Quick, to the lockbox!
I hear Al Gore hides it under his internet.
On this little song and dance regarding the debt ceiling, taxing, and spending, a few things:
It’s a show. The debt ceiling will be raised. I’d bet money on it. Republicans, who presided over one of the largest expansions of the US government and spending, are suddenly acting like they’re fiscally responsible again. They have to raise it or their voters don’t get their free ice cream. 40% of income in this country comes from transfer payments from the government. The spigot cannot be shut off or there will be consequences. For lawmakers.
And it’s an admission to the lie that social security actually set money aside and is funded. They didn’t. It’s not there. Just unfunded liabilities, which I’ve been saying for years and folks didn’t believe me.
July 19th, 2011 at 10:53 am
Correct!
The news media makes a big deal about the little ponzi scheme guys…like Madoff. The biggest ponzi scheme is the Fed (international banking cartel) printing money and loaning it our government and collecting the interest…which puts them in CONTROL.
The borrower is servant to the lender. Except for a few or some patriots, the others want to keep it that way.
July 19th, 2011 at 10:55 am
“Give me control of a nation’s money and I care not who makes her laws.” –Mayer Amschel Rothschild
July 19th, 2011 at 10:59 am
The Republicans may have been responsible for one of the largest expansions of government, but not THE largest expansion of government. Perspective here is that the Republicans were read the riot act by their voters and some of them are actually trying to get their act straightened out.
Dems voted against the Debt ceiling change when Bush was president and are still demanding more revenue to spend. Nothing changed there at all. Obama talks a nice on responsibility, but you don’t get responsibility by upping your debt limit and demanding more cash be put in the account.
None of this is paying down the debt either. What they are talking about is getting enough money to pay off the interest payments and doing nothing to push down the principle. Coburn is at least talking the right path. Just we’ll never see it.
Politicians don’t appear to understand any of this. The SS ponzi scheme isn’t going to end. All they have is a box full of IOUs and pretty talk. Simple conclusion is we’re screwed.
July 19th, 2011 at 11:25 am
All the more reason to let it fall on its face.. How many of you think that bailing out the banks was a good idea?? This is just bailing out the government… People would learn a lot about the government if this happens.. That ugly reality they hide from in their daily lives..
July 19th, 2011 at 11:32 am
Well, I’m sure that there were some people warning that Social Security was a Ponzi Scheme back when FDR brought it out, but since very few people have EVER turned down “Free Gooberment Money”, today the bill is coming due. BTW, there are a few Million U.S. Citizens who think that when they get their Income Tax Refund, it’s a Gift.
And they Vote. “TANSTAAFL!”
July 19th, 2011 at 11:54 am
I realized it was a ponzi scheme back in high school, and that the excess collected was raided for the general fund. Actually got into an argument about it with my mom, who’d grown up with that “trust fund” bravo sierra. It also rubbed her wrong that I kept referring to FDR as a creeping socialist. She grew up back then, and it took a while for the illusion to wear off. Not that she was ever a ‘rat, but she just didn’t perceive.
July 19th, 2011 at 1:09 pm
As always, the tricky question is the timing. When will it all explode in our faces?
July 19th, 2011 at 1:13 pm
Nylarthotep, sure they also had a hand when Regan spent billions, and never got any of those pesky cuts through. Same thing happened under GHW Bush.
July 19th, 2011 at 1:19 pm
Of course social security doesn’t have money aside. It’s a bank account. Do you think your bank has a big vault where they keep all the money that you put in your account? Hell no. They loaned it out, and now it is owed to them, just like the Social Security trust fund. You can have a beef with Social Security, but this argument is silly.
July 19th, 2011 at 1:21 pm
Comedy gold, right there.
No, it’s not. It’s a letter from congress that says “IOU eleventy bajillion dollars”.
There is no trust fund. Else, they wouldn’t need to raise the debt limit to pay it.
July 19th, 2011 at 1:43 pm
Uncle, would you really have them just take all the money and put it in a lockbox? Obviously they’re going to loan it out. That’s what you do when you have a large pile of cash.
Should the SSA not loan it to other parts of the Federal Government, but only to private industry? Maybe, maybe not. As you said, the Federal Government has to find funding (through taxes or borrowing from elsewhere) in order to pay back what it has borrowed from the Social Security fund. But the fund managers sure shouldn’t do nothing with it.
July 19th, 2011 at 1:44 pm
@Bubblehead Les –
The FDR administration was actually brought into Federal Court (SCOTUS, Helvering v Davis, 1937) to defend the SS mandate, because what it was being sold as (to the American People) was that it was a *special fund in your name* for your retirement, it was in *your* account, and would be there for *you* when you needed it in retirement.
That was a violation of the Constitution, which forbids a direct tax, allowing only tax *by apportionment*. The first chink in the protection of the People from Tyrannical Government was the 14th Amendment, which fundamentally changed the relationship of FedGov to the People (meaning, the States). The second chink in the armor was the 16th Amendment, which birthed the Federal Reserve as we know it today, set into law the individual income tax (thus overriding the apportionment clause of the Constitution, Article 1, Sec 8, Clause 1) to allow direct taxes on the individual, as opposed to apportion the tax so that wealthier states were forced to collect more taxes from their residents, and poorer states enjoyed a lesser burden.
July 19th, 2011 at 1:48 pm
Jay, you cannot ‘loan’ money to yourself. That is called spending.
July 19th, 2011 at 2:03 pm
What happened is that the government collected FICA taxes with its left hand, “invested” your money in government bonds issued by its right hand, and spent the cash. The taxpayer has no actual title to assets, not even a legally binding promissory note. The Supreme Court has already ruled that a citizen has no property rights to Social Security benefits; it is a welfare payment to be paid or not paid at the government’s pleasure.
July 19th, 2011 at 2:06 pm
Loan also implies repayment. It does not mean give me $7.50 so I can pay you the $5.00 borrowed last week. If you don’t give it to me I won’t be able to borrow $10 next week from anybody.
July 19th, 2011 at 3:07 pm
“…suddenly acting like they’re fiscally responsible again.”
Again? You’re saying they were fiscally responsible at some point?
July 19th, 2011 at 3:10 pm
As an aside, planners were expecting and counting on a major plague. Ala bubonic plague or the 1918 flu epidemic (http://www.cdc.gov/ncidod/EID/vol12no01/05-0979.htm), and were hoping HIV, and then H1N1 or swine flu would do something similar to the medicare and medicaid rolls.
Congress thought they could make promises to old people, because some bug would have killed them off by now. It is just bad luck that so many old and poor people are still alive.
July 19th, 2011 at 3:56 pm
Is that All? What a relief. That always puts things in perspective. 🙂
I’m sticking to the “We’re Screwed” summation.
July 19th, 2011 at 3:57 pm
I dunno, I find trillions and trillions a bit difficult to wrap my head around.
July 19th, 2011 at 3:58 pm
Uncle, if the federal government had borrowed money from the Chinese instead of the social security trust fund, it would have resulted in the same debt obligation and the same increasing deficit. The problem is borrowing money, not where we borrow it from.
July 19th, 2011 at 4:06 pm
Not really. It really has no obligation to actually pay itself back. And with no third party to come collecting, it’s not the same at all.
Here’s a real world example. Say you ‘borrow’ money from your 401(k) (which people do these days) and you spend the money. Now, you’re paying it back to your 401(k) account. What happens if you stop paying?
No one owes you the money. You can’t collect it. It’s not in an account. It’s just gone.
July 19th, 2011 at 4:23 pm
Reminds me of a story my grandfather told me. When my uncle was in the navy, he asked my grandfather for a loan to buy a car. My grandfather loaned my uncle money out of my uncle’s own savings account, and then made him repay it with interest, all without telling my uncle where the money had come from. When my uncle got home, he had a car, had the money he had repaid himself, and had all the interest he paid too. He still wasn’t very happy about the ruse.
That being said, I think that the problem you’ve identified is that the government has no obligation to pay the social security that we’re owed. (We pay into the system, so even if we’re not legally owed it, we morally are.) That’s a bad judicial ruling if it’s the case, but I still don’t think it’s a direct flaw with the idea of borrowing from the trust fund. Going back to your 401(k) analogy, the difference is that the 401(k) is your money, whereas the social security trust fund is not (or should not be) the government’s.
July 19th, 2011 at 4:26 pm
Yes. And they may not even have the ability soon.
There is no trust fund. Just IOUs dependent upon the .gov’s solvency.
But it was. And they spent it.
July 19th, 2011 at 5:53 pm
Re: the debt crisis, I wonder if any conservative Congressman or Senator has reminded the President of teh following and then agree with him:
“The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. . Increasing America’s debt weakens us domestically and internationally. Leadership means that .the buck stops here.. Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.” — Senator Barack Obama, March 20, 2006
July 19th, 2011 at 8:59 pm
What’s worse is that the “trust fund” obligations are so fake, that the government can’t even pack ’em up and sell them to investors.
July 19th, 2011 at 9:47 pm
>Do you think your bank has a big vault where they keep all the money that you put in your account? Hell no. They loaned it out,
Jay, the way fractional reserve banking is suppose to work is that they loan out your deposits to people with collateral, or they loan it out to people who are only allowed to purchase collateral with the loan (e.g. a house). The idea being that if the the guy with the loan does not pay, they can seize the house, sell it off and then the bank make their own obligations (if they ever get in a state where the pledged assets would not cover the sum of deposits, the US gov. is suppose to seize the bank BEFORE it costs FDIC any money)
That’s not what happened with Social Security. What happened with SS is that the surplus was handed over to Uncle Sam (who promptly blew the money on “stimulus programs”, cruse missiles, sliced ham, bogus “gun death” studies, foreign aid to countries that hate our freedoms, pothole repair, a free replacement bridge for Minneapolis on I-35, and apparently they also paid FBI informants so they could buy guns from FFLs (under orders to sell by the BATFU) and then smuggle those guns into Mexico just so the current administration could destroy gun shows as we know them)
In return for all that cash that Uncle Sam spent on things that are not normally considered investments, Uncle Sam handed back IOUs. Now Con-gress called them “Treasury Bills”, but they’re totally different than regular T-bills that could be bought and sold on the open market. Nope, the only thing that the SS admins can do with these IOUs is to hand them back to Uncle Sam and hope he can pay.
The government doesn’t really produce anything of value, so the only way they can come up with the cash is by taking it from someone else or diluting the money supply by making more money out of thin air.
You do the latter, you get Zimbabwe. Their current idea is to produce more T-bills out of thin air and hope some idiot is still willing to buy them.
As long as everyone is bamboozled into thinking that the government ability to borrow is without limit, everything is fine. If T-bills look a little risker then they have to start paying more interest out to the investor as a margin against default. Since the Gov is essentially taking a cash advance on the Mastercard to make the minimum payments on the Visa, a small spike in the interest rates can make the whole stack of cards crash pretty hard.
July 19th, 2011 at 10:00 pm
If I take in money for my clients in trust, and then I take it for my own purposes, I lose my law license and maybe go to jail. Jay, loaning the money “out” is what the government did not do. First, it simply took the money, then it spent it. If it had merely loaned it as some sort of interest bearing investment, but loaned it “out” it would have been that investment. They grabbed it and left us with pie in the future sky promises, which they still make.
“Out.” Loaning it “out” makes all the difference. Otherwise, they tricked us into voting for the Ponzi scheme, then they lie to us about its solvency, all while they force us–at the threat of imprisonment–to keep paying in.
July 19th, 2011 at 11:22 pm
This isn’t the same Republican party we’ve dealt with the last few decades.
We’re seeing the effects of a sea change in “conservative” voter sentiment. I was guilty, as were many, giving Bush a free pass due to the letter behind his name, but a lot of people (like me) are waking up and realizing that we have to take back the Republican party and remake it in the image of fiscal sanity.
The Republicans are the best hope we have for now. We must continue to replace big government Republicans in future elections, but for now, we have to dance with those in the room.
July 20th, 2011 at 11:23 am
Oddly enough, financial institutions that do that are still required, by law, to keep a certain percentage of your money on hand in just such a “lockbox” so that they can pay you back if you come to claim it. If you deposit $100, they can only invest $50 of that and they have to keep the rest available (these numbers are for example only, I’m not sure what the actual required percentage is).
The .gov has no such requirement for themselves, and there is no money left in SS to pay the people coming to claim it – they have to borrow from other sources to pay those claims.
July 20th, 2011 at 11:28 am
Dragon: “… as opposed to apportion the tax so that wealthier states were forced to collect more taxes from their residents, and poorer states enjoyed a lesser burden.”
Not quite: “No capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken.” Article 1, Section 9, Clause 4.
The “wealth” of a state had zero to do with the tax burden that could be imposed (at least in a legal sense).