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1 Political Atheist  Fri, Apr 22, 2011 8:11:35am

How can you be so sure some operational entanglement would not interfere with the process in the disastrous event of a debt crisis caused by not raising the debt limit? It seems to me that the securities might get all tied up in the mess.

2 Political Atheist  Fri, Apr 22, 2011 9:06:23am

I found this you might like…
[Link: www.businessinsider.com…]

And the answer is simple, though a little counter-intuitive. If Trust Fund principal balances go up in any given year due to a surplus of income over cost adding new offsetting Special Treasuries then so does ‘Intragovernmental Holdings’ and so in turn ‘Public Debt’. On the other hand if in any year total cost exceeds total income including interest, the flow of offsetting Special Treasuries is reversed, then Trust Fund principal goes down and in turn so does Public Debt. In between those two outcomes is a series of years where income EXCLUDING interest trails cost, but the accruing interest covers the gap, in which case the rate of principal increase is slowed and so the rate of growth of total Public Debt due to increased amounts of Intragovernmental Holdings.

Put all of that together and what do you get? Short term cuts in Social Security benefits absent any changes in revenue INCREASE the rate of principal accumulations of Intragovernmental Holdings and so ADD TO DEBT SUBJECT TO THE LIMIT. And the same is true for any benefit change starting before the projected date the Trust Funds hit their maximum, which right now is about $4.2 tn in 2023.

Which is why holding Social Security hostage to this year’s Debt Limit is simple bullshit. one has nothing to do with the other, and any attempts to start phasing in benefit changes via changes in the index (as B-S would starting in 2012) makes total Debt Subject to the Limit HIGHER and not lower. In fact far from giving our children and grandchildren a break it would absent other changes just time shift debt repayment forward in time while making the principal balances and hence ultimate payment amounts larger. It is all more Bait and Switch, just sophistry using ideas about seeming fiscal rectitude to screw over worker-retirees starting ten years out.

Read more: [Link: www.businessinsider.com…]

3 mikiesmoky2  Fri, Apr 22, 2011 10:01:45am

re: #1 Rightwingconspirator

How can you be so sure some operational entanglement would not interfere with the process in the disastrous event of a debt crisis caused by not raising the debt limit? It seems to me that the securities might get all tied up in the mess.

Daniel, are you responding to my comments????
If you are, can you explain what I said that precipitated your “interesting” response? LOL

I cannot imagine what part of my comments stimulated such an “interesting” response! LOL!!

Thank you,

mz

4 mikiesmoky2  Fri, Apr 22, 2011 12:40:03pm

re: #2 Rightwingconspirator

The following is excerpted from an article from the Angry Bear blog with my responses ([Link: www.businessinsider.com…]

REGARDING: “So the commonly expressed opinion that Social Security Trust Funds are not counted in that total $14 trillion of debt cited in the MSM is dead wrong, they constitute $2.6 tn of that $4.6 tn of ‘Intragovernmental Holdings’ or 18% of the total $14.3 tn in Public Debt.

RESPONSE: Whereas $2.6 trillion may be the amount of treasuries held by the SS fund, no SS functions created any of this debt. The debt was created by expenditures from the general fund in excess of the receipts. The $14 tillion of debt created by this excess of expenditures was FUNDED by the selling of treasuries to any entity that wished to purchased them, including the SS fund, which is mandated to invest its funds in U.S. treasuries. Yes, the treasuries held by the SS fund are characterized as ‘intragovernmental Holdings’.
The question is whether Social Security caused ANY of the debt, not the FUNDING of the debt.

REGARDING: In fact Social Security is by far the biggest creditor the U.S. has, with Treasury holdings double those of the Fed and two and a half times that of our largest foreign lender the Chinese.
RESPONSE: So what does that imply? Again, this is ‘funding’ situation, not the cause of the need for the funding.

REGARDING: And the answer is simple, though a little counter-intuitive. If Trust Fund principal balances go up in any given year due to a surplus of income over cost adding new offsetting Special Treasuries then so does ‘Intragovernmental Holdings’ and so in turn ‘Public Debt’.
RESPONSE: This is hilarious. Of course, the ‘IH’ is increased by the amount of the increase of receipts over expenditures within the SS fund BECAUSE all funds must be invested in U.S. treasuries!!!
Now, I have an idea why the author of this piece is not disclosed. LOL


REGARDING: On the other hand if in any year total cost exceeds total income including interest, the flow of offsetting Special Treasuries is reversed, then Trust Fund principal goes down and in turn so does Public Debt.
RESPONSE: Yes, at the point that expenditures exceed receipts, the SS fund will liquidate the necessary amount of U.S. treasuries, but the Public Debt will not be affected. It will be held by other purchasers of the debt.

REGARDING: Short term cuts in Social Security benefits absent any changes in revenue INCREASE the rate of principal accumulations of Intragovernmental Holdings and so ADD TO DEBT SUBJECT TO THE LIMIT.
RESPONSE: Is this author in high school or junior high??
Yes, yes, yes…, I am being facetious. Why, you ask?
The change in the amount of treasuries held by the SS fund has no effect upon the amount of outstanding treasuries. Rather than being held by the SS fund, they will be held by other investors.
Let’s try this another way. Assume there were no Social Security or SS Trust Fund. The deficits would still be funded by selling treasuries in the same magnitude.

mz

5 Political Atheist  Fri, Apr 22, 2011 5:35:27pm

re: #3 mikiesmoky2

Yes, my response to this page is a reply/response. Why do you put the word interesting in quotes?

6 mikiesmoky2  Fri, Apr 22, 2011 11:41:25pm

re: #5 Rightwingconspirator

Yes, my response to this page is a reply/response. Why do you put the word interesting in quotes?

Your “response” was non-responsive, since you didn’t indicate to which part of the article you were responding, i.e., your “response” wasn’t clear.

Please attempt to be clear, since my crystal ball is in the shop.

Thank you,

mz


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