Re: Bush busts Social Security with massive deficits

From: William F Hummel (wfhummel_at_comcast.net)
Date: 10/03/04 

Date: Sun, 03 Oct 2004 17:20:52 GMT

On Sun, 03 Oct 2004 06:20:26 GMT, Igor <jjweatherby@houston.rr.com>
wrote:

>William F Hummel wrote:

>> There is a much easier way to avoid "insolvency" of the SS. Congress
>> could declare a higher interest rate on trust fund bonds or simply
>> issue a dividend to the trust fund. It's purely a bookkeeping matter,
>> internal to the government.
>>
>Either way that means even large deficits that at some of which will
>need to be paid. Raising the dividend or the interest rate does not
>magically print money. Only the Fed can do that.

There is no way to "print money" for a trust fund. But it is easy to
credit the fund with additional assets. It only takes an act of
Congress.

>This will raise
>expenditures from the general fund and just mean we are using FICA to
>finance Social Security much earlier.

Crediting the trust fund with additional assets will do _absolutely
nothing_ to raise expenditures from the general fund of the Treasury.
The expenditures are determined by what the SS law mandates in terms
of benefit payments, period. FICA taxes will continue to cover those
benefits for the same length of time, regardless of whether the trust
fund gets new credits or higher interest rates on its bonds by edict.
>
>The only way to avoid massive debt is raise taxes and do it early or
>reduce benefits. A sensible approach would be to move back minimum
>retirement ages. We are living longer and living more healthier in early
>older years. People can potentially and are working longer. It makes
>sense to move the minimum retirement age back. It will not solve
>everything but it will help.

Here you completely ignore the effect on the macroeconomy that would
result from your proposal. Increasing payroll taxes is precisely the
wrong thing to do in terms of promoting vigorous growth in our
productive capacity. If there is a future problem in SS, it will be
in our productivity, not are financials.

There will likely be a substantial increase in government debt
securities to cover future SS benefits, but that is not necessarily a
problem. In any case we have no way of predicting 30 to 40 years
ahead. We can't even predict budget deficits 5 years ahead.

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