US Federal Government Defaulting on Loan payments

[FreakinDJ]

We've all known the US Government has been BORROWING from the Social Security Trust Fund for over 4 decades. Now that the trust fund has been raided to near insolvency the US Federal Government wants to Cut Benefits paid for by Citizen's Hard Earned Cash, rather then REPAY it's debt

Will the rest of the World De-rate US Bonds because of the Federal Government's refusal to repay the debt?

They have sold Debt and US Treasury Bonds on the "Full Faith and Guarantee of the United States Government" for 60 years now. This would clearly set precedence that the United States Federal Debt could be erased by Federal Decree

[Statistical]

The issue is that even with FULL repayment of the trust fund there is a gap.

Expenses (over next 75 years) exceed revenue.
To "balance the books" for SS requires either raising revenue and/or cutting expenses.



Nobody in any of the talks to cut/reduce SS is talking about defaulting on SSA bonds. It would be catastrophic and the costs would far outweigh any benefit. The goal is what to do with that $2.5 trillion and what to do with the unfunded liability ($14.5 trillion) over next 75 years.

Revenue vs Expenses . The rich would rather see the later.

SS is easily fixed. The "gap" between revenue and expenses over next 75 years while it is a big nominal number $14.5 TRILLLION!!!! is actually just 0.7% of GDP.

To give you an example:
Raising SS rate by 0.5%
Raising cap to 90% of wages
Requiring all employees to participate in SS
Fulling taxing SS benefit for high net worth individuals

http://en.wikipedia.org/wiki/Social_Security_debate_(United_States)#AARP_Study

Just those modest changes close 82% of the gap, leaving approximately $2.61 trillion but that is $2.61 trillion over 75 years ($30 billion a year).

[damntexdem]

6. That graph is b.s.

Although the population is aging (every cohort has been living longer), thus putting fiscal strain on SS in the future, the biggest effect has been that of the very-large boomer cohort (of which I am a proud member, a first-year boomer from 1946). Why the graph is b.s. is that it doesn't reflect the effect of the dying off of those of us of the boomer cohort over the projected years.

It is also b.s. because it assumes that current FICA tax policy will remain the same. A raising of, or elimination of, the income limit on FICA taxes would do away with the future funding deficit (this is because SS pays proportionately smaller benefits the higher the income).

[Statistical]

9. Hardly BS. It comes from the SSA trustee report.

It accounts for demographics, life expectancy, wage increases, population change, inflation etc.

"Why the graph is b.s. is that it doesn't reflect the effect of the dying off of those of us of the boomer cohort over the projected years."

Yes it does.

"It is also b.s. because it assumes that current FICA tax policy will remain the same. A raising of, or elimination of, the income limit on FICA taxes would do away with the future funding deficit"

I am not sure why you are calling "BS" I clearly indicated (copied from original post)

SS is easily fixed. ... To give you an example:
Raising SS rate by 0.5%
Raising cap to 90% of wages
Requiring all employees to participate in SS
Full taxing of SS benefit for high net worth individuals

Just those modest changes close 82% of the gap.


The fact is that SOME CHANGE is required to SS to avoid insolvency EVEN WITH FULL REPAYMENT OF THE TRUST. The debate on SS isn't about the trust. The trust will be paid in full. The debate is on the "next" $14.5 trillion.

[Hannah Bell]

12. you're talking about something that's predicted to start happening 30 years from now,

according to *one* of the three SS forecasts, one that has been wrong even in the short term more often than it's been right.

we can wait 25 years to look at that possibility.

[Statistical]

15. Well actually it is 2 of 3 forecasts and includes the most realistic one.

Also you are right we *could* wait however time is money. The longer we wait the harder the changes will be.
Starting today those changes close 80% of the gap. If you wait 25 years the same changes would only close a small % of the gap.

Given that at least some of the changes are relatively simple there is no reason to wait until it is far more punitive to change.
* Raising rate 0.5%
* Raising cap to 90% of wages
* Including all new employees in SS
* Fully taxing SS benefits for high net worth individual

Those simple steps close 80% of the projected funding gap and greatly improve the long term solvency of SS.

It is similar to begin saving for retirement 40 years out compared to 20 years out.

[Hannah Bell]

22. actually, it is *not* "the most realistic one". the so-called "optimistic" forecast

has more closely predicted the short-term situation than the so-called "intermediate" forecast.

"starting today" does *nothing* except keep the SS Trust Fund balances high, which actually means loan more money to the general fund, which actually = more tax cuts for billionaires, which means more money available for them to off-shore & invest in bubbles.

The changes will *not* "be harder the longer we wait." This is high twaddle. The retirement of the elderly is *always* funded out of current production.

Social Security was not set up as a savings plan. It was set up as a pay-go plan.

[Statistical]

25. While SSA was setup as a pay-go system the boomers change that.

They are simply too large of a Demographic block to ignore.

We could keep SSA "pay go" and it would require either massively cutting benefits for Boomers or massively increasing payroll taxes on their children. While one *could* do that neither option is hardly equitable.

The purpose of Trust Fund is to deal with the massive Demographic changes that will occur as Boomers move from workers to retirees. Our workforce population will begin to shrink starting in 2020. To pretend this doesn't present real (but solvable) issues is simply putting your head in the sand.

[Hannah Bell]

31. another bullshit point. the size of the boomer generation is irrelevant to the equation.

what matters, always, is the economy's productivity & the size of the surplus, and the share workers get.

the trust fund did *nothing* but take more money out of workers' pockets & loan it to the government, which "invested" it in tax cuts for billionaires, who in turn "invested" it in multiple bubbles & factories in china.

now folks like you are running around saying "you have no contractual right to social security," thus acting as apologists for theft.

while nevertheless pretending like doing the same thing again -- taking more money out of workers' pockets today to supposedly fund SS tomorrow -- is sound fiduciary policy.

complete bait-&-switch bullshit.

[Statistical]

36. I just stated facts. I didn't advocate for any "theft"

You insults and lies get tiring.

Nothing I stated is untrue. I also didn't advocate reducing any benefit.

SS is insolvent. It will be unable to pay all promised benefits without changes. Period. That is the cold hard reality.
If revenue isn't raised then benefit will be cut roughly 22% in 2037. People who pretend it isn't true likely plan on dying before 2037.

You wouldn't happen to be in that category would you?

"Fuck the next generation, what good did they ever do for me. I am going to grab what is mine while I can."
How very Randian of you.

[Hannah Bell]

42. The fact that you claim SS is "insolvent," & then claim I'm just arguing with you

because I'm out to screw younger people puts the lie to your outrage about being "insulted".

Unlike yourself, I've made only one semi-personal remark: That you are spouting winger talking points.

Because you are.

I have no idea what your personal motivations for doing so are (unlike you, who claims I am motivated by pure selfishness & desire to grab what I can).

But the winger talking points are there for all to see.

SS is not "insolvent".

And your claim that because one historically-inaccurate projection (which is adjusted yearly) says that it won't pay out promised benefits 30 years from now makes it "insolvent" is complete bullshit, and a winger talking point.

here are the non-facts in your post:

"While SSA was setup as a pay-go system the boomers change that. They are simply too large of a Demographic block to ignore."

This is not a fact; this is your opinion, & it's false.

"We could keep SSA "pay go" and it would require either massively cutting benefits for Boomers or massively increasing payroll taxes on their children. While one *could* do that neither option is hardly equitable."

No, it wouldn't require either. Again, that is not a "fact;" that's a claim you make without any evidence or discussion.

"The purpose of Trust Fund is to deal with the massive Demographic changes that will occur as Boomers move from workers to retirees."

Again, no "facts;" just another claim you make without evidence, or without explaining how saving money in a TF for 30 years (i.e. letting the government borrow 1% of workers' paychecks for 30 years) accomplishes what you claim it does.

"Our workforce population will begin to shrink starting in 2020. To pretend this doesn't present real (but solvable) issues is simply putting your head in the sand."

Again, no facts -- just a claim. In fact, the size of the workforce is irrelevant. What is relevant is how much the workforce produces, the size of the surplus, & the share of production workers get in monetized terms.

In fact, YOUR POST HAS NO FACTS WHATSOEVER, JUST A SERIES OF UNSUPPORTED CLAIMS.

[Statistical]

46. That is the DEFINITION of insolvency.

SS has promised X, based on projected revenue SS will be UNABLE to pay X.

That is INSOLVENCY. That is the definition of INSOLVENCY.

[Hannah Bell]

47. No, a projection about 30 to 70 years in the future is not insolvency.

[Statistical]

48. A pension fund or insurance plan would be declared insolvent under same conditions.

[Hannah Bell]

49. SS is not a pension fund nor is it a private insurance plan.

Nor is it funded like either of the above.

[hfojvt]

13. those are not all modest changes

this - Requiring all employees to participate in SS - is fairly big change for the people and groups affected.

One group that I know is against that is teacher's unions. Teachers in many states do not pay FICA taxes. To bring them into the program would increase revenue for social security, but it would also be a huge burden to states which are already cash=strapped. And it would take a pretty good bite out of teacher pay as well.

[Statistical]

14. One correction.

The proposal is for new employees to participate. Existing employees would be grandfathered.

[closeupready]

16. Oh, yes, there certainly are Republicans talking about legislating default on bonds held by SS

yes, there are.

[Statistical]

18. A cite please? n/t

[Romulox]

1. I know people want to believe that cutting SS benefits will rile the bond market.

But it won't. The obligations that fill out the so-called "Trust Fund" are a special type of issue which is not tradable on any market. They are not, as many would have you believe, the same bonds available for sale to the public.

But perhaps more importantly, nobody has any contractual right to Social Security benefits; if the Congress reduces benefits, and then continues paying on a reduced benefit schedule, no one has defaulted on anything.

[glinda]

4. except maybe house payments or bills

[Romulox]

7. Not an advocate for this--just negativing the "it CAN'T happen!" complacency. nt

[FreakinDJ]

5. Sorry - but those are RATpubliCON Talking Points

Social Security’s financial operations are handled through two federal trust funds — the old-age and survivors insurance (OASI) trust fund and the disability insurance (DI) trust fund. Although legally distinct, they are often referred to collectively as “the Social Security trust fund.” All of Social Security’s payroll taxes and other earmarked income are deposited in the trust funds, and all of Social Security’s benefits and administrative expenses are paid from the trust funds.

In years when Social Security collects more in payroll taxes and other income than it pays in benefits and other expenses — as it has each year since 1984 — the Treasury invests the surplus in interest-bearing Treasury bonds and other Treasury securities. Social Security can redeem these bonds whenever needed to pay benefits. The balances in the trust funds thus provide legal authority to pay Social Security benefits when the Social Security program’s current income is insufficient by itself.

http://www.cbpp.org/cms/index.cfm?fa=view&id=3299

Those BONDs or Instruments as you call them are a lot more binding them you claim.

Actually what the GOP wants is for SSI to forgive the Debt and never to claim the Bonds

[Romulox]

8. Sorry, but what in your post contradicts anything in mine?

No COLA increases for a few years is an example of a relative benefit reduction without anything that can be characterized as a "default", at any rate. The bond markets certainly won't prevent future changes to benefit formulae, either. I mean it isn't like things like increased retirement age haven't been done before. :hi:

[Statistical]

10. The bonds will still be repaid though.

Nobody is advocating a default on SS bonds. The SS "debate" is on what to do about the other $14.5 trillion unfunded liability (beyond the trust fund).

Paying for that will require either higher revenue or lower expenses.
The later benefits the rich, the former everyone else.

[Romulox]

17. OK. But they could be "repaid" over a longer time horizon than anyone anticipates

without any "default", for example.

"The SS "debate" is on what to do about the other $14.5 trillion unfunded liability (beyond the trust fund)."

No. It's MUCH bigger than that, I'm afraid. The General Fund will have (and already has begun) to begin paying the Trust Fund back at the same time as the stream of funds represented by those self-same loans from Social Security to the General Fund dry up--a double whammy.

Painful cuts in all "discretionary spending" will be required, else a substantial new source of credit--the President and the Congress have already shown that they will not ask the rich to pick up their fair share of the tab by letting the Bush tax cuts expire, let alone by raising taxes on the rich to the levels needed to sustain current levels of spending.

"Paying for that will require either higher revenue or lower expenses.
The later benefits the rich, the former everyone else."

Umm, tell it to the President. :shrug:

[FreakinDJ]

11. U.S. Treasury securities are a CONTRACTUAL Obligation

The Social Security trust funds are invested entirely in U.S. Treasury securities. Like the Treasury bills, notes, and bonds purchased by private investors around the world, the Treasury securities that the trust funds hold are backed by the full faith and credit of the U.S. government. The U.S. government has never defaulted on its obligations, and investors consider U.S. government securities to be one of the world’s safest investments.

http://www.cbpp.org/cms/index.cfm?fa=view&id=3299

The problem here being the US Federal Government would have to raise taxes to repay debt at the current spending levels

I won't jump into that High Functioning Moron's (George Bush), argument "there is nothing in there"

You dear Sir are attempting to rationalize the ramblings of a High Functioning Moron

[Romulox]

19. Between divisions of the gov't? My point is that INDIVIDUALS do not have a contractual right

to receive Social Security benefits at any set level.

[FreakinDJ]

20. Explain that to all the lawyers who argue for SSI Benefits

see how far that argument gets you there

[Romulox]

21. SSI = Supplemental Security Income. It's not the same as Social Security. nt

[Statistical]

23. You are missing the point.

Lawyers argue the current benefits under current law. They appeal decisions on who is covered and how much.

Still unlike say a pension or insurance contract you have no RIGHT to a particular benefit. If tomorrow Congress cut all benefits by 50% across the board there would be no recourse. Benefits are set solely at the discretion of Congress and can be modified at any time, in any manner, for any reason.

You have certain rights as a holder of pension, or insurance policy. You have no such contractual rights with Social Security.

[Hannah Bell]

24. you have no rights as the holder of a pension or insurance policy either.

as numerous bankruptcies & defaults have demonstrated.

if the gov defaults on SS it will reap what it sowed.

thanks for the winger talking points.

[Statistical]

26. Well you do have rights.

In bankruptcy pension holders are a protected class. They can sue to receive at least partial compensation from the bankrupt entities assets. The same thing applies to policy holders. You have contractual rights. Now those rights may not make you "whole" but they exist and are enforcable in any bankruptcy court in the country.

You have no such right with Social Security. If/when Congress changes the benefits you have no recourse. You can't sue, you can't file a claim in Bankruptcy. The benefits (if any) are based solely at the whim of Congress.

Pretending that difference doesn't exist helps nobody and makes you look foolish.

[Hannah Bell]

27. not if there's no money. as many people who counted on pensions & other benefits know full well.

the only person who looks foolish is the one putting up winger talking points.

[Romulox]

28. That's the ancient legal principle of "no blood from a stone".

"the only person who looks foolish is the one putting up winger talking points."

I think you don't even understand why you are namecalling at the moment. Stastistical is explaining, not advocating. :hi:

[Hannah Bell]

33. no, statistical is putting up bullshit winger talking points, & if you don't get that,

you don't get anything.

[Romulox]

40. Right. And knowledge of the Bankruptcy Code is tantamount to WITCHCRAFT!!!!

:eyes:

[Hannah Bell]

43. not sure how the straw counters the fact that statistical is putting up winger talking points.

[Romulox]

44. Well, it *IS* a tad frustrating inasmuch that *you're* right that there is no money

in the so-called "Trust Fund" and that *he* is right inasmuch as there is no contractual right for individual retirees to receive Social Security benefits at any particular level.

I think that *you* are wrong on a more fundamental level by thinking that synthesizing and understanding the foregoing one is advocating "winger talking points". In fact, I think there is without question a reasoned and principle position one can take in which you recognize significant structural problems with Social Security while still acknowledging the core values of keeping our promise to our seniors (and that means more than just BOOMER seniors, by the way!) In addition, given the downward trajectory of American wages and standards of living during my lifetime, I cannot accept that projections based on neverending growth are the end-of-discussion solution to these problems. Finally, I personally am suspicious of the motives of those who argue against raising the cap on top earners based on some tortured definition of "welfare". That same criticism can be laid at increased income taxes, and the President's recent tax cuts for the wealthy show us that the wealthy will not be "paying back" anything via the income tax, anytime soon.

That said, I'm not calling anyone any names over any of it.

[Hannah Bell]

45. the only "structural" problems withh SS are the ones the wingers & neolibs have

created by design -- & are continuing to create with their phony "solutions."

[Statistical]

30. In very few bankruptcies are there "no money". Reduced money yes, insolvency yes.

But all money, all assets, all wealth just vanished. That is very rare.

Of course even in those cases there is the Pension Guarantee Corporation.

Having a right doesn't always mean winnning 100%. You can sue a Doctor for malpractice and you can lose and end up with nothing. Still most people would want the right to sue.

Likewise you have certain contractual rights with a pension fund or life insurance policy. No such rights exist with Social Security.

Also you "right winger talking points" nonsense is just that. If a right winger says the sky is blue it doesn't mean the sky isn't blue just because somebody you liked didn't say that. All your insults and violations of DU rules doesn't change the fact.

Pensioner and Insurance policy holders have certain protected contractual rights.
SS beneficiaries have absolutely no rights or legal protection from changes in SS system to include benefit payments.

Period. Neither of those facts can be disputed. Call the RWer all you want. They are valid facts.

[Hannah Bell]

35. but somehow there's "no money" for SS. so by your reckoning, it has gone somewhere.

where is it that it went?

[Statistical]

37. There is $2.5 trillion for SS.

There is also future revenue stream of SS contributions over next 75 years worth tens of billions more. So there is plenty of money for SS. Nobody said otherwise just another one of your insulting strawman arguments.

However expenditures exceed revenue over the next 75 years by $14.5T. IF nothing is done then benefits will need to be cut by almost 1/4 starting in 2037. Solving the problem is pathetically easy but doing nothing guarantees benefits will be cut.

Pretending the problem isn't there won't make it go away. The simplest (but most unfair) way to solve SS and return it to pay go is just cut benefits by 22% in 2037 or hike contribution rates 22% in 2037. There are far more equitable and less punitive solutions if we start now.

[Hannah Bell]

38. no, there is *not* $2.5 billion for SS. There's a bunch of IOU's for $2.5 trillion, which

you yourself have just been arguing the government has no obligation to pay.

While arguing at the same time that a historically inaccurate forecast about what might happen 30-70 years from now means that we must all be very frightened & give the same government you say has no obligation to us even more money from our pockets today to forestall future catastrophe.

Some argument.

$14.5 is a bullshit number.

1) It's talking about a 75-year window.
2) It's based on a forecast that has been mostly inaccurate even in the short-term.
3) It's based on multiple assumptions about the next 75 years; the accuracy of said assumptions diminishes to zero the further out you go.

Finally, and once again: Retirees' income always comes out of current production. Your prescription of giving even more money to the government today to fund tomorrow's retirees is bullshit, particularly given your argument that the government has no obligation to repay it.

[FreakinDJ]

29. Thats Bullshit and you know it

United Airlines dumped their pension obligations on the backs of tax payers, via PBNG a couple of years ago thanks to laws signed by George Bush

[Statistical]

34. And pensioners were protected via the PBNG thanks for proving the point.

United paid into PBNG. The system works similar to unemployment compensation. Pension granting entities paid into a common insurance pool to provide a backstop for benefits. PBNG is not funded by taxpayers. If pensioners had no rights they could be left simply cold with nothing.

I don't even know why this is an argument the facts are not in dispute.

As a pensioner or insurance policy holder you have contractual rights (rights doesn't indicate you will win 100% of time and be made 100% whole).
As a SS benefit recipient you have absolutely not right or recourse if that benefit is changed, reduced, or stopped.

[FreakinDJ]

50. Enough Winger Talking Points - PBGC is a Government Agency

The Pension Benefit Guaranty Corporation protects the retirement incomes of more than 44 million American workers.

http://www.pbgc.gov/about/

Notice the .gov

[FreakinDJ]

32. As long as they are spending $Trillions in Iraq and Afghanistan every year

I don't see the American public putting up with that with any thing less open street revolt

[Romulox]

41. Here, you and I agree. nt

[dixiegrrrrl]

2. Take a look at the debt instrument in your wallet, btw.

It is called a Federal Reserve note.

Backed by "Full Faith and Guarantee of the United States Government".

cheerful thought, eh?

[SlipperySlope]

3. Wouldn't be the first time the United States defaulted.

This won't be the first time that the United States defaulted.

In the long run, bond purchasers don't give a flip about who gets screwed so long as it isn't them. The United States could put every single Social Security recipient out on the streets without a penny to their name and the bond market won't care as long as the vig keeps coming.

[Kaleva]

39. I lost out on the old GI Bill

The old GI Bill was due to expire at the end of 1976 but those who served or were serving prior to its expiration would still get it. So, I enlisted in Dec. of '76 under the delayed entry program. Prior to being discharged in 1990, I was told by the ship's counselor I still had the old GI Bill benefits since I enlisted in Dec. of 1976. When I signed up at a local college after discharge, I was again told I had the benefits and my out of pocket expenses were to be minimal. Shortly before the fall classes began, I got a letter from the college informing me I had no GI Bill benefits because while I was qualified under the old plan, I wasn't under the new one passed by Congress while I was on active duty and thus I had to scramble to get student loans on top of wiping out my savings.

Point being is that while one may be told they are eligible for something, Congress may at any time change the rules and one is pretty much left hanging.