A Bunch of Worthless IOU’s
Next time you hear some trained Bush monkey echo Bush talking points and claim that the Social Security trustfund is stocked with nothing but a bunch of worthless “IOU’s,” pull out a $20 bill like this one:
A worthless IOU.
Explain to them that if the United States Bonds and Treasury Bills that make up the Social Security trust fund are “worthless IOU’s,” then so is this twenty dollar bill.
You see, Gvt. bonds, t-bills and this twenty are all inherently worthless pieces of paper with some printing on them. They have no real, intrinsic value.
Their only value comes from being backed by the “full faith and credit” of the United States.
So, in essence, what the Bush monkeys and Bush himself are saying is that you just can’t count on the “full faith and credit of the United States.”
A curious argument, and a dangerous one to make.
Dangerous because we are now running annual defecits in the neghborhood of $200 billion a year, based on Bush’s own questinable budget estimates. That means our Gvt does not have enough revenues from taxes, fees, etc to pay for all of its spending on an anual basis. We are $200 billion short…every year.
But, we still make our payments. We don’t print more money to do it. We BORROW that money. Yes, we borrow about $200 billion a year to pay for our Gvt spending habit.
But how, exactly do we borrow it? Do we go to a bank and say: “Hey bank, can you float the US Gvt a $200 billion loan this year?” And then repeat the process every single year for God know how long?
Of course not.
We borrow it by issuing Bonds and Treasury Bills that are bought by investors.
As it turns out, most of those who hold these “IOU’s,” happen to be foreign banks, and investors. Japan, China, Europe, Saudi Arabia…all invest in US Gvt Securities.
And we rely on their confidence in the “full faith and credit” of the United States to mainatin their habit of propping up our Goevrnment’s annual spending.
But what do you think these investors will do if Bush and his trained monkey minions keep saying that US Gvt. Securities are nothing but a bunch of worthless IOUs?
Yes. They will be much LESS likely to buy them because Bush is implying that we will default on them at some point. Thus, they will become more risky! So, in order to attrract buyers for these securities, we will have to RAISE THE RATE OF RETURN on them to make them more attractive. This will kill our economy because this will also raise longterm interest rates.
Or, we will have to massivley increase taxes by at least $200 billion to pay for our spending.
Or, we will have to cut our annual spending by at least $200 billion a year.
That means massive cuts in Medicare, Medicaid, defense and a whole host of other vital programs.
In other words, Bush and the GOP are willing to destroy the product of all the blood, moral authority, and hard work previous generations of Americans put into building up the “full faith and credit” of the United States in order to achieve a short-term short-sighted, cheap-ass propaganda victory on Social Security.
Who needs Al Qaeda when you have the Republican party?
UPDATE: It’s even worse than I thought!
March 11th, 2005 at 11:21 am
The SS expert at AARP reports that because of the interest generated by these “worthless” financial instruments (about 6%), the 2018 drop dead date is extended to 2028. How can the iou’s be worthless if they are yielding 6%?
March 11th, 2005 at 12:05 pm
Gawl, I read that and thought Counterspin’s Hesiod wrote that! A toast!
March 11th, 2005 at 1:12 pm
Boy, am I glad to see someone else making this argument. Everytime the Repugs whine about “worthless paper” they should be slapped down hard.
March 11th, 2005 at 1:36 pm
I understand how fashionable it is to disagree with any policy proposal that Bush comes up with, but has anyone bothered to ask Clinton and Gore what THEIR concerns were with the stability of Social Security? They made similar pronouncements in the late 1990s if memory serves me correctly.
March 11th, 2005 at 1:50 pm
“Who needs Al Qaeda when you have the Republican party?”
And by the way, bullshit comparisons like that one explain in part why the Dems are on the outside looking in. Grow up.
March 11th, 2005 at 3:04 pm
Cruxader: Apparently it hasn’t ever been fashionable to refute the lies that are everything that emerge from Bush’s mouth. We are in deep stool ’cause of the man and his friends and you believing what has been disproved over and over. You want to play along? Fine. You can be China’s, United Europe’s and Saudi Arabia’s bitch.
Clinton fixed minor problems with SS. Few presidents have ever avoided the need to adjust SS. Gore wanted to secure the trust where no future president (Bush) could raid it to fund an immoral tax cut for his wealthy friends (I bet you made fun of that “lock Box” deal, too. As usual, with no valid refutation of it’s actual validity.) And “Bullshit Comparisons” are simply us getting tired of the shaft and fighting fire with fire. Don’t tell us you don’t like it. We know all too well. Ask any “Old Arab”.
March 11th, 2005 at 3:11 pm
Also its important to read the 14th amendment
Section 4. 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. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.
March 11th, 2005 at 4:24 pm
“And by the way, bullshit comparisons like that one explain in part why the Dems are on the outside looking in. Grow up.”
Bush is doing more damage to our financial underpinnings and the “full faith and credit” of the United States than Osama Bin Laden could have hoped for in his most diseased fantasies.
If that’s an uncomfortable truth for you to deal with (as anyone who reads my post above will understand) then tough titties.
We have been called traitors, Saddam lovers, terrorist sympathisers, you name it and the Bush fifth column has used the epithet.
So shove it up your hypocritcal, whiny ass.
March 11th, 2005 at 7:09 pm
You’re missing the target entirely. The issue is that the gov is borrowing the social security money to reduce the deficit. Money borrowed from the trust fund is not the same as money borrowed from outside sources. The issue really is that when the revenue from social security is less than the benefits paid out, then the government has to actually borrow the money from outside to repay social security. The deficit at that point may be so high that they won’t be able to do it at reasonable interest rates. And the prudence of borrowing to repay money you borrowed in the first place is very bad. You’re financing interest on money you borrowed. Reduced Social Security benefits will be the vehicle the government uses to repay the debt, and that would be the exact breach of full faith and creidt you say won’t happen.
March 11th, 2005 at 7:26 pm
A good point, DF1957. Reduced benefits, in the context you describe, are a constitutional violation worthy of Lawsuit. If one would restore previous tax rates, or raise the cap, or extend the cap, or a combination of the three, that constitutional provision will be less likely violated and that one would be held in revered historical esteem for averting the potential for one of the greatest constitutional crisis in history.
March 11th, 2005 at 11:53 pm
The United States Government issues new treasury certificates to pay back each treasury certificate that comes due. This includes taking on more interest to pay for the principle and additional interest to pay for the interest due. So, to redeem a treasury certificate worth $100 plus $5 in interest requires issuing a new treasury certificate for $105 plus $5.25 in interest. It might also take a higher interest rate to sell a $100 treasury certificate. And so on and so on. The same thing would have to be done to finance the treasury securities in the social security trust fund. When the trust fund begins to pay out more than it takes in, the treasury certificates will have to be redeemed in the same manner all treasury certificates are redeemed. Lowering benefits would prolong the length of time the social security trust fund would be solvent, but it will not reduce the amount that the government will have to borrow unless the trust fund never runs out of money. So, to finance social security without increasing foreign debt (that’s who buys our treasury securities), the benefit cuts will have to match the decrease in payroll taxes used to pay contemporary social security benefits. This would be a very serious cut. And privatization would decrease payroll tax income even more and require even greater benefit cuts.
What is responsible for having to resort to such drastic measures to provide the elderly and disabled with a minimally adequate standard of living? Increasing government spending and decreasing income taxes at the same time. Could it be any clearer?
March 12th, 2005 at 1:33 am
When people talk about the general fund not repaying its debts to Social Security, it’s predicated on the fact that the budget is not balanced and never will be. If the budget is balanced, the repayments to SS are included in that budget and the system works. How do we balance a $477 billion deficit? Well, a roll-back of the 2001 tax-cut knocks between $250 - $300 billion off of the deficit right away, and finding some way to extricate ourselves from Iraq knocks off another $100 billion a year. Simply doing those two things would go a long way towards stabalizing SS through the middle of this century (2042 or 2052 depending on which reports you read.)
Crusader, Clinton and Gore had exactly the same concerns about Social Security as we have right now. Their solution was to stop loaning the Social Security money to the general fund and to put it in a more secure investment (aka as a lockbox). This would have been possible, because the general fund was running a SURPLUS (remember that?). Presumably this investment would have had a greater rate of return than U.S. bonds and extended the life of the trust fund even more. We can’t do this now.
Bottom line: Today Social Security has about a $150 billion surplus. The general fund has about a $450 billion deficit. Which would you fix?
March 12th, 2005 at 7:39 am
Jon, I think you’ll find that even in Clinton’s biggest surplus year the “general Fund” of the United States still wasn’t in surplus. The surplus of Social Security income was what drove the total federal budget into a surplus situation. Which is the point that a lot of people have been trying to make. Even in our biggest boom period in decades the government had to borrow to operate. If they can’t get the budget to balance in a period like that, how are they going to get it to balance in the future when they have to repay social security notes? The total deficit has zero chance of shrinking as the size of the social security surplus decreases each year. And when social security reaches the break-even point the government will have to finance the entire deficit through borrowing outside the government (as opposed to borrowing part from social security). As social security needs to withdraw from its trust fund, the government will additionally have to borrow that money from outside sources. It’s like running up a huge credit card debt for dining out. You have nothing long term to show for the money, and you’ve got a spiraling debt situation. Borrowing for non-capital items is foolish, and we’ve been doing it for years. So to avoid total insolvency, I believe the government will simply cut benefits to match what social security has coming in, and therefore never have to repay the notes. I would certainly consider that a breech of full faith and credit.
March 12th, 2005 at 8:15 am
“Jon, I think you€™ll find that even in Clinton€™s biggest surplus year the €œgeneral Fund€ of the United States still wasn€™t in surplus.”
That is actually not true. In ‘99 and 2000, I believe, we had an absolute surplus, not counting the SS trustfund.
March 12th, 2005 at 9:18 am
How do we balance a $477 billion deficit? Well, a roll-back of the 2001 tax-cut knocks between $250 - $300 billion off of the deficit right away, and finding some way to extricate ourselves from Iraq knocks off another $100 billion a year.
Ahem. As I understand it, that $100 billion bill for the war was “left out” of the $477 billion estimate…
March 12th, 2005 at 10:41 am
Bush is doing more damage to our financial underpinnings and the €œfull faith and credit€ of the United States than Osama Bin Laden could have hoped for in his most diseased fantasies.”
And yet the world markets have no problem investing here, do they? Does that even register in your warped view of matters?
“We have been called traitors, Saddam lovers, terrorist sympathisers, you name it and the Bush fifth column has used the epithet.”
I would say they were *right* in applying those epithets to anyone who was both careless and foolish enough to make the remark you did with regard to Al Qaeda/the Republican party.
“So shove it up your hypocritcal, whiny ass.”
Go fuck yourself. I’m going to enjoy watching pinheads like yourself aid in the implosion of the Democratic party over the next 4 years. If the powers that be there are stupid enough to listen to simps of your ilk, it might be decades before they can recover from that mistake.
March 12th, 2005 at 10:46 am
For any of the rest of you who would like a more objective review of where the Clinton administration stood with regard to the privatization of Social Security, you might enjoy the following link, showing that administration studied the issue for 18 months and reached the same conclusion that our current administration holds–that is should indeed be privatized: http://www.cato.org/dailys/07-13-01.html
March 12th, 2005 at 10:46 am
hesoid is correct, thank you. Google congressional budget office and use the historical budget data link to find $1.9 billion surplus in 1999 (negligable in relation to overall budget), and 89 billion in 2000, still very small. Those were the only two surplus years for the “general fund”. What is more shocking is to see the 2003 and 2004 budget deficits for general fund. 2004 rapidly approaching $600 billion, and there’s no reason to think 2005 will be less really. We’re screwed!
March 12th, 2005 at 2:48 pm
Cruxader:
National Review December 21st 1998:
“For all Clinton’s rhetoric about Social Security, he has made only one commitment regarding reform: He will not support an increase in the payroll tax rate. Everything else is apparently on the table. After the President discussed Social Security with a group of congressmen on December 9, one who attended the meeting, the Republican Mark Sanford of South Carolina, said, ‘I got no sense that Clinton is for private accounts. It was the most indiscernible of all the tea leaves we were trying to read.’”
Clinton SotU Speech 1993:
http://www.washingtonpost.com/wp-srv/politics/special/states/docs/sou93.htm#socialsecurity
“The only change we are making in Social Security is to ask those older Americans with higher incomes, who do not rely solely on Social Security to get by, to contribute more.”
Clinton SotU 1997:
http://www.washingtonpost.com/wp-srv/politics/special/states/docs/sou97.htm#socialsecurity
“Whatever our differences, we should balance the budget now, and then, for the long-term health of our society, we must agree to a bipartisan process to preserve Social Security and reform Medicare for the long run, so that these fundamental programs will be as strong for our children as they are for our parents.”
Clinton SotU 1998:
http://www.washingtonpost.com/wp-srv/politics/special/states/docs/sou98.htm#socialsecurity
“I have a simple four-word answer: Save Social Security first.
Tonight, I propose that we reserve 100 percent of the surplus €“ that’s every penny of any surplus €“ until we have taken all the necessary measures to strengthen the Social Security system for the 21st century.
Let us say €“ let us say to all Americans watching tonight, whether you’re 70 or 50, or whether you just started paying into the system, Social Security will be there when you need it. Let us make this commitment: Social Security first. Let’s do that €“ together.
I also want to say that all the American people who are watching us tonight should be invited to join in this discussion, in facing these issues squarely and forming a true consensus on how we should proceed. We’ll start by conducting nonpartisan forums in every region of the country, and I hope that lawmakers of both parties will participate. We’ll hold a White House conference on Social Security in December. And one year from now, I will convene the leaders of Congress to craft historic bipartisan legislation to achieve a landmark for our generation, a Social Security system that is strong in the 21st century.”
Clinton SotU 1999:
http://www.washingtonpost.com/wp-srv/politics/special/states/docs/sou99.htm#socialsecurity
“Our fiscal discipline gives us an unsurpassed opportunity to address a remarkable new challenge, the aging of America. With the number of elderly Americans set to double by 2030, the baby boom will become a senior boom.
So first and above all, we must save Social Security for the 21st century.
Early in this century, being old meant being poor. When President [Franklin D.] Roosevelt created Social Security, thousands wrote to thank him for eliminating what one woman called “the stark terror of penniless, helpless old age.” Even today, without Social Security, half our nation’s elderly would be forced into poverty.
Today, Social Security is strong, but by 2013, payroll taxes will no longer be sufficient to cover monthly payments. By 2032, the trust fund will be exhausted and Social Security will be unable to pay the full benefits older Americans have been promised.
The best way to keep Social Security a rock solid guarantee is not to make drastic cuts in benefits; not to raise payroll tax rates; not to drain resources from Social Security in the name of saving it. Instead, I propose that we make the historic decision to invest the surplus to save Social Security.
Specifically, I propose that we commit 60 percent of the budget surplus for the next 15 years to Social Security, investing a small portion in the private sector just as any private or state government pension would do. This will earn a higher return and keep Social Security sound for 55 years.
But we must aim higher. We should put Social Security on a sound footing for the next 75 years. We should reduce poverty among elderly women, who are nearly twice as likely to be poor as are other seniors. And we should eliminate the limits on what seniors on Social Security can earn.
Now, these changes will require difficult, but fully achievable choices over and above the dedication of the surplus. They must be made on a bipartisan basis. They should be made this year. So let me say to you tonight, I reach out my hand to all of you in both houses in both parties and ask that we join together in saying to the American people, we will save Social Security now.
Now, last year, we wisely reserved all of the surplus until we knew what it would take to save Social Security. Again, I say, we shouldn’t spend any of it, not any of it, until after Social Security is truly saved. First things first.”
Clinton SotU 2000:
http://www.washingtonpost.com/wp-srv/politics/special/states/docs/sou00.htm#socialsecurity
“Beyond paying off the debt, we must ensure that the benefits of debt reduction go to preserving two of the most important guarantees we make to every American — Social Security and Medicare. (Applause.) Tonight, I ask you to work with me to make a bipartisan down payment on Social Security reform by crediting the interest savings from debt reduction to the Social Security Trust Fund so that it will be strong and sound for the next 50 years.”
I would say Clinton’s legacy was the budget surplus.
Incidently, your link was the only resource I could find anywhere that even mentions Clinton considering Privatization.
A better resource than the Cato inst. for you, cruxader:
http://www.cepr.net/pages/socialsecuritymedicare.htm
By the way, you wouldn’t happen to be a broker, who stands to make commisions from Privatized Social Security accounts, would you?
March 12th, 2005 at 3:22 pm
For you cruxader:
http://www.washingtonpost.com/wp-srv/politics/special/states/docs/sou93.htm#socialsecurity
http://www.washingtonpost.com/wp-srv/politics/special/states/docs/sou97.htm#socialsecurity
http://www.washingtonpost.com/wp-srv/politics/special/states/docs/sou98.htm#socialsecurity
http://www.washingtonpost.com/wp-srv/politics/special/states/docs/sou99.htm#socialsecurity
http://www.washingtonpost.com/wp-srv/politics/special/states/docs/sou00.htm#socialsecurity
From President Clinton’s 2000 State of the Union Speech:
“Tonight, I ask you to work with me to make a bipartisan down payment on Social Security reform by crediting the interest savings from debt reduction to the Social Security Trust Fund so that it will be strong and sound for the next 50 years.”
Clinton wanted his legacy to be a budget surplus, not Social Security reform.
Also This
http://www.wsws.org/news/1998/dec1998/soc-d09.shtml
And this is helpful:
http://www.cepr.net/pages/socialsecuritymedicare.htm
You are correct, cruxader, that Clinton and his administration studied privatization. I have found a few references to his having studied the idea. I have found no references to Clinton having publicly proposed Privatization. He never proposed it because he didn’t want his legacy to be that of screwing the middle-class and working poor. Why do we love FDR to-this-day and not Coolidge and Hoover? You figure it out. (for one FDR didn’t kill US WWI soldiers who had come to collect their promised veteran’s benifits.)
By the way, cruxader: You wouldn’t happen to be a finance broker who stands to reap comissions from Privatized SS accounts, would you?
March 12th, 2005 at 3:31 pm
cruxader sez:
“And yet the world markets have no problem investing here, do they? Does that even register in your warped view of matters?”
2 countries have bailed $’s for Euros. It’s a start.
March 12th, 2005 at 3:38 pm
From President Clinton’s 2000 State of the Union Speech:
“Tonight, I ask you to work with me to make a bipartisan down payment on Social Security reform by crediting the interest savings from debt reduction to the Social Security Trust Fund so that it will be strong and sound for the next 50 years.”
Clinton wanted his legacy to be a budget surplus, not Social Security reform.
You are correct, cruxader, that Clinton and his administration studied privatization. I have found a few references to his having studied the idea. I have found no references to Clinton having publicly proposed Privatization. He never proposed it because he didn’t want his legacy to be that of screwing the middle-class and working poor. Why do we love FDR to-this-day and not Coolidge and Hoover? You figure it out. (for one FDR didn’t kill US WWI soldiers who had come to collect their promised veteran’s benifits.)
By the way, cruxader: You wouldn’t happen to be a finance broker who stands to reap comissions from Privatized SS accounts, would you?
March 13th, 2005 at 5:25 am
“And yet the world markets have no problem investing here, do they? Does that even register in your warped view of matters?”
Ahhh…you want me to assume a false premise, do you?
First, there’s a difference between private investment in the US, and investment in US Gvt. securities.
Second, your assertion that countries AREN’T looking to invest elsewhere in greater numbers is simply wrong.
Just recently, the Prime Minister of Japan in a moment of candor said that Japan out to “diversify” their foreign currency holdings. i.e. buy more Euros and less dollars.
This, predicatbly, crashed the Dollar against the Euro, and the Japanese had to publicly disavow what the Prme Minister said (even as they start to shift to the Euro anyway).
China is also moving toward the Euro vs. the Dollar. For them it’s a national security issue.
All of these things may have taken place eventually in any case. But, Bush isn’t helping.[He’s allowing the dollar to crash to foster increased exports — a shortsiggted policy given the massive defecits this dumbass has wracked up]. Fortunetly, foreign investors in US securities apparently believe Bush is full of shit and lying. [An ironic BENEFIT of being so two-faced and dishonest about Iraq].
But, the more he keeps saying this, the more they are going to start taking him seriously.
I sometimes wonder whthere the trained Bush monkeys even know what the fuck they are talking about. Based upon cruxader’s stupid comments, obviously not. Fortunately, true CONSERVATIVES aren’t so stupid. [Note the distinction.]
March 23rd, 2005 at 10:07 am
Sorry about the repetitive posts, folks. At the time they weren’t showing up in the forum. Well, apparently, they did!