Re: Removing Cap Virtually Eliminates SS Funding Gap

From: William F Hummel (wfhummel_at_comcast.net)
Date: 02/23/05 

Date: Wed, 23 Feb 2005 15:14:17 -0800

On Wed, 23 Feb 2005 01:33:29 -0500, "tonyp" <tonyp@world.std.com>
wrote:
>
>"Mason A. Clark" <masoncNOT@THISix.netcom.comQQQ> wrote
>
>> Interesting idea. Setting aside doubt about the surpluses, how
>> would they have paid a retiree in, say, 2018 or 2040? In what
>> form would they have been stored for that future use?
>
>
>Easy: pay down the national debt, now, using the surplus FICA collections
>from working boomers. Then, when they start retiring, borrow money to pay
>their SS benefits. You don't have to store beans and corn. You can store
>up borrowing capacity.

What you are really saying is eliminate the on-budget deficit so the
FICA tax surplus will pay down the debt, because there is no other use
for the surplus FICA taxes in that case.

But the Treasury will still have to borrow from the public when FICA
taxes no longer cover SS benefits, regardless of what the federal debt
is at the time. You can store beans and corn, but you can't store up
borrowing capacity.
>
>In accounting terms, imagine that excess FICA payments collected from us
>boomers had gone straight to paying down the "publicly-held" portion of the
>national debt. Imagine, in the extreme, that come 2018 the Treasury's
>_only_ outstanding debt was its IOUs to SS.

The debt you so fear is a major part of the net financial wealth of
the private sector. By eliminating all that wealth you would stop the
economy cold in its tracks and kill new investment. Bad policy!

What is needed now to cover the baby boomers in full retirement is a
robust economy with high employment levels. That in turn will support
the new investment needed to increase the real output per man-hour.

>Imagine how much easier it
>would be, in that case, to run huge deficits (i.e. to "borrow from the
>public", i.e. to issue new debt) in order to raise the cash to pay the IOUs.
>Compared, I mean, to trying to borrow from "the public" when you already owe
>"the public" several trillion dollars.

Come on Tony, this same baloney has been heard year after year for at
least the last 40 years. The government has no problem raising cash.
The reason it borrows is not to "raise cash" but to recapture its
deficit spending. Otherwise it would lose control of the interest
rate that banks must pay for the funds they lend.
>
>> I have a habit of thinking in beans and corn and I can't
>> figure out how money tinkering saves today's beans and
>> corn for future use.
>>
>> Mason C, master of the succotash principle
>
>
>Well, instead of raising beans and corn, you spend some of your labor,
>today, on digging irrigation ditches and building combine harvesters, so
>that tomorrow's smaller workforce can still produce all the beans and corn
>you'll need, tomorrow. You would be more and more inclined to do that,
>rather than invest in Treasury bonds, if the Treasury was actively retiring
>debt and therefore offering less and less interest.

Interest on the debt is just another form of spending. All of it is
recaptured either through taxes or the sale of bonds.

The problem is not with the debt or the interest on the debt. It is
the many fallacies in conventional wisdom, some of which you are
repeating here.

Relevant Pages

  • Re: Removing Cap Virtually Eliminates SS Funding Gap
    ... pay down the national debt, now, using the surplus FICA collections ... You don't have to store beans and corn. ... boomers had gone straight to paying down the "publicly-held" portion of the ...
    (sci.econ)
  • Re: Im a little confused...
    ... surplus for the fiscal year ending September 30, ... The U.S. Treasury Dept. disagrees with your math, because it does not take into account intergovernmental holdings. ... The general fund eventually has to pay back the SS fund with your tax money. ... The U.S. treasury correctly computes the debt at over $500 Billion in 2001. ...
    (rec.crafts.metalworking)
  • Re: OT:who is the worst pres of all time?
    ... We had a surplus for two budgets, ... >> never used to pay down debt. ... > So then there never was a surplus for those two years. ... used to pay down the federal debt. ...
    (rec.gambling.poker)
  • Re: OT:who is the worst pres of all time?
    ... We had a surplus for two budgets, ... >>> never used to pay down debt. ... >> So then there never was a surplus for those two years. ... > used to pay down the federal debt. ...
    (rec.gambling.poker)
  • TURMEL: Brantford Chamber of Commerce Survey
    ... Bank of Canada which does not need to pay interest to any ... interest on the mortgage debt for his practice. ... municipalities collect tax up front, ...
    (sci.econ)