Sunday, November 28, 2010

Remember that New Your Times' Deficit Puzzle?

There were complaints about including Social Security. Here is part of the Times' response given on November 26: (emp add)
In our puzzle, we ... treated Social Security as part of the federal government. We allowed you to leave it alone, despite its long-term deficit, or we allowed you to make cuts that exceeded the size of its deficit and thus would help pay for other programs.
Stop right there.

Cuts to Social Security that exceed the size of its deficit means defaulting on the bonds (at least a part of them).

The Times continues:
Some readers argue that Social Security should not be considered part of the federal budget and should instead be addressed separately. This approach would ensure that Social Security was not subject to cuts larger than those needed to close its own deficit. This argument tends to be more popular among liberals who want to protect the program.
That's bullshit. It's not a "liberal" thing to want to fully honor the bonds. Wanting to have the program run as promised is not a liberal or conservative position. It's a position that says that the program was set up, and paid into, with the promise that it would be paid back.

There will be a shortfall in 2037, but that's not what's being discussed here. The Times is trying to get people to consider Social Security paying back less prior to 2037 than the program was set up to do. Without expressly saying so (at least in the Deficit Puzzle).

FOR FUTURE REFERENCE: That reply was written by David Leonhardt. Remember that name in case it comes up in subsequent Social Security debates.


Cuts to Social Security that exceed the size of its deficit means defaulting on the bonds (at least a part of them).

No it doesn't.

Just because the Social Security Administration has the bonds doesn't mean they have to redeem them at any particular time. They could simply cut Social Security benefits or increase the retirement age, thus avoiding redeeming the bonds. This would theoretically make the bonds available for redemption in the future, possibly extending the shortfall beyond 2037.

Alternately, and preferably, the Federal Government could declare a payroll tax holiday, and allow Social Security to pay benefits strictly from bond redemption. This would put money directly in the hands of working Americans, while draining away the immoral, illegitimate so-called trust fund. Once the fund is gone, Social Security can be restarted as a pay-as-you-go system. Otherwise, it is still a Ponzi scheme, that will crash and burn when the bonds run out in 2037.

By Anonymous jms, at 11/29/2010 4:25 PM  

Post a Comment