Re: On Government Trust Funds

On Wed, 24 Aug 2005 17:37:47 GMT, "sinister" <sinister@xxxxxxxxxxxxxx>
wrote:

>
>"William F Hummel" <wfhummel@xxxxxxxxxxx> wrote in message
>news:fi0pg1dlnk7o47c1sgktu9mldocumf70ln@xxxxxxxxxx

>> No, the economic distinction goes much further. Take Social Security
>> for example. It is a pay as you go system whether we realize it or
>> not. Today's benefits are paid out of today's Treasury receipts.
>> There is no lock box to store today's excess FICA taxes for use in
>> some future year. Thus the economic effects of today's payments,
>> whatever they may be, fall on today's taxpayers. Likewise the effects
>> of future payments will fall on those paying taxes at the time.
>
>So why run a SS surplus?
>
The reason an SS surplus exists is simply because of the FICA tax
system. There would be no such thing as an SS surplus if we got rid
of that system and the so-called trust fund. The SS surplus adds to
the "official debt" which only compounds the confusion among the
public and the politicians in Washington who don't really understand
government finance. The only government debt that matters is that
held by the private sector on which actual interest payments are made.

>>>And while it's true that SS beneficiaries (future and current) have no
>>>property interest in their benefits, it would be very difficult
>>>politically
>>>to wipe away the SS trust fund by a change in statute, even though it
>>>would
>>>be permissible under the Constitution to do so.
>>>
>> What is politically possible is irrelevant. In any case, few seem to
>> realize De facto, all
>> current benefits are paid out of the general fund, while bookkeepers
>> adjust the amount that the government owes itself, a meaningless
>> exercise.
>
>Misleading. These distinctions certainly matter in terms of who pays the
>taxes.
>
Who pays taxes is governed by the tax code, and is a different issue.
If the SS trust fund were eliminated, the government would continue to
pay SS benefits out of the general fund and no one would notice
because that is how it is done now. The only difference is that it
would no longer have to engage in an meaningless bookkeeping exercise,
writing and canceling IOUs to itself

If FICA taxes were also eliminated, however, there would have to be
some change in the tax code to compensate for loss of revenue.
.

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