Why did they choose $700 billion ??

[kentuck]

They must have had a reason to choose that number? Do they anticipate it to cost that much? Do they have a general idea of the magnitude of the crisis? Perhaps they knew that $100 billion would not be enough? Perhaps they thought $1 trillion would be too much to ask for?

Or did they simply pull that number out of their asses? Paulson has admitted he had no idea what it would cost? So why $700 billion? There must have been a reason??

[Romulox]

1. The same reason stores price items at $99.99. It's a psychological trick.

Since they know that the actual price tag will be 3 to 4x the stated amount, the number they chose was simply meant to manipulate the taxpayer. "A trillion" sounds a lot more massive than a measly few hundred billion...

[NNN0LHI]

2. It was the least offensive number to the focus groups they tried different numbers on

[Dora]

3. Because they're insane TERRORISTS.

[antigop]

4. I asked the same question on the stock market thread a couple of days ago.

IF they picked a number out of their ass, why wasn't it $800 billion, $932.15 billion? Where did this number come from?

Someone posted a link to an article that said the $700 billion was related to the credit default swaps.

I'll try to find it.

<edit to add>
Check this out..
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=3503637&mesg_id=3503981

[radfringe]

5. how much is in social security fund and

how much is expected to be added to it over the next couple of years?

[antigop]

6. Around $2trillion in the Social Security Trust Fund.

Old age and survivor's insurance trust fund...
http://www.ssa.gov/OACT/STATS/table4a1.html

Scroll down to year 2007, look at the right-hand column Assets at end of year
2,023,616 (in millions) So that makes it over $2 trillion.

[radfringe]

8. then you have the answer to how they came up with $700 billion

$700 billion is just for starters

they will keep coming back to borrow another cup of sugar every couple of months, just like they come back for more money for Iraq time and time again

[antigop]

9. No,the $2 trillion is for all of the stuff they want to bail out -- it adds up to $2trillion

carloans, mortgages, everything they want to bailout -- total was $2 trillion, as per an article posted on the stock market thread.

[Romulox]

10. The "assets" in the "Social Security Trust Fund" are merely debts owed by the US taxpayer.

Debt is not wealth.

[antigop]

11. Yes, at some point those bonds come due and have to be paid off

And if they add $700 billion to the debt with this bailout, it will impact our ability to pay the trust fund bonds when they come due.

<edit to add> Also, the Medicare trust fund bonds (and Medicare is in MUCH worse financial shape than Social Security right now, before any bailout)

[Romulox]

12. Right. But the payor is the US taxpayer, not some third party.

To "raid" the SS trust fund, you must do one of two things: cut SS payments, or RAISE TAXES. Social Security is pay as you go; there is no "fund" with monies to raid.

" it will impact our ability to pay the trust fund bonds when they come due."

No matter whether you characterize this as a raid of the SS "Trust fund" or new spending by Congress, the money will come from the same place, and will therefore have the same impact on our ability to pay these so-called "trust fund bonds".

[antigop]

13. They are obligations of the U.S. government -- the trust fund bonds and the $700 billion debt

If we add $700 billion to the debt,that is that much less money we have to pay off the Social Security trust fund bonds.
SO they can cut SS payments (or increase taxes), to offset the $700 billion debt and interest.

That's why there are some of us who feel this is a stealth attack on Social Security, which is what Wall Street has wanted.

<edit to add> They will use the increased debt and interest as an excuse to cut Social Security payments.

[Romulox]

15. I agree with you 100%.

"If we add $700 billion to the debt,that is that much less money we have to pay off the Social Security trust fund bonds.
SO they can cut SS payments (or increase taxes), to offset the $700 billion debt and interest. "

Agreed. My only point is that it matters not whether you characterize the bailout as a "raid" on the SS Trust Fund or new spending. Since the SS Trust Fund is nothing but an accounting fiction, the money will come from the same place (namely, new taxes or spending cuts, and likely both.)

[antigop]

16. I disagree that the trust fund is "nothing but an accounting fiction"

The bonds in that trust fund are obligations of the U.S. government.

Sorry, I don't have any more time on DU --- I gotta go.

<edit> What I am saying is that they will use this new debt and interest to cut (eliminate) SS payments.

[Romulox]

20. WE (not some third party) are the US government's financiers. You can't owe a debt to yourself.

[antigop]

21. They are an obligation of the U.S.Gov't-- go argue with Krugman--I'm done with you

I'm briefly checking into DU over lunch.

Krugman has spelled all of this out and we've been through this discussion a gazillion times on DU:
http://www.bepress.com/ev/vol2/iss1/art1/
http://www.nytimes.com/2005/01/04/opinion/04krugman.html?oref=login

I'm not going to argue the point any more...I don't have time for this..

Besides, you are getting sidetracked-- The real issue:they are going to use this bailout as an excuse to cut SS payments (and Medicare).

So post away -- I'm done. If you want to go argue with Krugman, then go argue with Krugman.

The point remains: they will use this as an excuse to cut SS Security and Medicare.

[Romulox]

22. LOL. Pout and stomp off when logic fails you! See ya!

:hi:

"The real issue:they are going to use this bailout as an excuse to cut SS payments (and Medicare)"

How many ways do you need to hear, "YES" to understand? :silly:

[Romulox]

24. Krugman: "There are only two things that could endanger Social Security's ability to pay benefits"

From the link you provided:

There are only two things that could endanger Social Security's ability to pay benefits before the trust fund runs out. One would be a fiscal crisis that led the U.S. to default on all its debts. The other would be legislation specifically repudiating the general fund's debts to retirees.

http://www.nytimes.com/2005/01/04/opinion/04krugman.html?oref=login

I'm not even sure what you think you're arguing about. :shrug:

[TheCowsCameHome]

7. It's a 30% off sale, marked down from $1 trillion.

What a bargain.

[Solly Mack]

14. It is a curious number

Do they already know they need that much? (knowing they'll always ask for more and more)

Then - How do they know? Based on what? (especially if it is a matter of participation as he said)

Do they already have a list of companies waiting for their hand out?

Show us that list.

What was the sum needed?

He said companies could participate or not...so, which companies do they expect to participate?

Did they send out feelers?

Which companies responded in the affirmative?

Show us the list.

What was the sum needed?

[ellie]

17. According to

the Calculated Risk blog:

"Why $700 billion?

The plan only limits the Treasury to "$700,000,000,000 outstanding at any one time", so the total purchases can exceed $700 billion. In fact, every time the Treasury sells some securities, they will probably plow the net proceeds back into more troubled assets until the entire $700 billion is gone."

http://calculatedrisk.blogspot.com/search?updated-max=2008-09-22T00%3A06%3A00-04%3A00

[Solly Mack]

18. Thanks for the link!

[onenote]

19. because $700,000,000,000.01 was too much and

$699,999,999,999.99 was too little.

Just guessing.

[katty]

23. they couldn't rob social security lock, stock and barrell

[killbotfactory]

25. They thought 800 billion would sound extreme

They're trying to bankrupt our nation and tie the hands of the next president, preventing him from doing anything.