean anything personal by that, of course. I wouldn’t expect you to take a comparable deal from me!

Methinks1776 March 21, 2011 at 2:34 pm

Note: The fact that Muirdiot has just approved of your logic should have you worried.

I don’t mean anything personal by that, of course. I wouldn’t expect you to take a comparable deal from me!

Why not?

Daniel Kuehn March 21, 2011 at 2:53 pm

Because I don’t have the means or the credit history to make anybody feel confident about getting a fifty percent return on $10 million.

Methinks1776 March 21, 2011 at 2:59 pm

LOL!! Well, I assume that Don’s IOU’s also haven’t been trading for 221 years on super liquid international markets. I just assumed that the only thing that would change in the hypothetical is the name “DB” to “DK” – which is why I asked.

Daniel Kuehn March 21, 2011 at 3:35 pm

Huh? That’s precisely why I wouldn’t take the deal from Don. Because his IOUs haven’t been trading in liquid markets and because he doesn’t have a 221 history of good credit.

If he had those things, as I said, I would take the deal in a heartbeat.

Methinks1776 March 21, 2011 at 3:39 pm

You could have left that whole part out. We already know that and it makes your hypothetical (which otherwise made your point) needlessly confusing.

muirgeo March 21, 2011 at 2:29 pm

Bingo!!!

Methinks1776 March 21, 2011 at 2:32 pm

If your IOUs were traded in a multi-trillion dollar international market characterized by strong demand, and you had a history of good credit going back 221 years I would take that in a heart-beat.

How about if you were the one who had to provide the cash to purchase the asset when you sold the asset? Then would you book it as an asset?

In the private sector, we book that as fraud.

The Dweller Ysul March 21, 2011 at 7:43 pm

Dude, you can’t be serious after what your Wall St. buddies just put the world through. We’re all waiting for the first prison term to drop.

tkwelge March 21, 2011 at 10:17 pm

What?

If somebody committed actual fraud, like Madoff, they deserve to be punished. I don’t think that they belong in jail, because I don’t think that any non violent person belongs in jail, but they should be stripped until they are penniless and flipping burgers at wendy’s.

The real crime is being committed primarily at the Federal Reserve level, but HEY! LOOK AT THAT THING OVER THERE! WallSTREETKOCHSCITIGROUPGOLDMANSACHSAJSGO_HRGPHSVHOPAHHHHHHHHHHHHHHH!

muirgeo March 22, 2011 at 1:18 am

Most of the guys on the Federal Reserve frequent the same clubs as WallSTREETKOCHSCITIGROUPGOLDMANSACHSAJSGO_HRGPHSVHOPAHHHHHHHHHHHHHHH!

They are the same people.

tkwelge March 22, 2011 at 4:44 am

I agree, but hating “wall street” vastly misses the point. It is like hating the SS while not mentioning anything about Hitler.

Don Boudreaux March 21, 2011 at 2:37 pm

Daniel: You continue utterly to miss the point – which is this: A bond issued by X and held by Y is a net asset for Y; that same bond, if held by X, is not a net asset for X. But these bonds issued by X and held by X are continually being pointed to as if they ARE net assets for X. They are not.

The reason you’d take the offer that you say you’d take is precisely because you’re confident that Uncle Sam will raise taxes or cut spending elsewhere (or both) in order to repay the funds to you. You might well be correct; Social Security might never, ever miss a beat in paying what it ‘owes’ to its beneficiaries. But the U.S. Treasuries that it holds in its ‘trust fund’ are not, and cannot be, an independent source of the funds government uses to meet its Social Security obligations.

That you fail to see the issue here – or fail to understand that an I.O.U. can never be a net asset if it is held by the same party that issues it – truly is baffling, and disappointing.

Daniel Kuehn March 21, 2011 at 2:44 pm

I don’t miss the point, Don. I continue to make the point to you that you are very unique in considering the OASDI trust fund and the general fund as being the same entity. If they’re not the same entity, this isn’t weird. But since you insist on considering them the same entity, we have to think about what this is effectively doing. Practically speaking, it’s just an internal transfer if you think they’re the same thing – so talk of assets and liabilities isn’t even relevant.

Your second paragraph gets to the heart of the matter that you always find your way to when I probe you further. Your concern is the solvency of the government, not the accounting niceties. Fine. There’s more than enough to talk about on that point. But don’t confuse matters with talk of IOUs if your real concern is the government’s solvency or the philosophical justification of taxation.

re: “or fail to understand that an I.O.U. can never be a net asset if it is held by the same party that issue it”

I don’t misunderstand this. The OASDI trust fund does not issue Treasuries. The Treasury issues Treasuries. If you want to confuse matters by redefining everything, fine. We can adjust to accomodate that. But don’t do that and then suggest I fail to understand what we’re talking about.

Don Boudreaux March 21, 2011 at 2:51 pm

Daniel: The point IS the solvency of government. People who worry about the unfunded liability point out that, in reality, something must give. Many of the other people who wish to deny this reality point to what you rightly describe as the “accounting nicety” in which one branch of Uncle Sam holds assets issued by another branch of Uncle Sam – and then these other people say “See! Net assets for Social Security! The problem predicted by people like Charles Krauthammer is not as big as he says it is!”

As for the trust fund and the general fund not being the same entity, you’re mistaken if the issue is whether or not Uncle Sam will be able to pay all of his outstanding obligations in the future. Chevrolet might hold bonds issued by Cadillac and vice-versa, and there might well be good management and internal accounting reasons for such an arrangement. But at the end of the day, G.M.’s creditors worry about G.M.’s ability to pay, not caring one whit about its internal management and accounting conventions.

I think, my friend, that while you undoubtedly believe that you understand this issue, in this case you decidedly do not.

Daniel Kuehn March 21, 2011 at 2:58 pm

“But at the end of the day, G.M.’s creditors worry about G.M.’s ability to pay, not caring one whit about its internal management and accounting conventions.”

Precisely my point. Why do you seem to care so much about the internal management and accounting conventions?

Daniel Kuehn March 21, 2011 at 3:01 pm

re: ” think, my friend, that while you undoubtedly believe that you understand this issue, in this case you decidedly do not.”

You say this, but it only seems to take a couple layers of comments to get you to agree with me that (1.) we “shouldn’t care a whit” (to use your words) about the IOU labeling, and (2.) it’s the solvency that matters.

Methinks1776 March 21, 2011 at 3:08 pm

DK,

The only reason to care about the accounting is because it is the accounting that is used to lie about the insolvency. They are, in fact, claiming solvency on the basis of this fraudulent accounting. You have done so yourself.

Methinks1776 March 21, 2011 at 3:11 pm

Accounting is the language of finance. It’s purpose is to try to reflect economic reality. That’s why the accounting is important. You can lie very easily with accounting.

Forget the accounting for the moment. Look at the economic reality and then ask yourself if the accounting reflects economic reality.

aheinzm March 21, 2011 at 5:05 pm

Yes it’s the solvency that matters, but people that claim to not be worried about the solvency do so by pointing to these Treasuries as assets. They aren’t assets. The GM/Cadillac bonds aren’t assets. If people want to argue that Social Security isn’t facing insolvency like others predict, then they should do so without invoking this accounting gimmickry that is irrelevant to the main problem of cash coming in vs cash going out.

You either raise SS Tax, cut SS benefits, raise General fund taxation and subsidize the SS, cut General fund expenditures and subsidize the SS, borrow more for the General fund and subsidize the SS, or allow the SSA access to Bernanke’s window. Saying “it’s fine, don’t worry about it” doesn’t work anymore. If people can’t admit there will be a tradeoff then they aren’t worth listening to.

brotio March 21, 2011 at 11:44 pm

Why do you seem to care so much about the internal management and accounting conventions?

Because Chevrolet kept claiming that it was a sound investment since Cadillac promised to pay the debts it owed to Chevrolet.

Don Boudreaux March 21, 2011 at 3:04 pm

Daniel: I DON’T worry about how Uncle Sam does it’s internal accounting. What I do worry about is the fact that so many people – such as the Larry DeWitt fellow to whom I responded in my letter today – interpret this internal-account convention as creating NET assets for Social Security.

Jay March 21, 2011 at 3:10 pm

Dan: SS accounting is equivalent to what Enron did. Throw all your liabilities that you want to hide on an off balance sheet SPV so your primary balance sheet looks pristine.

SS should be held to pension fund standards. Yet we continue cash basis accounting that distorts reality.

Daniel Kuehn March 21, 2011 at 2:50 pm

You spoke of right and left hands before.

If I give your left hand a dollar to give me back $1.10 a year from now, and in the meantime your left hand gives that dollar to your right hand for a piece of paper, only to switch it back a year later, I really could care less.

If your two hands are different people we can give that piece of paper the name “bond”. That’s what most people have decided to do. If they are the same entity, it’s just a piece of paper that I never know about – it’s just their accounting system. That’s what you’ve apparently decided to do. I don’t really care which you prefer to call it.

Methinks1776 March 21, 2011 at 2:54 pm

If I give your left hand a dollar to give me back $1.10 a year from now, and in the meantime your left hand gives that dollar to your right hand for a piece of paper, only to switch it back a year later, I really could care less.

Where does your left hand get the additional $0.10?

MattChicago March 21, 2011 at 3:27 pm

Unable to see the forest through the trees…

Methinks1776 March 21, 2011 at 2:39 pm

I still can’t understand why you don’t understand that an asset is an asset in one set of hands and a liability in another set of hands.

If I lent you money, that loan would be booked as an asset on my balance sheet for me and a liability on yours.

When I collect on the loan, I don’t go to my bank account to get the money, you go to yours.

When I loan myself money, I book neither a liability nor an asset. I engage in fantasy. When I go to repay my “loan” to myself, it comes from my bank account.

Can you not see that the money to pay US (holders of the asset knowns as a “special issue bond”) is coming from US (the ones who floated the bond)?

Sam Grove March 21, 2011 at 3:51 pm

The money is easy to come by, the resources to purchase with that money is another matter, for the retired can’t acquire very much nutrition from money.

Daniel Kuehn March 21, 2011 at 4:06 pm

I bet it has a lot of fiber, at the very least.

The Dweller Ysul March 21, 2011 at 7:38 pm

Yeah, I can’t imagine why Don thinks his is such an apt analogy. It’s pretty lame.

Methinks1776 March 21, 2011 at 8:35 pm

Uh…Daniel?! Your drinking buddy is back.

Jay March 21, 2011 at 2:20 pm

On topic, the difference between Don and the Feds is that the federal government has a monopoly on violence. They can set a 100% tax on SS receipts with the threat of indefinite imprisonment at Gitmo (the place Obama “promised” to close) to pay for SS liabilities.

muirgeo March 21, 2011 at 2:31 pm

“government has a monopoly on violence….”

LOL… Drama Queen!

crossofcrimson March 21, 2011 at 2:56 pm

I’m sorry, but what exactly is the “drama” in acknowledging that the government has a monopoly on violence?

vikingvista March 21, 2011 at 3:26 pm

You people get so worked up over the fact that extortionists treat disobedience by sending burly armed men to kidnap you and throw you in a cage, or kill you while trying. Don’t you have something more important to think about? Like how we can stop people from profiting from peaceful trade?

Gil March 21, 2011 at 10:03 pm

Just shoot dead any government agent who turns up at your house and show them they don’t have a “monopoly on violence”.

vikingvista March 21, 2011 at 11:49 pm

You’ll soon find out that they do.

brotio March 21, 2011 at 11:52 pm

What, exactly, happened to those government agents who shot up the Branch Davidian compound, or murdered Randy Weaver’s wife at Ruby Ridge?

Gil March 22, 2011 at 4:18 am

Four of them ended up dead, didn’t they brotio?

muirgeo March 21, 2011 at 2:28 pm

Why would treasuries in the trust fund be any less valuable than the ones I hold or that China holds? That’s silliness. Sure it’s an accounting scheme but talk to Reagan about that.

Brain dead America is being propagandized by the right wingers like Don into believing they must sacrifice their social security benifits to help fight the debt. It’s really despicable this right wing propaganda machine… like the one that lead a coupe in Chile an placed a murderous bastard in charge of their country.

Methinks1776 March 21, 2011 at 2:44 pm

Why would treasuries in the trust fund be any less valuable than the ones I hold or that China holds?

You don’t get that? Coooool. I’ve got some “assets” I think you’ll be veeerrrry interested in.

Fool and his money and all….

muirgeo March 21, 2011 at 3:40 pm

Sure … I’ll take you treasury IOU’s and you can pay the differnce by payiing extra taxes to the general fund. This works great because this way you don’t have to worry about those worthless treasuries I’ll be taking off your hand. GREAT… problem solved.

jcpederson March 21, 2011 at 7:31 pm

As good an answer as he perhaps deserves, but otherwise worth its own thread:
- What would happen if the OASDI were to go into the vaults with forklifts, take all their US treasuries, and have a grand bonfire with them? Would that destroy value the same way it would if the Chinese were to do it? The Treasury Dept might get a little tingle from suddenly owing less money to the OASDI, but they would find a line of SS recipients outside their office looking to them for checks.

Methinks1776 March 21, 2011 at 8:38 pm

Muirdiot deserves many things. Many many many – Lord, help me – MANY things.

His own thread is not one of them.

aheinzm March 21, 2011 at 5:16 pm

The ones you hold are assets to you and liabilities to the government.

The ones the government holds are assets to the government and liabilities to the government. They cancel each other out.

It’s why a $100 loan from me to myself is worth nothing to me, but a $100 loan from me to you is worth $100 to you (excluding interest, etc). Otherwise the list of Forbes billionaires would simply be equivalent to a world’s phone book.

Ryan Vann March 21, 2011 at 9:51 pm

Seems you are missing a sink somewhere in your circular debt flow argument. At some point the borrowed money went out, but the debt obligation did not.

kyle8 March 21, 2011 at 6:29 pm

Really and truly if you don’t understand just how worthless these “instruments” are, then you are even stupider than I imagined. Goddamn you are stupid.

I Issued some zero interest bonds to pay myself $10,000,000 when I reach 65 years old, want to buy them?

John C. Randolph March 21, 2011 at 10:07 pm

Since you asked, it’s just as stupid for the Chinese to count on their US bonds being redeemed, as it is for the people expecting payouts from SS.

-jcr

nailheadtom March 21, 2011 at 2:44 pm

Alan Greenspan said: “At present, the Social Security trustees estimate the unfunded liability over the indefinite future to be $10.4 trillion. The shortfall in Medicare is calculated at several multiples of the one in Social Security. These numbers suggest that either very large tax increases will be required to meet the shortfalls or benefits will have to be pared back.

Because benefit cuts will almost surely be at least part of the resolution, it is incumbent on government to convey to future retirees that the real resources currently promised to be available on retirement will not be fully forthcoming. We owe future retirees as much time as possible to adjust their plans for work, saving, and retirement spending. They need to ensure that their personal resources, along with what they expect to receive from government, will be sufficient to meet their retirement goal.” The rest is at http://www.federalreserve.gov/boarddocs/testimony/2005/20050315/

Ike March 21, 2011 at 2:49 pm

Better still.

I think I want a new car. A 1960 Aston-Martin ought to do.

When I go to the bank, and the loan officer asks me for my income, I’ll just show them a big stack of “notes-to-self,” where I commit to shaking down schoolchildren for their lunch money.

yet another Dave March 21, 2011 at 6:05 pm

muirgeo did mention a coupe in Chile back at 2:28pm :-)

muirgeo March 21, 2011 at 3:38 pm

Here is the total USof A debt

$14,224,862,420,919.33

http://www.treasurydirect.gov/NP/BPDLogin?application=np

That’s what we need to pay back. Social secuirity has NOTHING to do with this. Social Security has a surplus of $2,600,000,000,000 and does not need to do anything in the near future. END OF DISCUSSION

The best way we can pay off our debt is to grow the economy. The best way to do that is to abdondon the bankrupting policies prescribed to us by the neolibertarian these last 40 years.

Methinks1776 March 21, 2011 at 3:46 pm

Since this is the END OF DISCUSSION for you, can we expect that you will now stop spraying us with your mental sewage and go back to the Daily Kos?

muirgeo March 22, 2011 at 1:22 am

HEY! TwinkleToes! I thought I said END OF DISCUSSION!

Alan Gunn March 21, 2011 at 3:58 pm

“Social Security has a surplus of $2,600,000,000,000″

What do you mean by this? If you mean it has that much money on tap, available to pay benefits without getting the money from taxes or borrowing, you are wrong. If you don’t mean that, what you say is senseless. Whether we should cut Social Security benefits, or raise taxes, or do some combination of these things, or other things, is of course a real policy question. But claiming that Social Security “has a surplus” is either very misleading or an outright lie.

vikingvista March 21, 2011 at 6:06 pm

What do you mean? I have a $100 surplus in my checking account, and I’m not worried about next month’s $4000 mortgage payment, $500 car payment, $300 electric bill, …

muirgeo March 21, 2011 at 8:32 pm

“What do you mean by this? If you mean it has that much money on tap, available to pay benefits without getting the money from taxes or borrowing, you are wrong.”

NOPE I’M NOT.

The taxes needed to be raised to pay what is owed to social security resulted from OTHER government spending from the general fund. Social Security has not added ONE PENNY to the debt and has not used and will not use ONE PENNY of money from the general fund.

YOU are guilty of either propagating a RIGHT WING PROPAGANDA talking point or succumbing victim to one.

This is ALL propaganda by Repubicans and Libertarians to SCARE Americans into thinking Social Security is going broke when it is not.

Ultimatly the Republicans who and libertarians who overspent and thought they could hide their overspending by raiding the general fund will have to raise taxes on the billionaires they are protecting.

Methinks1776 March 21, 2011 at 8:45 pm

GLAD TO SEE YOU FOUND THE CAPS LOCK.

ANY CHANCE YOU COULD GIVE US A BREAK AND BORROW A BRAIN FOR YOUR NEXT POST? ANYTHING IS BETTER THAN THIS. SEE IF YOUR HAMSTER CAN SPARE A BIT OF GREY MATTER.

THANKS.

jcpederson March 22, 2011 at 12:13 am

I miss the like feature

Alan Gunn March 22, 2011 at 7:58 am

So which is it: We don’t need to raise taxes because the trust fund has trillions of dollars it can use to pay benefits or we do need to raise taxes because all the money has been spent on things other than Social Security? It’s silly to argue both at once.

Trapper_John March 21, 2011 at 4:20 pm

Um, you are dead wrong. In the field labeled intragovernment holdings, Social Security is the holder of $2.6 trillion of those notes. Look it up. http://en.wikipedia.org/wiki/United_States_public_debt

Social Security took in an excess (receipts minus expenditures) of $2.6 T over its history. The government spent that money, issuing debt to itself to the tune of (guess what) $2.6 T. This debt is a liability for the US Government, not an asset. The point that people are missing is that if we borrow money to pay that money back (it goes out as SS benefits), the total debt of the United States will not change. We simply exchange one liability (intragovernment holdings) for another (non-government holdings). It’s already on the balance sheet. It’s not hidden. Seriously.

Mesa Econoguy March 21, 2011 at 7:33 pm

Ding!!! Ding!!! Ding!!! Ding!!!

We have a winner!!!!!

Trapper John is exactly correct, the notes held by the “trust fund” (incidentally, part of which is “special notes” only available to the trust fund, and effectively non-tradeable) represent claims on the government, not assets. They are intragovernmental debt, where one part of government owes another.

More info here:

http://www.ssa.gov/oact/progdata/investheld.html

Sam Grove March 21, 2011 at 8:11 pm

It’s similar to the fiction that government employees pay taxes because they file returns and trade checks with their employer.

Methinks1776 March 21, 2011 at 8:41 pm

Government employees pay taxes? Nobody told Geithner or Charlie Rangel.

vikingvista March 22, 2011 at 12:06 am

“Government employees pay taxes? Nobody told Geithner or Charlie Rangel.”

Of course they do. At least once they’re caught.

HaywoodU March 22, 2011 at 6:56 am

Muirdingle must not be able to find the reply button, again.

Bruce Krasting March 22, 2011 at 8:14 am

Wrong. Of that 14.2t about 4.5t is the intergovernmental account. of which SS is 2.6t.

The 9.5t of debt held by the public NEVER gets paid back. It gets rolled over. Old bonds and notes come due, new ones are issued to the pubic to raise the money. Get that? Our public debt never gets paid back.

But the SI bonds held by SS MUST be paid back. The only way that can be done is by increasing the debt held by the pubic. This number is already at dangerous levels. To push this number up so that the SI bonds will be paid will result in a credit squeeze that kills the real economy. Should that happen all those SS beneficiaries will lose. Do you really want that to happen?

Trapper_John March 22, 2011 at 8:50 am

Ah, now this is an interesting point–does the transfer from intragovernment holding to publicly held debt affect… anything? everything? I honestly don’t know, but my guess is that the market has already priced this into the current debt rates. If not, seems like there’s an opportunity for someone smarter than me to make a ton of money on this impending swap (because it’s gonna happen). This type of arbitrage opportunity is typically not long-lived because someone smarter than me is always thinking of ways to make a ton of money in bonds, etc.

Bruce–I’m curious to hear the economic machinations that will result in the impending credit squeeze you mentioned.

Alan Gunn March 21, 2011 at 3:41 pm

What I can’t figure out is whether these people who insist that the “trust fund” is full of assets that the government can use to pay Social Security benefits without either collecting more in taxes or borrowing more are idiots or are just lying so people will think there’s no problem and go on supporting lavish spending programs. It’s really very simple: the “balance” of the trust fund equals the net excess of Social Security tax receipts over Social Security benefit payments since the trust fund was established. All that excess money has been spent. Putting an IOU in a “trust fund” when you spend money doesn’t give you the ability to spend the same money again without getting it from somewhere: somewhere other than the “fund” that holds the IOUs. Why is this hard?

Don Boudreaux March 21, 2011 at 3:46 pm

Daniel Kuehn writes “re: ‘ think, my friend, that while you undoubtedly believe that you understand this issue, in this case you decidedly do not.’

“You say this, but it only seems to take a couple layers of comments to get you to agree with me that (1.) we “shouldn’t care a whit” (to use your words) about the IOU labeling, and (2.) it’s the solvency that matters.”

Daniel: Why do you suppose that I only came around to this position? It has been my point all along.

I add that while we indeed “shouldn’t care a whit” about the I.O.U. labeling, the heart of my complaint is that too many people DO care more than a whit about it; they are confused by the I.O.U. labeling into believing that Uncle Sam holds net assets in the Social Security trust fund. Pointing out that those bonds are NOT net assets is, and remains, the only point of my recent writings on this matter. What you didn’t grasp was the point I was making. Now you do, I gather.

muirgeo March 21, 2011 at 3:49 pm

Here are your choices…REAL WORLD… get your social security benifits cut so billionaires don’t need to have their taxes raised and can maybe spend more of the money you oput intio the fund for their own benifit OR increase taxes on the wealthy to pay the general fund debt including what it borrowed from soxial security.

So who here wants the SS benifits cut? If you really want that then you really deserve it. But that is in fact wnat most of you are arguing for.

Your protest signs should read…. I DEMAND MORE TAX CUTS FOR BILLIONAIRS AND I WANT A CUT IN MY SS BENIFITS TO PAY FOR THEM… LIVE “FREE” OR DIE….DAMMIT!

Yeeah… that should be your signs.

SweetLiberty March 21, 2011 at 4:30 pm

muirgeo,
Let’s divide the country in half – you can take first choice as to whatever half you want. Let’s also divide “the rich” equally. On your half, you can create all the rules and regulations you can think of and tax the rich all you want – up to 100% if you so choose! On my half, I will reduce the rules and regulations and taxes on the rich by an inverse proportion to your raise.
After the first year is out, I’m willing to wager that most of your rich people will have moved over to my half of the country, creating jobs and eliminating most of the need for welfare that your state now so desperately depends upon. The only problem is, over time, you will also eliminate the source of your welfare funding as anyone capable of producing anything will move to my side of the country rather than get over-regulated and taxed blind by you. Your next solution will be to order your military to prevent your rich (and poor) from leaving your country. That’s always worked well in the past, so no reason you shouldn’t try it. By the end of a decade, both of our countries will be unrecognizable from what they started out as. I predict an enormous expansion of both of our middle classes – only the people you call middle class in yours will be worse off than the homeless in mine.
So yes, don’t cut – eliminate my Social Security (I’m willing to grandfather in people over 50), and lower the taxes and regulations on the billionaires. As Thomas Jefferson said, “I would rather be exposed to the inconveniences attending too much liberty than to those attending too small a degree of it.” Count me in with Tom.

muirgeo March 22, 2011 at 1:35 am

So in other words you are going to be Mexico and I will be Canada.

MWG March 22, 2011 at 2:32 am

I’m not surprised you think Mexico has few rules and regulations. You are, after all, and idiot.

John V March 22, 2011 at 11:14 am

He automatically thinks that poorer countries are somehow underregulated and undertaxed. IT MUST BE THAT.

He also underestimates the role of informal institutions: government culture and the attitudes of people toward government…and each other in various social and business settings.

Regardless of whether the moves toward more taxes and control are good or bad, the bottom line is that wealthy countries don’t become wealthy BECAUSE OF high taxes and lots of rules and regulations. Taxes and regulations chase wealth.

Take Denmark. This is an example of a small, relatively homogeneous country (as far as developed countries go) with a strong and long tradition of social peace/cooperation, industriousness, trade and faith in the rule of law. As a result OF THAT, they are and always have been relatively wealthy country. As far as taxes and regulations go, they are relatively highly taxed by developed nation standards but they are also one the best in terms of being well regulated, un-suffocating and un-obstructive in the movement and discretion of capital and labor.

If you take the Denmark tax and redistribution model and superimpose it on a developing African nation, the results will not be good. There simply isn’t enough wealth to absorb all those taxes and still grow. OTOH, the regulatory structure would probably be beneficial…though some caveats exist. The Danish system of law is well developed around a people who respect the rule of law and have faith in the system. This may not fly as easily or without hiccups in a society where this tradition isn’t as strong….but it is still better than the status quo.

Canada and Mexico are two very different countries in these respects. Canadian taxation is high and regulations are better than many lefitsts willl admit. But again, this came as a result of the people and their free capitalist traditions which created the wealth and the demand for certain subjective standards that is now taxed for other reasons.

My point is that muirgeo is ignoring all of this with his response to your hypothetical. He is trying insinuate that taxes and regulations create wealthy societies and that is not true. Wealthy societies, built on freedom and trade, eventually move toward more regulation and taxation….for better or worse. Modern cases like Mexico and other such countries have become heavily regulated as a result of different factors from a broken system that is weak in informal foundations and has pushed people to support socialistic policies that didn’t help the country to ever prosper as they had hoped.

muirgeo March 22, 2011 at 9:15 am

I’m surprised you think Canada doesn’t.

MWG March 22, 2011 at 2:22 pm

Where did I say that?

John V March 22, 2011 at 2:26 pm

MWG,

“Where did I say that?”

Muirgeo is shadow-boxing against what he wants to think you meant.

Sam Grove March 21, 2011 at 4:00 pm

If I had a LOT of money, I would suppose that I would be very wealthy.

However, if EVERYONE had a whole LOT of money, the above does not necessarily follow.

MONEY….IS….NOT….WEALTH.

muirgeo March 21, 2011 at 4:06 pm

OK then… you’ve just earned a cut in the MONEY you will get from your social security check with the differnce going into the accumulated WEALTH of some already very wealthy people… good point.

Sam Grove March 21, 2011 at 6:16 pm

I have no expectation or you comprehending my point, and you do not fail to fulfill my expectations.

MWG March 22, 2011 at 2:34 am

In muir’s warped authoritarian/statist mind, he alone decides who gets what.

muirgeo March 21, 2011 at 4:02 pm

Has anyone every bought a US treasury? According to Don… we have some bad news for you. Because you know that money you gave the government for that treasury…. THEY SPENT IT!!!! OH…. MY … GODDDDD!!!! And that treasury you hold…according to Don and the Republian/LIBERTARIAN Koch Brothers Propaganda Machine is now WORTHLESSS…. WORTHLESS… you have been swindled and if you come to cash that treasury in you can bet a man with a gun will tell you to…” Turn away”.

Yeah… really this is a true story.

Alan Gunn March 21, 2011 at 4:18 pm

A treasury that I hold is not worthless, because I can sell it and get the money free and clear.

If the government holds a treasury, it can sell it, too. But it doesn’t get the money free and clear because it then has to pay interest on it and, when it matures, repay the principal. In other words, when the government sells a bond, it is borrowing money, which it will have to repay. When anybody else sells a government bond, they get money that they don’t have to repay.

Quite a difference.

Gosh, this is easy!

vikingvista March 21, 2011 at 6:10 pm

Distinguishing between primary and secondary bond markets is way beyond is IQ grade.

muirgeo March 22, 2011 at 1:40 am

OK so let’s pretend your name is not Alan Gunn but lets call you Jocial Security. And lets pretend you have lots of Treasury and you cash them in. Do you get money free and clear…. Sure you do.. and the government gets to worry about were the funds to pay the Treasuries will come from… It’s NOT Jocial’s problem.

Alan Gunn March 22, 2011 at 8:01 am

Right: it’s the government’s problem. The whole point of the “the trust fund is a fraud” position is that there’s nothing in the trust fund that can be used to pay Social Security benefits, so the government will have to raise taxes or borrow to come up with the cash. You now seem to agree. Congratulations on seeing the light.

Last I heard, Social Security was a government program.

muirgeo March 22, 2011 at 9:24 am

Yeah basically we agree. My point being the problem was not with Social Security. It was with other government funding and spending from the general fund. The general fund gets to fix the problem NOT social security because … as a program… it does NOT have a debt problems. That’s just propaganda for people who hate the program to spread around to the general public to kill the program or to get the program turned over to private interest on Wall Street.

Private pensions are sometimes set up the same way. Vested money is protected from bankruptcy and other debts of the companies “general fund”. No Social Security is fine… the general fund…that’s the problem and we need to raise taxes on the wealthy not rob from middle class donors to social security.

Sam Grove March 21, 2011 at 4:10 pm

I haven’t figured out how to clue people in to the distinction between money and wealth.

Why is it so difficult to deliver the insight shared by those who appreciate Austrian economics to others?

The ability of the government to extort people does not mean that the resources people hope to purchase with the account transfers of redistribution will be available when they want it.

If government spending and printing stalls the engines of creation, the resources will not be created in sufficient quantities to make good on the promises of SS and Medicare.

By definition, the government cannot “go broke”, but it certainly can break the economic ability to fulfill the promises that politicians have made.

Jason March 21, 2011 at 5:39 pm

Ask people this question: if there were no such thing as money, and there were only a barter system, would people still have goods and services? If they answer in the affirmative, then they just realized money is just a means of exchange and wealth is the goods and services we possess.

vikingvista March 21, 2011 at 6:13 pm

What do you mean? If all production and trade shuts down, can’t the government just print more money to make up for it?

Sam Grove March 21, 2011 at 6:17 pm

If it can still get paper, but it won’t make up for it.

vikingvista March 21, 2011 at 6:31 pm

Ooo. Good point. We better nationalize the paper industry just to be on the safe side. I mean, if the food industry collapses, I don’t want to starve to death because I couldn’t get any money.

Al Barton March 21, 2011 at 5:29 pm

Whether the IOUs can be considered assets depends on the federal government’s ability to finance repayment of the IOUs at the time they become due. People who assert these promises to pay are assets assume the government will be able in perpetuity to finance its financial outlays in excess of receipts. In other words, there will never be a time when the piper needs to be paid. Further, these same people lose sight of the fact that the debt incurred to finance repayment of the IOUs increases Treasury debt held by third parties, which adversely affects our creditworthiness.

John Dewey March 21, 2011 at 5:35 pm

Daniel Kuehn suggested that the U.S. Treasuries held by Social Security are “traded in a multi-trillion dollar international market characterized by strong demand”. That is not correct. The Special Purpose Treasuries held by Social Security are not marketable securities.

Methinks1776 March 21, 2011 at 5:55 pm

Doesn’t matter. They’re issued by the same entity which has the good credit rating and the good history. If you were to rate a similar security by the same issuer, you’d give it a similarly good rating. The holder of the special issue will never have to rely on a market for the security to monetize it, so liquidity in the product is irrelevant.

John Dewey March 21, 2011 at 7:09 pm

You’re the expert, not me. But it seems strange to me that a non-marketable security issued to oneself would ever be given a rating, or that such a rating would in any way be meaningful. After all, the Special Purpose Treasury Securities are not debt.

Methinks1776 March 21, 2011 at 8:32 pm

What I mean is that Daniel Keuhn’s hypothetical was sound. I apologize for using shorthand.

If an entity with a long history of issuing securities, – the market for which was one of the most liquid in existence – has an excellent credit rating (as judged by the market not the SEC created handful of rating agencies) and were to offer to sell me a similar security, I would personally rate that deal (“rate” for my own portfolio) where the market rates the entity’s other securities.

Under normal circumstances, I would very much care if the securities were marketable because if there was no market for them, I would want to pay less to account for the additional transactions costs and price uncertainty associated with illiquid assets. However, because in this case we’re talking about the special case of government securities, I don’t have to sell to another willing buyer to monetize my position. All I care about is the government’s ability to force some poor shmuck to cough up the money to pay me :)

I do understand that the government can refuse to monetize the securities, but the government can (as you point out) do whatever the hell it wants, so it’s a sort of a moot point in the context of Daniel’s hypothetical.

He’s basically saying “if you fit this profile, I’m willing to give you credit” to support his stance that all is well because the trust fund has such a sound asset.

The part he’s missing (hopefully WAS missing) is that in your portfolio’s and China’s it’s an asset. In Uncle Sam’s portfolio it’s a lie.

John Dewey March 21, 2011 at 5:51 pm

Besides being an accounting device, the Special Purpose Treasury Securities held by the Social Security Trust Fund have two purposes:

1. These securities allow – but do not require – the federal government to transfer funds from general revenues to the Social Security Trust Fund without specific authorizing legislation.

2. Enable Washington politicians to fool the general public into believing the government has assets with which it will be able to pay the Social Security benefits it has promised.

It is important to understand that Congress can easily prevent the transfer of general revenues to the Social Security Trust Fund. All Congress has to do is somehow reduce Social Security outflows to the level of Social Security inflows. Congress can do so by:
- raising the retirement age;
- means-testing Social Security benefits;
- reducing Social Security benefits for some or all promised recipients;
- increasing FICA tax rates on all or portions of wage earners;
- applying FICA taxation to non-wage income;
or a myriad of other ways.

Why would Congress take any of the steps to bring SS outflows in line with inflows? They might wish to fund wars and pay defense contractors.. They might wish to continue agriculture price supports. They might wish to continue funding food stamps. They might wish to fund highways and rail lines to keep their construction friends in business.

The point I’m trying to make is this: regardless of whether the Special Purpose Trust Fund Securities exist, Congress will ultimately decide which of the many, many government programs get funded and to what level they are funded. Congress does not have to ever pay down the level of Special Purpose Treasuries if they do not wish to do so. They can continue rolling over these accounting devices forever.

Don Boudreaux March 21, 2011 at 6:01 pm

Right on, Bro!

vikingvista March 21, 2011 at 6:20 pm

Nor need they reduce the level of funding of ANY programs, in *nominal* dollars. Although the SS COLAs will require some statistical fraud to maintain nominal benefits, that is nothing new or below Congress.

kyle8 March 21, 2011 at 6:31 pm

I like most of your posts, I am just wondering why you chose the name of one of the worst socialists of the twentieth century?

Don Boudreaux March 21, 2011 at 6:34 pm

I assume that it’s the man’s real name.

John Dewey March 21, 2011 at 7:05 pm

I’m glad you like most of my posts.

John Dewey is my real name. There are many John Dewey’s in the U.S.

My father’s last name was Dewey. The first and middle names he and my mother gave me were the names of the brothers – both pilots – each had lost in World War II.

kyle8 March 21, 2011 at 11:21 pm

Sorry, I just imagined that old commie who began to ruin the education system in this country.

muirgeo March 21, 2011 at 8:44 pm

That’s right.. and that’s why it is important for the average American contributing their wages to Social Security to understand that Republicans want to effectively use their contributions to give tax cuts and tax breaks to billionaires. That is the simplest way to explain what is going on here.

kyle8 March 21, 2011 at 11:24 pm

And yet you want to go back to those bad old day when the tax rates were extremely high and very progressive, except, no one paid them.

You want to go back to those old days when the upper 1% of wage earners paid less than half as much as a percentage of the cost of government than they do now.

Lower rates = more progressivity., It is sort of like when more guns equals less crime. But I don’t expect you to get it. Lefties don’t understand things like that.

muirgeo March 22, 2011 at 1:49 am

No actually if we had just not gotten rid of the Clinton taxes the $2.6 trillion owed social security could have been paid off, the debt would be closer to $10 trillion instead of $13 trillion and we’d save an additional $3 trillion over the next coming decade.

Oh and dduring that HIGH TAX period we saw the economy ad 20 million new jobs… so yeah I want to go back to that.

rhhardin March 21, 2011 at 7:43 pm

It seems to me that he’s right.

SS can sell the IOUs it holds to the public to raise that cash, because the government credit rating is better than yours.

Of course that displaces other Treasury borrowing, so it comes down to a matter of sustainability; but that’s not what’s in question here.

You’d have to argue why your credit rating is comparable to the goverment’s credit rating.

vikingvista March 21, 2011 at 8:44 pm

That credit rating (as determined by market bond rates) has nothing to do with compartmentalization of SS assets. The market looks at total Federal government liabilities and revenues. It is as though Congress simply looted and spent all of the SS revenues, and then as an afterthought decided to issue a mass of t-bills to cover its liabilities.

And if as you suggest, the SSA started dumping its t-bills on the open market (excluding the inevitable Fed Res intervention) to cover its liabilities, you would see this effect in the rates the SSA could obtain for those bills.

John Dewey March 22, 2011 at 2:28 am

As I pointed out above, the Special Purpose Treasuries held in the Social Security Trust Fund are not, by law, marketable securities. So, technically, those securities cannot be sold to the public to raise cash.

If you believe this farce that the Social Security Trust Fund is a creditor with rights equal to those who hold public Treasuries, then consider this:

- as several have pointed out, the federal government is going to honor the publicly-traded Treasuries: creditors holding those securities will receive the cash when the securities are redeemed;

- the federal government is not required to ever give cash to the Social Security Trust Fund: the government can continue to exchange new Special Purpose Treasuries for every one the Trust Fund redeems.

muirgeo March 21, 2011 at 8:37 pm

The super rich have stolen equity from Americans homes, from workers 401K and retirement funds…. The is no demand for which to invest their billions so now they want to raid the Social Security funds everyone pays into to get themselves more money. There only other option includes creating more bubles in the economy and short of robbing people at the gas pump there is not much left to rob but the social security funds.

Unfortunatly many middle class Americans are ignorant of their schemes or are actual in support of having their money transferred to the “deserving wealthy” or are Vassals of the Lords of wealth and make their living protecting their wealth through their propaganda generating mechansism such as instutues, think tanks , blogs, student indoctrinations and on and on…..

tkwelge March 21, 2011 at 10:22 pm

The government and the Federal Reserve are the tools used by SOME super rich to steal from the country. You continue to ignore this fact.

I like how you went from, “The SS trust fund full of IOU’s is a good thing,” to, “Yeah the SS trust fun is bankrupt, but that’s okay, because we should be taxing wealthy people more anyways…

Methinks1776 March 21, 2011 at 10:26 pm

Twelge,

Don’t strain yourself. Every time this idiot goes off his meds, he ends up on this blog. We’ve been having Encounter of the Muirdiot kind since 2007.

Ed Bosanquet March 21, 2011 at 11:11 pm

Don,
You are right that the US has many “legal” ways to magic itself out of debt. These include not paying “promised” social security, refusing to pay certain loans(voiding loans held by Chinese or any X) or inflation (printing our way out of debt). You fail to confront the fundamental fact that once Uncle Sam defaults on some of its obligations, everyone else will believe that it will default on its other obligations. Therefore, if the government wishes to borrow any more money, it will have to pay a large premium on each loan. While you might be blase about this, I believe the best interest of the country is to honer these obligations to the best of our ability.

John Galt might wish our government to borrow even more but I’m not ready to see a dark New York.

Thank you,
Ed

kyle8 March 21, 2011 at 11:27 pm

Or, if what you say is true then we ought to wish for a default, which means that the government would not be able to borrow again.

Ed Bosanquet March 21, 2011 at 11:38 pm

Kyle8,
I might be a coward but I would prefer not to live through a default of the Dollar. It seems like a very harsh adjustment to go back to trying to determine things in the cost of gold or just getting tap water.

Back to my first comment, Ayn Rand had a favorable opinion of what might happen on the collapse of a socialist government and a return to property rights. Unfortunately, I don’t see any rights being respected in anarchy.

Bottom line, we need to make a good faith effort to pay back anything written as an IOU to ourselves unless we want to declare bankruptcy.

Thank you,
Ed

vikingvista March 21, 2011 at 11:53 pm

“I don’t see any rights being respected in anarchy.”

So, if there were no government lording over you, you would not respect anybody’s rights? That admission does not reflect well on you, but I’m pretty sure those of us who do respect rights would defend ourselves against you just fine.

Ed Bosanquet March 22, 2011 at 12:14 am

vikingvista,
I also said “I might be a coward…” I have no desire to take what is yours but I also have no desire to be forced to defend myself in person. I very much prefer the police and other government armed services to shoulder the burden of my cowardice.

I will defend myself, property and loved ones if attacked. I prefer not to be attacked.

Thank you,
Ed

vikingvista March 22, 2011 at 12:39 am

“I also have no desire to be forced to defend myself in person”

What does this have to do with anarchy? You know, freedom from force means freedom to form whatever voluntary associations you and others agree to. You seem to think anarchy means having a great big government that does nothing but force you to do everything by yourself.

And I’ll take it that when you said “I don’t see any rights being respected in anarchy”, you didn’t really mean it.

Ed Bosanquet March 22, 2011 at 12:56 am

vikingvista,

I don’t see rights being respected in an anarchy. Not from my own desire but I see the need to defend myself from the desire of my neighbors.

You said “You know, freedom from force means freedom to form whatever voluntary associations you and others agree to.” That voluntary association you mention is government and it means members give up something to participate. I consider taxes to be my payment for that piper. I wish to reduce my governments obligations but I don’t feel I (we) can reject a debt owed without drastic consequences.

Thank you,
Ed

vikingvista March 22, 2011 at 1:12 am

“I don’t see rights being respected in an anarchy. Not from my own desire but I see the need to defend myself from the desire of my neighbors.”

If you see yourself respecting rights in an anarchy, then you necessarily see rights being respected in an anarchy. If you don’t see rights being respected in an anarchy, then you are necessarily saying that YOU would not respect rights in an anarchy. Why is this so tough for you? Are you an offensively violent person, or aren’t you? Make up your mind.

“You said “You know, freedom from force means freedom to form whatever voluntary associations you and others agree to.” That voluntary association you mention is government and it means members give up something to participate.”

Interesting you say that, because I have never known, heard of, or been able to even conceive of a voluntary government. There is, by the very meaning of “government” no such thing. That is, by the way, the whole point of anarchy–to rid ourselves of the acceptance of involuntary associations. If you believe that ONLY voluntary associations are legitimate, then you are definitely an anarchist.

“I consider taxes to be my payment for that piper. I wish to reduce my governments obligations but I don’t feel I (we) can reject a debt owed without drastic consequences.”"

If you are willing to pay it, then it really isn’t a tax for you. A tax is ONLY necessary for those who do NOT want to pay. There are already names for when you want to pay–”trades” and “donations”. The government doesn’t give a damn what you consider taxes to be. Think of them what you will, the result is always the same. They tell you to pay up or suffer the brutal consequences. It really is as simple as that.

muirgeo March 22, 2011 at 1:55 am

Go to Ethiopia and shut up already BiG MAN.

vikingvista March 22, 2011 at 2:05 am

“Go to Ethiopia and shut up already BiG MAN.”

What the F are you talking about you twisted malicious little fool? Psychotic worthless creep. Cripes, I need a shower just because you responded to me.

John Dewey March 22, 2011 at 10:15 am

Ed,

I agree that the U.S. will never default on its publicly traded debt. However, the Special Purpose Treasury Securites held by the Social Security Trust Fund are not publicly traded debt. These non-marketable securites can be rolled over forever. Although it would be politically difficult, Congress could legally reduce Social Security annual disbursements to the level of Social Security income. As the Special Purpose Treasury Securities come due, Treasury can simply replace them with newly-issued Special Purpose Treasury securities.

Could Congress reduce future Social Security disbursements? They’ve already done so in the past when the raised the full retirement age for everyone born after 1939. IMO, they will do so very soon by implementing means-testing. Rather than devote 50% or 60% of federal ax revenues to Social Security and Medicare, Congress will, IMO, somehow reduce benefits so that they can continue defense spending, highway and mass transit spending, agriculture price supports, etc.

Randy March 22, 2011 at 8:09 am

I believe that the Trust Fund represents a debt owed by the political class to those of us who were forced to fund their activities over the decades. The fact that they failed to “invest” the confiscated funds over the years, and instead simply divvied it up amongst themselves and their friends, changes nothing. The note is due, and they should pay in full. And only when their vast assets have been liquidated will I even begin to listen to arguments that they should be relieved of the burden.

muirgeo March 22, 2011 at 9:33 am

Here is the key question.

Let’s assume you have one of two choices to replace the so -called missing $2.6 trillion dollars of the social security trust fund.

Do you choose:

A: Raise taxes back to the Clinton era rates ( the debt to social security would be paid off in less than 10 years).

or

B: Cut Benefits of those who have paid into social security their whole lives.

It’s a no brainer to me… the general fund spent the money and people benefitting from those expenditures should have to pay back into the fund…. NOT the people who contributed to social security.

Choice B is simple a transfer of wealth from the middle class to the wealthy class.

Bill March 22, 2011 at 10:30 am

Since money is fungible, as a practical matter, how do you identify “people benefiting from those expenditures”?

Methinks1776 March 22, 2011 at 10:50 am

I eated sum fungible and gote cheez WITH my eggs this mornung. Why are you TALKING about FOOD, bill? While your are Taking ABOUT food, the RICH are steelung stuff FRUM ewe. Thu BILLIONARES are taking all the muny FRUM us DONORS to the soshul securitee LOCKBOX!!!!! GODDDDDDDDDDDD!!!!……..EWE LIBERTOPIUNS ARE STOOOOOPED!!!!

It’s a No braner fur me. I DONT HAVE ONE, so its REEEL simple.

Cunnect thu dots, bil. CUNECT THU DOTS!!!!!!

Ewe and eye agree. Basekly. evun THOW I have NO ideuh wat Ewe ARE TAWKING ABOUT!!

-Muirdiot

muirgeo March 22, 2011 at 2:30 pm

dats whut Im takling abut!!! Zactly!

brotio March 22, 2011 at 7:49 pm

HSIROTFLMAO!

vikingvista March 23, 2011 at 1:24 am

Whoa! Methinks, I nearly shot you some invectives because I thought you were muirprick. Great impersonation!

STATISTICULOUS March 22, 2011 at 11:10 am

You ought to check out the numbers on tax receipts in the US historically. Over the last 70 years they have moved up and down between 14% and 21% of GDP, independently of top marginal tax rates. Yes, they were high during the last few Clinton years (near or above 20%) but they were low (13%-15%) during the 50s and 60s, when the top rates were very high- highest in our country’s history.
My point is: you can’t just raise taxes and say “alright, now the government will collect more and our problems will be solved”. That’s not what happens empirically.
We are better off pursuing pro-growth policies to address these problems, but most of the policies you support are anti-growth from what I’ve read.

Methinks1776 March 22, 2011 at 11:35 am

WHUT?!!!!!! NO!!!!!!! I don’t undurstand MATH so that makes NO SENSE to me. plus, i seriusly HATE pepul who have akomplished anything. Maiks me feel BAD ABOUT MYSELF.

We SHUD tax thu EVIIIIIL RICH 100% MINIMUM and TAKE all the BILLIONARE’S MUNY that they got frum EXPLOITATION uv thu PROLITARIUT and THROW THEM IN JAIL!!! Then we will nevur have to worry about the soshul securitee donated funds EVER AGAIN!!!

WAKE UP!! Or we will all move to ETHIOPIA.

- Muirdiot

muirgeo March 22, 2011 at 2:37 pm

Statisticulous,

I would challenge your data on effective tax rates.

http://blog.prospect.org/blog/ezraklein/effectivefederaltax.jpg

There is also this data linking top marginall rates to GDP;

http://www.presimetrics.com/blog/wp-content/uploads/2010/12/Follow-up-Bar-Graph.bmp

Randy March 22, 2011 at 12:47 pm

There are not just two choices. There is also option C; confiscate all assets of the political class until the debt they owe is paid in full.

Alcibiades March 24, 2011 at 3:51 pm

It is simply amazing at how many people don’t get Don’s fundamental and very basic point regarding accounting.

Pretend you are self-employed and own your own one-person small business. Next, ‘borrow’ some money from your business, spend it all in Vegas, and then go back home and look at the loan as it appears on your books.

Finally, tell me if the ‘asset’ (loan to be re payed by you personally to the business) is really an asset owned by your small business – similar to the cash or property assets held by your business.

RS March 31, 2011 at 2:03 pm

Bill Gross’ comments:

http://www.pimco.com/Pages/skunked.aspx

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