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1 researchok  Fri, Jul 8, 2011 8:19:15pm

Another great case for trashing the tax code/tax/spending/borrowing/accounting/ regulations and starting all over.

2 Bob Dillon  Fri, Jul 8, 2011 8:49:48pm

re: #1 researchok

Another great case for trashing the tax code/tax/spending/borrowing/accounting/ regulations and starting all over.

Amen!

3 mikiesmoky2  Sat, Jul 9, 2011 1:32:06am

I will respond to the salient points of the article.
The author, apparently, has a large axe to grind:

Following my RESPONSES will be a letter grade assessed to the statement to which I am responding.

The 81% Tax Increase
Bruce Bartlett, 05.15.09, 12:00 AM ET
REGARDING: …the trust fund itself is economically meaningless. RESPONSE: Normally, after reading that comment, I would discontinue further reading of an article. The best descriptor of the statement: inane and misleading. F

REGARDING: Whereas the beneficiary of a private trust fund legally owns the income from it, the same is not true of a government trust fund, which is really nothing but an accounting device. RESPONSE: The SS trust fund owns the principal and the interest derived, therefrom, which is redundant, i.e., any reader should recognize the nonsense that the SS trust fund doesn’t own its stream of income. I am very uncomfortable reading this utter nonsense, but I will continue. After all, I am a Taurus from Missouri. F

REGARDING: Most Americans believe that the Social Security trust fund contains a pot of money that is sitting somewhere earning interest to pay their benefits when they retire. On paper this is true; somewhere in a Treasury Department ledger there are $2.4 trillion worth of assets labeled “Social Security trust fund.” RESPONSE: Almost accurate, except that there is a separate trust fund that receives SS taxes and pays out benefits (some of which should be paid from the general fund). B-
REGARDING: The problem is that by law 100% of these “assets” are invested in Treasury securities. RESPONSE: Absolutely true. A+

REGARDING: Therefore, the trust fund does not have any actual resources with which to pay Social Security benefits. RESPONSE: Apparently, the author does not believe that treasury bills, notes, and bonds are “resources”. F

REGARDING: It’s as if you wrote an IOU to yourself; no matter how large the IOU is it doesn’t increase your net worth. RESPONSE: This is an example that “a little knowledge is dangerous”. Let’s use the $2.4 trillion dollar number. The SS fund has the $2.4 trillion of treasuries in its portfolio, while the general fund has a $2.4 trillion liability for those issue treasuries being held by the SS fund. It like your brother borrowed $10,000 from you, thus he has a $10,000 debt to you, and you have a $10,000 receivable from him. As a unit of “brothers”, the net is zero. F

REGARDING: This fact is documented in the budget, which says on page 345: “The existence of large trust fund balances … does not, by itself, increase the government’s ability to pay benefits. Put differently, these trust fund balances are assets of the program agencies and corresponding liabilities of the Treasury, netting to zero for the government as a whole.” RESPONSE: Just like the brothers, the main fund is responsible to the SS fund, but as a “family”, the net is zero. Are you going to forgive your brother’s debt to you? F

REGARDING: Consequently, whether there is $2.4 trillion in the Social Security trust fund or $240 trillion has no bearing on the federal government’s ability to pay benefits that have been promised. RESPONSE: That is, absolutely, untrue. The SS fund’s treasuries are converted into cash, to pay its obligations, by maturing treasuries and selling treasuries in the open bond market. F


CONTINUED……………………………..

4 mikiesmoky2  Sat, Jul 9, 2011 1:36:45am

REGARDING: In a very technical sense, it would lose the ability to pay benefits in excess of current tax revenues once the trust fund is exhausted. RESPONSE: That would be true, obviously, but changes would be made prior to that “eventuality”, e.g., eliminating the “ceiling” upon which income is subject to the SS tax and taxing passive earnings. C

REGARDING: But long before that date Congress would simply change the law to explicitly allow general revenues to be used to pay Social Security benefits, something it could easily do in a day. RESPONSE: That could happen, but it wouldn’t make any sense. The parameters would be changed, including the above mention additional revenue. C-

REGARDING: The trust fund is better thought of as budget authority giving the federal government legal permission to use general revenues to pay Social Security benefits when current Social Security taxes are insufficient to pay current benefits—something that will happen in 2016. Effectively, general revenues will finance Social Security when the trust fund redeems its Treasury bonds for cash to pay benefits. RESPONSE: Convoluted, misleading, and outright incorrect. F

REGARDING: What really matters is not how much money is in the Social Security trust fund or when it is exhausted, but how much Social Security benefits have been promised and how much total revenue the government will need to pay them. RESPONSE: Do I really need to answer this? Oh key doe key. There are revenue and disbursements. I know, I know, this is obvious and redundant, but how else can such nonsense be answered? Was the author paid for this trash? F
REGARDING: The answer to this question can be found on page 63 of the trustees report. It says that the payroll tax rate would have to rise 1.9% immediately and permanently to pay all the benefits that have been promised over the next 75 years for Social Security and disability insurance. REPONSE: Although I don’t trust anything this author says, let’s assume that statement to be correct. He doesn’t consider that the ceiling can be raised. D+

REGARDING: Bruce Bartlett is a former Treasury Department economist and the author of Reaganomics: Supply-Side Economics in Action and Impostor: How George W. Bush Bankrupted America and Betrayed the Reagan Legacy. He writes a weekly column for Forbes. RESPONSE: Ahhhhhh, that brings back the concept of Voodoo economics as coined by the elder Bush.

OVERALL GRADE: D+ (being very generous)

Enjoy,


mz


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