I guess it’s just due diligence but it’s good to know that the Treasury Department has been exploring the implications of using the 14th Amendment to declare a congressional debt limit unconstitutional. While the White House has so far been dismissive of the idea, recent rhetoric could be an indication that they’re prepared to make the case to the American people. The argument basically, is this:
“We put everything on table, including our own sacred cows, including Social Security, and they wouldn’t budge. This administration has a Constitutional obligation to pay our government’s debts. Section 4 of the 14th Amendment states, “The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.” Driven by ideology, the Republicans behave as if they have the power question the validity of our public debt. They don’t have that power. I won’t allow our debt to be questioned, nor will I stand by while the Republicans wreck the global economy which is just struggling to get to its feet after eight years of neglect and mismanagement.”
On the other hand, the Republicans are acting like there is a 50-50 (or better) chance of a deal being struck in the next 48 hours.
That leaves us with basically nothing to talk about. We’ve heard some nasty rumors about what might be in the deal, but we have almost nothing to go on in terms of what the overall package will be.
I’m waiting to hear what’s under the Christmas tree, because cuts to Social Security are mighty hard to justify. We should have a huge surplus of cash to pay for Social Security, but rich people stole that money so that we could run up huge deficits while they enjoyed low taxes. It’s those same rich people who should pay that money back now.
the money was borrowed, not stolen. those taxes were supposed to be temporary.
they should be forced to pay it back, at gunpoint if necessary.
ha ha.
That’s funny.
Borrowed.
No, it was stolen, which is why we have a problem financing Social Security. No one wants to pay taxes, so the money’s gone.
I don’t buy the argument that the Social Security Trust Fund (indeed any government trust fund that invests in the US debt through intragovernment transfers) is a subordinate creditor.
Repudiating one dollar of this debt is default as much repudiating the debt to an investment bank or a foreign country.
I think what the dance is about is the GOP trying to make the American people take a default on a debt crisis that doesn’t exist just to force the President to cut Social Security and Medicare.
This will either be Agincourt or Dunkerque for Obama.
It’s not a subordinate creditor. It’s been fleeced.
The problem is that politicians are afraid to set taxes at a level that would pay for what they want to do. So, they use SS as a subsidy that they have no intention of paying back. They’ll honor the existing bonds, but they’ll do it by reducing promised benefits.
I’m very glad to hear you finally admit it, Booman.
I knew it was all over when I heard Nancy Pelosi caving on SS during an interview with Bloomberg this afternoon. Guess I’ll just work until I die and NEVER vote Democratic again.
I never didn’t admit it. I’ve said the same thing for years.
Progressives keep telling me that SS isn’t contributing to the deficit. Okay, that’s true in a very limited sense. It’s true that it shouldn’t be contributing to the deficit. But it is, and has been ever since the government decided to spend all the surplus money, pay interest on the bonds, and then borrow more money on top of it.
The result is that every SS bond creates a bigger deficit, and we have to pay that money back even as we pay interest on it every day.
Unless we stop robbing Peter to pay Paul, the SS program is a huge drain.
Granted, it’s not the fault of SS. It’s the fault of the people who rob SS. But since that is built into the system, SS has to be reformed. And since no one can get Congress to tax people at an adequate level, benefits must go under the knife.
That’s just how it is.
I don’t allow people to steal from me. Not ever.
temporary = supposed to be paid back.
so yeah, NOW it’s stolen. Were the Bush tax cuts passed on a party line vote, or were democrats complicit?
The 2001 cut had significant Democratic support. The 2003 cut did not. It passed 50-50 plus Cheney.
In 2001, Sens. Max Baucus, John Breaux, Jean Carnahan, Max Cleland, Diane Feinstein, Tim Johnson, Herb Kohl, Mary Landrieu, Blanche Lincoln, Zell Miller, Ben Nelson, and Bob Torrecelli all voted for the tax cuts. Akaka and Bingaman voted ‘present.’ John McCain was the lone Republican to vote against them because he felt they were irresponsible.
In 2003, only Ben Nelson and Zell Miller voted ‘aye.’ But that was enough to get them to 50, and Cheney broke the tie. McCain and Snowe were the only Republican dissenters.
Well, as I’m sure you know, It was not possible, even theoretically, for the government to keep that money as “a pile of cash.” It did the only thing he could do with the money, which is to spend it. In compensation, the SS trust fund received government bonds, which were essentially promises to pay Social Security from general revenue if the money raised by the Social Security tax turned out to be insufficient to fund Social Security payments. As long as we don’t actually default, those bonds in the trust fund are still good.
That said, there is a sense in which you are completely right. If we had used this excess revenue from the SS wage tax to pay down our existing non-SS debt (which was, in fact, what Al Gore proposed in 2000), then the government would be in a better financial position to pay back the bonds in the SS trust fund, because there wouldn’t be so many bonds owned by the general public. Rather than doing this, we borrowed money to give tax cuts to rich people and fight some expensive and useless wars. So now, the government owes lots of money, and one way to deal with this might be to reduce SS benefits, thus putting off the day (perhaps indefinitely) when some SS benefits need to be paid from general revenue. Another way to deal with this might be to raise taxes on the wealthy. Of course you know the option that I prefer.
It was possible theoretically. The whole idea behind the surplus was that SS would build up a nest egg to deal with known demographic changes (the aging of the population) that were coming down the pike. The money was never intended to act as a subsidy for lost tax revenue, but that’s exactly what happened.
For thirty years, SS has been a regressive tax shift from the rich to everyone else. That’s one reason why I’m not wedded to the current system.
Granted it’s a lot of money lying around doing nothing but earning interest. It should have been possible to use the money as some kind of targeted investment bank for worthy projects. But to just throw it in the general revenue bucket when you’re running a deficit anyway?
It’s this part of SS that’s broken. The problem, which progressives bemoan but then out of the other side of their mouth ignore, is that politicians are unwilling to raise the revenue they now need to honor the bonds. So, they’ll cut benefits because it’s less painful politically than jacking up taxes on the rich.
Your second and fourth paragraphs are right, but your first and third paragraphs are wrong.
There was no way for the government to “keep” the SS surplus. Where would it put it? Deposit it in a private bank? Not such a great idea to take a few trillion dollars out of circulation, not to mention this is basically a huge subsidy for the bank, who can then loan out money with interest. Put it in a mutual fund? There’s a word for that one – privatization.
No, the only thing it could do with the money was to “loan” it to itself, use the money for current operations in lieu of general revenue, and promise to pay the money back from general revenue in future. This is the way Social Security was designed to work.
The problem is not that we “spent the surplus” – the problem is that we knew that the direction of monetary flow would reverse one day (i.e Social Security cross from general revenue, through redemption bonds) and we did not prepare for this by reducing our other debt.
In fact, your comment above, in response to Voice seems to indicate that you are in agreement with me here. The real problem is that we added so much to the debt ON TOP of the money that we owe social security, that now we find ourselves unable or unwilling to pay the Social Security debt.
It has been federal law since the early 1960s that any Social Security taxes collected beyond that year’s Social Security expenditures be put into the general fund.
You are absolutely correct.
I do agree with you. But here’s what you’re missing. The design is flawed. The way it is supposed to work, doesn’t work.
You say it’s designed to work this way. I say it is designed to work this way, but the design doesn’t work. Put another way, the idea is to raise more money than you spend for a period of time in order to prepare for a future where you will spend more than you raise.
Pouring all the surplus into the general revenues when the government is running a deficit year after year, is throwing away the money. You make a pledge to pay the money back to the person who gave it to you, and you make a promise to pay the money back to the Trust Fund, you pay interest to the Trust Fund (which also comes out of general revenues), and pretty soon the program is insolvent because the government is insolvent. Then overwhelming pressure comes to rip up the deal and rewrite is as something affordable.
At the most basic level, this is a problem with the design of the system not taking into account the predictable behavior of politicians. We tend to treat the Trust Fund as this separate entity from Congress that has its books in order. Well, no. It keeps loaning cash to people who aren’t good for the money.
“Oh, but the government has to respect its bonds or its credit rating will collapse.”
Right. But it doesn’t have to honor its other promises. And it’s not going to. No conceivable Congress or president would honor the promises we’ve made to SS. At best, they’ll kick the can down the road so someone else can take the blame.
This is why it’s a nice argument to say that SS isn’t contributing to the deficit, but it means almost nothing despite being technically true.
Here’s a thought experiment.
Imagine a dual kitchen sink.
On the left is the Social Security Trust Fund. It is full of water and it has a plug in the drain.
On the right side is Congress and the general revenues. It is empty and the drain is unplugged.
Now, take the faucet and put it over the left side of the sink. Turn on the water.
The water from the left will start overflowing in the right sink and running down the drain.
The longer you do this, the more water is lost down the right sink’s drain.
Every couple of minutes, the right side of the sink gives you a glass full of water to pour on its full side if the sink. It, too, overflows and goes the right side’s drain.
At some point, someone pulls the drain from the Trust Fund’s side and it begins to empty out. At this point, it asks for more than just a glass of water every few minutes. It wants all the water it gave away back right away so that it doesn’t become empty.
But the right side of the sink still has an empty drain, and it can’t afford to buy any more water.
This is how Social Security actually functions. You can say it is designed to function that way or not designed to function that way. But that is what is happening. And it needs to be fixed.
I like this metaphor, but to make it accurate, you need two things:
(1) The sink on the right also has a faucet; this is the general revenue.
(2) The drains go back to the water company, who send it back to the faucets. This reflects the fact that money spent by the government isn’t “lost” – it goes into the economy, where it can be recovered through taxes.
Now, if you’re telling me that the system cannot possibly work to refill the sink on the left, no matter what the water flows, I will have to disagree with you.
But if you’re telling me (as you seem to be saying in the comment above) that the system won’t work because the water flows in the faucets are not politically feasible, then I am likely to agree. But this is a different kind of argument.
That said, I think a danger in this metaphor is that it treats money as a real thing that could possibly be stored (for example, in some water tank somewhere). Money is not a real thing – it is a social and legal instrument by which one can make a claim on actual goods or services. When the government takes in Social Security taxes and pays out benefits, it is basically compelling one group of people (those who are working) to provide goods and services for another group of people (retirees). Given that the amount of this transfer must be set through a political process, I don’t see any way to make this operation impervious to politics. (Of course, one could always privatize the system, thus leaving the government out of it, but this has its own disadvantages.)
If you can’t create a surplus account of cash, then it is folly to design a system to do just that.
Cuts to SS don’t mean benefit cuts. I have a dog in this race.
SS has cut costs with things like having all payments made through direct deposit. That saves on mailing costs.
The reported proposal on the table is CPI chaining, which would change the calculation of COLAs so as to reduce the percentage of COLA for every percent of CPI increase. And it would be chained, i.e. compounded, because the next reduced level would be applied to the the baseline of the results of the previous reduced level.
Reducing costs through administrative actions like shifting people to direct deposit does not require Congressional authorization. And is already going on. The hindrance there is people’s access to banks. A lot of folks take their Social Security checks to their local store and get them cashed before they buy groceries. Especially in rural areas.
http://bonddad.blogspot.com/2011/07/facts-about-social-security-and-chain.html
Yep, that’s the math.
The killer is the compounding.
No more checks, TarheelDem. They flat out refused to send me one. I just wanted to photocopy the first, but there are no more. Soon no more deposits, either.
My direct deposit goes straight into a credit union. I’ve got my Medicare card to match up with my draft classification card from the 1970s. Don’t need a copy of the first SS check.
But I didn’t know they were forcing everyone into banks.
Happened this year. I’ve been carrying my original SS card since 1960, so of course I couldn’t find it when I applied for benefits! Ditto with the original draft card from 1963.
I live quite a distance from the nearest SS office and was delighted to find I could do it all on the web, with a follow-up by phone. It was quick and much easier than I had imagined it would be.
You do have the option of getting a reloadable debit card. I’ve never used a debit card and I’m not starting now. Actually, Citibank replaced their ATM card with a debit card, so I do use it, but only to log in to the ATM machine.
Is it wrong of me to kind of wish we were back in a recession again? Not a major one, like 2007-2009, but just enough of a slowdown to make big money men a little queasy and republicans uncertain enough to retreat to their dark corners and throw potshots instead of trying to do their half-govern/half-sabotage routine.
Or, on the other hand, I wish the economy was booming again like in the 90s so that this political bullshit carried much less of a price.
Basically, I wish things would either get a lot better or a little worse, rather whatever this is we have now. Or, even more preferably now that I think about it, for every last Republican in office to die horribly in the next month. That would be best. Not in the cards though. So it goes.
Do thieves and swindlers ever get queasy about recessions or anything else they can profit from? Not that I’ve ever heard of. I’m afraid you’re dreaming. Unless, of course, the perp walk to the nearest lamppost with mobs carrying ropes comes to pass.
By now I’m hoping the Republicans stick to their principles and refuse to compromise. As bad as a constitutional crises would be, I think it would be better than the deal that’s on the table, together with the precedent it sets that a party can get whatever it wants if it’s just willing to hold the country hostage.
me too. I don’t want to get fucked in the ass with a steak knife to make Republicans, conservatives, and rich people happy.
And I’m not voting for anyone who cuts my future benefits, or my parents benefits.
Think Green, brendan. The Democratic Party is in Wall Street’s left hip pocket. The Republicans are in the right hip pocket.
Howard Dean told us we had the power, but he was wrong.
as it happens, that’s my favorite color.
I am very much thinking Green.
This is true:
No, it is not a failsafe. It requires the government not to default on its debts. I believe that that requirement includes the beneficiaries of US government trust funds that have invested government funds in the full faith and credit of the US government.
The government can cancel contracts, defer payments, no issue contracts, negotiate with suppliers, and so on pretty much without Congressional interference.
Has any piece (like the legislative and judicial branch or defense) of the FY 2012 budget passed yet? I don’t foresee an easy path to a continuing resolution.
And if the GOP is hardnosed, the government shuts down for the items for which the Congress has not authorized expenditures.
They don’t want to TarheelDem. It was all kabuki to fool us while serving their corporate masters. Now, you and I will work until we have a fatal stroke or heart attack on the plant floor as I’ve seen too many guys do already.
A few years ago, a Chinese friend wanted me to move to Shanghai with him and work doing English software documentation. He would translate and I would clean up the grammar. I should have taken him up on it. This country id dead, a victim of political suicide.
Wonder if Guithner’s little trial balloon brought Frank to the table that the White House laid for the Rep leadership. The GOP response that they’re just certain Obama’s raising the debt would be an impeachable offense is good sign their armour has a chink.