Re: Removing Cap Virtually Eliminates SS Funding Gap

royls_at_telus.net
Date: 02/24/05 

Date: Thu, 24 Feb 2005 22:40:19 GMT

On Wed, 23 Feb 2005 15:14:17 -0800, William F Hummel
<wfhummel@comcast.net> wrote:

>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.

But it will be easier to get that money from taxpayers if the
government is not paying so much debt interest as well.

>You can store beans and corn, but you can't store up
>borrowing capacity.

?? Of course you can, by not borrowing.

>>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.

I have already explained to you a number of times why this claim is
nothing but financial sleight-of-hand: the future payments of the debt
principal and interest are counted now as private bondholders' assets,
but the taxes that will be levied on private taxpayers to make those
payments are not counted as anyone's liabilities. Such phony "assets"
are not wealth in any meaningful sense of the word.

>By eliminating all that wealth you would stop the
>economy cold in its tracks and kill new investment.

Garbage. Debt reduction only adversely effects the economy when it is
accompanied by money supply reduction.

>>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.

It can always just print it.

>The reason it borrows is not to "raise cash" but to recapture its
>deficit spending.

More sleight-of-hand.

>Otherwise it would lose control of the interest
>rate that banks must pay for the funds they lend.

That's just an artifact of the idiotic debt-money system.

>>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.

Bond sales just defer the day of reckoning. So more debt -> more
taxes, less debt -> less taxes. Less debt will leave more taxable
capacity in the future economy to pay for SS.

>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.

The biggest fallacy in conventional "wisdom" repeated here is the
private sector government debt asset without the balancing private
sector tax liability, and it's _yours_.

-- Roy L

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