Unions kill the twinkie?

[Bob Hubbard]

8-0

Hey, it happens.

 

[Steve]

"Borrowed." If you call what they did stealing then what Congress has done to Social Security's also stealing.....
(yes that is sarcasm in there)

It was borrowing until they requested that the debt (what they owed their employees' pension funds) be written off in the bankruptcy. Then it was... Not exactly stealing, but certainly unethical.

The fed has never defaulted on social security or requested that the debt be written off.


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[Bob Hubbard]

Steve, an IOU that is never paid, and is never intended on being paid.....well, call it what you like but Congress has been dipping into SS for years and has no intent to ever return what they 'redistributed'.

 

[shesulsa]

Steve, an IOU that is never paid, and is never intended on being paid.....well, call it what you like but Congress has been dipping into SS for years and has no intent to ever return what they 'redistributed'.

Sound familiar?

 

[Bob Hubbard]

Sound familiar?

Nope. I know nuthing. Nuthing!

 

[Steve]

Steve, an IOU that is never paid, and is never intended on being paid.....well, call it what you like but Congress has been dipping into SS for years and has no intent to ever return what they 'redistributed'.

This just isn't true. If you say that congress double counts FICA, I would see your point and agree. But double counting isn't he same as not paying. The fed hasn't failed to pay anyone who is due a social security check their Full payment, and to my knowledge ha yet to bounce a check. and as we move from taking more in FICA than is paid out to drawing from the trust funds, the fed is making good on the IOUs.

The IOUs are in the form of treasury bonds, and as those bonds are spent paying benefits, through the point that the trust funds are depleted, the fed is precisely making good in the IOUs. That's the very definition of the term.


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[Bob Hubbard]

We're tangenting a bit, but let me address this. The US Supreme Court ruled that there was no obligation of the Fed to pay anything to anyone. They did this in a case where someone wanted their benefits and was denied.
Supreme Court Case: Flemming vs. Nestor http://www.ssa.gov/history/nestor.html

In this 1960 Supreme Court decision Nestor's denial of benefits was upheld even though he had contributed to the program for 19 years and was already receiving benefits. Under a 1954 law, Social Security benefits were denied to persons deported for, among other things, having been a member of the Communist party. Accordingly, Mr. Nestor's benefits were terminated. He appealed the termination arguing, among other claims, that promised Social Security benefits were a contract and that Congress could not renege on that contract. In its ruling, the Court rejected this argument and established the principle that entitlement to Social Security benefits is not contractual right.

As to the FED being able to handle the IOU's....well:

At the end of 2011, the Trust Fund contained (or alternatively, was owed) $2.7 trillion, up $69 billion from 2010.
...
By 2033, the fund is expected to be exhausted. Thereafter, payroll taxes are projected to only cover approximately 75% of program obligations.[3]

There is controversy regarding whether the U.S. government will be able to borrow sufficient amounts to honor its obligations fully to recipients or whether program modifications are required. This is a challenge for the Federal government overall, not just the Social Security program.

http://en.wikipedia.org/wiki/Social_Security_Trust_Fund

Sounds familiar. Hey, anyone up for some Greek food?


ok, back to kavetching about twinkies.

 

[arnisador]

Unlike Hostess, the U.S. Govt. can print money or raise taxes to meet its obligations.

What Hostess did with the pensions sounds very bad--but is all-too-common. Pensions need to be 100% untouchable for the system to work. And now it isn't clear where the pension claimants stand as creditors--that sucks. People want workers to be responsible for their own retirement sans Soc. Sec. Here's a case where they were screwed by the company--yet another reason while federal retirement programs are necessary.

 

[Makalakumu]

Unlike Hostess, the U.S. Govt. can print money or raise taxes to meet its obligations.

What Hostess did with the pensions sounds very bad--but is all-too-common. Pensions need to be 100% untouchable for the system to work. And now it isn't clear where the pension claimants stand as creditors--that sucks. People want workers to be responsible for their own retirement sans Soc. Sec. Here's a case where they were screwed by the company--yet another reason while federal retirement programs are necessary.

If a company can default on retirement plans, so can a government. It's happened too many times to count and it's happening right now in other countries. It could happen in the US too.

Now, when you say that a government can raise taxes and inflate it's money supply to meet it's obligations, I would add one more thing. It can also go into debt. These three things have never saved a government plan once it has run massive deficets. This is because of the massive impact on the economy all three of these methods have.

Taxes directly reduce the amount of money that can be spent in the economy and have the harshest effect.

Inflation erodes the purchasing power of the currency, meaning that any benefit actually being paid out is cut in reality.

Debt doesn't have a direct impact until the load becomes too great and interest rates rise. Then, governments have to divert more and more money to pay the interest on the debt. When governments reach a debt load that is so high that they must raise taxes to cover it, the raised taxes cause tax receipts to actually go down and the problem gets worse.

This is when governments start inflating.

And depending on how big the deficit is, the value of the currency can actually be substantially reduced. The cause of this is massive poverty and ultimately a race to dump that countries bonds. This is how a country defaults.

If you combine this process with war debt, it's like pouring gasoline on a fire.

So, no, the US is in no position to fund anyone's retirement. We're on a historical downward slide that is measurable by the Feds unlimited purchasing of US bonds. According to mainstream economists, it's a last ditch gambit that no one knows if it will actually pay off.

According to historical trends and Austrian economists, our currency is headed over a cliff.

So, yeah, don't expect this government to cover it's debts. At least in the case of Hostess, the effect of the poor policy will be limited. With the government, everyone is going to be affected, even the unborn.

 

[Bob Hubbard]

Unlike Hostess, the U.S. Govt. can print money or raise taxes to meet its obligations.

Sure the government can print more money. So why not just print a $14T bill and pay off out debt in 1 shot?
Doesn't work that way Arni. You know that.
Print too much money, you'll destroy the currency and people will need wheelbarrows to haul around enough for a loaf of bread again.
Raise taxes too much, you'll devastate the investor class and significantly damage the economy.
Giving more to people who have proven incapable of doing right with what they already have...never was a smart move.
I mean, if your kids pissed away their allowances, you didn't keep giving them more, right?
But why don't we use the perfect system. 100% taxation for everyone. You work, and your labors help the country, who in return provides you with a home, a car, food, a phone and your utilities. We can all be equal then. I'll just be cuter. (I'm sure they'll mandate I wear a fake wart to even things up)

What Hostess did with the pensions sounds very bad--but is all-too-common. Pensions need to be 100% untouchable for the system to work. And now it isn't clear where the pension claimants stand as creditors--that sucks. People want workers to be responsible for their own retirement sans Soc. Sec. Here's a case where they were screwed by the company--yet another reason while federal retirement programs are necessary.

Right. Which is why Social Security should also be untouchable by Congress, and it limited to what it was -sold to the public as-, retirement benefits.

It's hard for a parent who is irresponsible to raise responsible kids, harder still for a government to instill responsible behavior in it's citizens when it squanders what it steals, and rather than take it's own advice and tighten it's belt, just takes more.

What Hostess did with the pensions sounds very bad

No disagreement here.

 

[arnisador]

Sure the government can print more money. So why not just print a $14T bill and pay off out debt in 1 shot?
Doesn't work that way Arni. You know that.
Print too much money, you'll destroy the currency and people will need wheelbarrows to haul around enough for a loaf of bread again.
Raise taxes too much, you'll devastate the investor class and significantly damage the economy.

The last point is not well-supported by evidence, but yes it's always a balancing act and so it's fortunate that there are many ways to raise money (and to save money) and that they can be combined. Removing the approx. $100k/year salary limit for payroll taxes solves all these problems immediately. That's a regressive tax (albeit only w.r.t. those making six figures per year) that would have limited effect on investors who make a lot of non-wage income. Simple, immediate, imperfect fix. The govt. can pay its bills. It's just politically unpopular to do so--or to stop paying for services.

Right. Which is why Social Security should also be untouchable by Congress, and it limited to what it was -sold to the public as-, retirement benefits.

I was also referring to federal pension benefit guaranty insurance here. By saying it should be limited to retirement benefits, do you mean it shouldn't also pay orphans/widows/disabled benefits, or just that it shouldn't be raided to pay for other federal spending?

My point here is that the law needs to protect pensions as pensions in companies--and not allow companies, which have many fewer ways to raise money, to tamper with them. Otherwise we're right back to where we started.

 

[Steve]

We're tangenting a bit, but let me address this. The US Supreme Court ruled that there was no obligation of the Fed to pay anything to anyone. They did this in a case where someone wanted their benefits and was denied.
Supreme Court Case: Flemming vs. Nestor http://www.ssa.gov/history/nestor.html


As to the FED being able to handle the IOU's....well:

http://en.wikipedia.org/wiki/Social_Security_Trust_Fund

Sounds familiar. Hey, anyone up for some Greek food?


ok, back to kavetching about twinkies.

Jesus Christ, bob. The point at which the trust funds are depleted, the fed will already have made good on the IOUs. Do you seriously not understand that? They will have paid back every dollar. Solvency is a different issue. You brought this up, and you're just wrong. Trying to score a last point and then dismiss it as a tangent is a little cheap, particularly since you're factually incorrect.


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[arnisador]

Yeah, I'm just not buying the theory that the U.S. will treat its debt (to itself or others) like Argentinian bonds.

 

[Bob Hubbard]

Jesus Christ, bob. The point at which the trust funds are depleted, the fed will already have made good on the IOUs. Do you seriously not understand that? They will have paid back every dollar. Solvency is a different issue. You brought this up, and you're just wrong. Trying to score a last point and then dismiss it as a tangent is a little cheap, particularly since you're factually incorrect.


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Nope, just Bob here. I'm not Jesus Christ, nor am I his brother Damnit.

If I'm "factually incorrect" Steve, take a minute and update the Wikipedia article will ya please? They could use the correction too.

According to the Social Security Trustees, who oversee the program and report on its financial condition, program costs are expected to exceed non-interest income from 2011 onward. However, due to interest (earned at a 4.4% rate in 2011) the program will run an overall surplus that adds to the fund through the end of 2021. Under current law, the securities in the fund represent a legal obligation the government must honor when program revenues are no longer sufficient to fully fund benefit payments. However, when the trust fund is used to cover program deficits in a given year, the Trust Fund balance is reduced. By 2033, the fund is expected to be exhausted. Thereafter, payroll taxes are projected to only cover approximately 75% of program obligations.

[h=3]Overview[/h] The trust fund represents a legal obligation of the federal government to program beneficiaries. The government has borrowed nearly $2.7 trillion as of 2011 from the trust fund and used the money for other purposes. Under current law, when the program goes into an annual cash deficit, the government has to seek alternate funding beyond the payroll taxes dedicated to the program to cover the shortfall. This reduces the trust fund balance to the extent this occurs. The program deficits are expected to exhaust the fund by 2033. Thereafter, since Social Security is only authorized to pay beneficiaries what it collects in payroll taxes dedicated to the program, program payouts will fall by an estimated 25%.

The trust fund is expected to peak in 2021 at approximately $3.0 trillion.[SUP][22][/SUP] This means that from 2022 through 2033, the government will have to find approximately $3 trillion in other funding to pay beneficiaries beyond program revenues. If the parts of the budget outside of Social Security are in deficit, which the Congressional Budget Office and multiple budget expert panels assume for the foreseeable future, there are several implications:

• Additional debt must be issued to investors to obtain the funding necessary to pay this obligation. This will increase "debt held by the public" while simultaneously reducing the "intragovernmental debt" represented by the trust fund.
• Investors may be unwilling to fund this shortfall unless considerably higher interest rates are offered, if at all.
• Other parts of the budget may be modified, with higher taxes and lower expenditures in other areas to fund Social Security.[SUP][23][/SUP]
• Debate regarding whether the proper debt to GDP ratio for evaluating U.S. credit risk is the "debt held by the public" or "total debt" (i.e., debt held by the public plus intragovernmental debt) will be rendered moot, as the amounts will converge substantially.

On the other hand, if other parts of the budget are in surplus and program recipients can be paid from the general fund, then no additional debt need be issued. However, this scenario is highly unlikely.

After you fix the Wiki article, let Forbes know so they can print a retraction.
http://www.forbes.com/sites/merrill...-the-2-6-trillion-social-security-trust-fund/

Social Security status-quo defenders have assured us for the past 25 years that Social Security is fully funded—for the next 25 years, or 2036. So if there are real assets in the Social Security Trust Fund—$2.6 trillion allegedly—then how could failure to reach a debt-ceiling agreement possibly threaten seniors’ Social Security checks?
The answer is that the federal government has borrowed all of that trust fund money and spent it, exactly as Krauthammer asserted. And the only way the trust fund can get some cash to pay Social Security benefits is if the federal government draws it from general revenues or borrows the money—which, of course, it can’t do because of the debt ceiling.

Not seeing a "pay back" in either article, maybe my over tiredness is causing me to miss it.

Regardless, I'm done arguing or reading this thread.

 

[arnisador]

How many times has the debt ceiling been waived? Is it infinity yet?

 

[bluewaveschool]

Bob, -10 points for using Wiki as an authoritative reference.

 

[Bob Hubbard]

How many times has the debt ceiling been waived? Is it infinity yet?

You can't print unlimited money, and you must eventually pay back what you borrow. Unless you go bankrupt.
Hostess did. The US is following.

Bob, -10 points for using Wiki as an authoritative reference.

Wiki is as reliable as Britannica or Americana according to investigations. Regardless, sources are cited. I also cited Forbes.
I've also read the report from the Congressional Budget Office, but they probably aren't that reliable a source either.

But Steve said I was wrong without posting any counter information, and I cited the wrong sources yet again, so I have to be incorrect, so rather than continue to cite the wrong sources, and keep posting incorrect correct information, I'm done here.


SLATFATF.

 

[arnisador]

Wiki is as reliable as Britannica or Americana according to investigations.

True...and it's easier to check WP's sources.

SLATFATF.

OK, I don't know this one. Oh wait, Douglas Adams maybe?

 

[Steve]

L

Nope, just Bob here. I'm not Jesus Christ, nor am I his brother Damnit.

If I'm "factually incorrect" Steve, take a minute and update the Wikipedia article will ya please? They could use the correction too.





After you fix the Wiki article, let Forbes know so they can print a retraction.
http://www.forbes.com/sites/merrill...-the-2-6-trillion-social-security-trust-fund/


Not seeing a "pay back" in either article, maybe my over tiredness is causing me to miss it.

Regardless, I'm done arguing or reading this thread.

Let's say I set up a college fund for my son, and then "borrow" that entire amount, but put an IOU in for every dollar. I also calculate accrued interest for every dollar I borrow. If I count the IOU as an asset, I could double count everything, because I now have the dollars I put in, plus an IOU for each dollar. That's one issue, double counting.

At some point, my son goes to college and starts cashing the IOUs until the account is depleted. I have made good on every dollar and have "stolen" nothing, whether or not my son has a college degree at the end. The balance in the account has been spent. Whether I double counted the assets or not, I am actively making good on the IOUs as my son obligates the money for books and tuition.

Now that the account is empty, my son continues going to school. at that point, my contributions into the account are only enough to pay 75%. Now that the account is empty, we have a decision to make. Either I contribute more or he spends less. That's solvency.

You're posting links to information that doesn't support your allegation. Solvency and double counting are different issues than the one at hand. Double counting is the accounting trick that allows me to more easily balance the books, and solvency is the issue of how long my son wants to draw from the account vs how much is in the account at the time he begins cashing in the IOUs.

Once again, you are asserting that 2+2=orange. You are wrong, bob, but not because your information is incorrect. It's because the information you're posting is irrelevant to the assertion you're making.


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[Makalakumu]

Let's imagine that your son is working for an account that will eventually pay for his schooling. This account is currently paying for other people's schooling now. It's also paying for other things it was never intended to pay for, thus there are a substantial amount of IOUs in it. If economic conditions remain exactly the same, maybe we can tweak the system to take in more now and pay out less in the future. Maybe we could cover your son's bill. But will it be around to pay your grandson's bill? Will we be able to stop the stress on the system being caused by the borrowing? What if economic conditions change and it's harder and harder to make those payments? What if an exceptionally large group of people need assistance on top of that?

It's too idealistic to think that we can simply fix this. Given the choice, there is no way people would choose that level of risk....but we're forced to accept it.