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You Want To Cut Social Security for My Kids and Grandkids, So You Can Do What?

letsgetitdone's picture
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Mike Allen in the Politico Playbook reports that he hears from the Administration that the members of the mis-named National Commission on Fiscal Responsibility and Reform may be nearing a deal “around a package on Social Security.” The money quote is:

The virtue of action on Social Security is that it demonstrates the ability to begin to affect the long-run deficits. Social Security isn’t the biggest contributor to the problem – that’s still health-care costs. But it could help a little bit, buy time, and strengthens the odds of a political consensus behind other spending cuts or tax increases. Most importantly, it would establish more CREDIBILITY with the MARKETS. The mood of the world at the moment (slightly excessive, from the administration’s point of view) is that if you don’t do anything with spending cuts, it doesn’t get you credibility.

So, let's see now, the Administration and the Commission will propose changes in Social Security, most likely including spending cuts that will fall on my kids and grandkids, primarily because legislating these cuts “. . . would establish more CREDIBILITY with the MARKETS.” And just why is that important for me and mine?

Well, the Administration, CBO, other Government forecasters and neo-liberal economists everywhere, are worried that if we don't have such credibility, “the markets” will raise rates on the Treasury Bonds the US sells to “fund” the national debt. In fact, projections based on CBO say we'll have $11.8 Trillion in interest costs between now and 2025, if we don't maintain “credibility.” But, this chain of reasoning is based on the idea that the US Government must sell Treasury Bonds to “fund” its deficit spending; that it has no other choice, and that is why we must have “market credibility.

But, the idea that we have no other choice is a fairy tale. To see why let's begin with what Marshall Auerback says today, in a piece in New Deal 2.0 on Mike Allen's “revelation”:

. . . consider the following question posed by my friend, Professor Bill Mitchell: If a government bond auction “fails” (i.e. the government doesn’t find enough buyers for the paper it issues during that particular sale), does this mean that your Social Security cheque is going to bounce? Will national infrastructure projects be suddenly halted because the net spending is not “funded”? Do we have to stop fighting a war in Afghanistan? The answer to all of these questions is the same: Of course not! The net spending will go wherever the Government intends it to go - after all the Government needs no funds to spend because it first creates the currency which is ultimately required to be spent in the real economy. The private sector does not produce dollars (if it did, it would represent a jailable offence called counterfeiting).

Randy Wray makes the same point from another perspective:

The anti-deficit mania in Washington is getting crazier by the day. So here is what I propose: let’s support Senator Bayh’s proposal to “just say no” to raising the debt ceiling. Once the federal debt reaches $12.1 trillion, the Treasury would be prohibited from selling any more bonds. Treasury would continue to spend by crediting bank accounts of recipients, and reserve accounts of their banks. Banks would offer excess reserves in overnight markets, but would find no takers—hence would have to be content holding reserves and earning whatever rate the Fed wants to pay. But as Chairman Bernanke told Congress, this is no problem because the Fed spends simply by crediting bank accounts.

Yes, the Treasury/Fed combination spends simply by crediting bank accounts, and its spending, taxing, and borrowing operations are all operationally independent. Also, one effect of deficit spending without borrowing would be to flood banks with overnight reserves and to drive the natural interest rate down to near zero. So, in short, there's no need for the Treasury to borrow against the national debt, or to do anything else than gradually retire it as it falls due while continuing to deficit spend. If it does that, then, obviously, the US won't have to worry about its “credibility with the Markets.” In fact, the markets will have no power to increase our interest costs at all. Selling Treasury Bonds, paying interest on them, and maintaining the national debt, is, therefore, a choice our Government makes. It is not a necessity. It is a hangover from the old gold standard days, that we can do without.

Earlier today, Scarecrow, also commented on the Mike Allen “revelation,” and on the Administration's “problem” posed by Social Security which he called a “massive scam.” He also said;

. . . the "biggest contributor to the problem" is a President and White House team willing to form a secret commission, led by ignorant clowns and stacked with too many people with anti-democratic biases and little understanding, none of whom have to worry about retirement security, and allow them to recommend the degree of retirement insecurity for already insecure seniors, with no political accountability ever, and then have the White House Coward in Chief front for this anti-democratic process and anti-Democratic agenda and feed a useless, tantalizing tidbit to an unquestioning stenographer who doesn’t understand anything about the "deficit" issues, thus faithfully representing the Beltway media.

And why are we celebrating a calculated leak from a secret commission conducting the public’s business that affects tens of millions of our most vulnerable citizens behind closed doors? Open it up, or shut it down.

Yes, indeed. “Open it Up, or shut it down.” But I'd go even further. Let me review my understanding of what the Commission and the Administration are really saying to me and mine, and to other Americans as well.

We're proposing changes in Social Security, most likely including spending cuts, that will fall on your kids and grandkids, primarily, making life tougher for them, and perhaps causing them to retire later in life, because legislating these cuts “. . . would establish more CREDIBILITY with the MARKETS”. We need to establish this credibility because we want to prevent the market from raising interest rates on US Treasuries in future years, resulting in interest costs that will crowd out other Government expenditures. We could, alternatively, make no changes to Social Security, and avoid the problem of credibility with the markets and rising interest costs, by ceasing to issue debt instruments, e.g. Treasury Bonds in the future. But we'd rather not do that, because we'd have to stop paying China, Japan, other foreign nations, and, mostly, wealthy Americans an interest return on their favorite safe harbor investment instruments, our Treasuries, and it's more important for the US Government to pay these nations and people an interest return, than it is to provide adequately for you working Americans in your retirement years.

This argument, of course, not only applies to the proposed cuts in Social Security, but, in addition, and in slight variations, to all cuts to be proposed by the Commission related to the social safety net, and even to discretionary spending that we need to fulfill the future needs of the American people. Because in every case, we can always point out that any justification for cutting Government spending on grounds that it will destroy credibility with the Markets, and drive up interest rates, means putting the priority of paying interest to China, Japan, wealthy individuals, etc before Government spending to fulfill the needs of the American people.

Somehow, I don't think that a story like this will be very acceptable to the American people as a justification for cutting Social Security and other entitlements for our kids and grandkids. And so, I say, forget about opening up the Commission. Just end it. Shut It Down. Send Alan Simpson, Erskine Bowles, Alice Rivlin, and the rest, home for good, and let's get on with the business of getting the rest of the country back to work!

(Cross-posted at All Life Is Problem Solving and Fiscal Sustainability).

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Hookfan's picture
Submitted by Hookfan on

makes the Administration think that our kids and grandkids will have jobs to retire from? I mean, they are doing so well at creating jobs now.

letsgetitdone's picture
Submitted by letsgetitdone on

there will be persistent economic problems. That's why they're projecting the future so pessimistically. The SS problem is all about pessimistic projections. If the growth rate of nominal GDP rises to the historical norm of 2.0 every decade, we won't have any problem with SS at all in 2037.

Hookfan's picture
Submitted by Hookfan on

some form of priestly political logic?
Heck, I'm pessimistic about the working class and middle class financial viability for the long term. Where are the paying jobs (you know, the ones necessary to have to even think about retiring at some point) going to come from? From health care? Heck nurses already are under pressure for longer hours with less pay. Doctors are already seeing a reduction in utilization due to people's inability to pay even with health insurance. States don't have the budget to handle the increases to medicaid. They'll be laying off state workers causing even less revenue next year and on and on. Construction is on life support. Banks aren't lending I believe because 1) there's no demand and doesn't look to be for years to come, 2) the big boiz got theirs and still want to play the horses. No lending equals no jobs equals no income equals no demand equals no lending. Even if Obama gives a smart sum to small business there is no demand for their product. Big corps are keeping their profits at the top or are offshoring for jobs in Mexico or SE Asia for cheaper labor. That doesn't create jobs here.
No jobs equals a lack of opportunity for the younger generation equals less money and a long term lower standard of living. How are you going to retire on a Wal-Mart income? Or a Waitress' income when you're lucky to even have that as a job?
And they want to cut Social Security in order to keep "market credibility" (whatever the hell that means-- seriously are the Chinese or Japanese that nuts to give the "market" any credibility after what's happened?) with that long term context? I've heard of "voo doo" economics, but that is beyond the pail even for that. They've got to be high on peyote or some other hallucinogenic. . .
Let's see. . . the economy stinks, and people will have no money to retire-- so the solution is to cut social security or delay it until they're nearly dead, but the impoverished will still be required to pay same rates. . . Yeah. Makes sense to me. . . and please pass the bong with another hit of the white stuff.
And aren't you presuming alot tying gdp to jobs? Doesn't it have more to do with Wall Street and Corporate income now rather than a reflection of what the majority of peeps income is all about? Increased GDP doesn't reflect our increased income (ie.workers not Bankers or CEO's) does it? Who pays social security with a meaningful percentage of their income? Not CEO's or Bankers, or Corporations. Why would GDP have anything to do with us peons?

vastleft's picture
Submitted by vastleft on

There are approximately zero people under 40 interested in taking a break from Farmville to care about this.

letsgetitdone's picture
Submitted by letsgetitdone on

we'll just have to see.

coyotecreek's picture
Submitted by coyotecreek on

I see it all over the place but have no idea what it is...but then, I'm a big bit over 40.

letsgetitdone's picture
Submitted by letsgetitdone on

the connotation, but also don't know exactly what "Farmville" except that it might be the destination you get before arriving at "Hooverville."

Hookfan's picture
Submitted by Hookfan on

right in small town USA. In fact locally the Obamaville had proliferated so much we had a huge increase in small theft break- ins to vehicles and homes, which the police were, not so helpfully ignoring. Until the police Chief's house was burglarized by the same. Isn't that interesting? Homeless people actually do anti social acts in order to feed themselves. Who woulda thunk.
Apparently the Chief got a little pissed cause w/i a week there were several arrests (and more to come), the crime spree has halted, and peeps are no longer forming vigilante squads. They're still sitting up at nights with a shot gun on their laps, purposely (I'm told) leaving their windows and doors unlocked hoping somebody who doesn't belong there comes through and can find out what a shotgun western handshake is all about. Yes, it's been a long hot summer in rightwing America, and people (even the police) are being very noisy as they approach their friends and neighbors. I wonder why that is?
Obama's approach to this economy does not portend good things for the future.

letsgetitdone's picture
Submitted by letsgetitdone on

be on the last train to Obamaville.

vastleft's picture
Submitted by vastleft on

that posts annoying updates to all your Facebook friends, at least the ones who didn't de-friend you after all your annoying Mafia Wars updates.

Submitted by gob on

My 20-something nephew remarked to me the other day that Obama is to Big Finance what Bush was to Big Oil.

Shrewd, I thought.

All the Obama fans I know are over 40. But then, most of the people I know are over 40.

If my neighbor doesn't take down that Shepard Fairey abomination soon, I may start dreaming of house fires.

Hookfan's picture
Submitted by Hookfan on

Sorry, but I can't help but ask: What type of dog is that pictured? Is it a Bichon? It's adorable!!! I have a Charles Spaniel/ Bichon cross and looks almost identical. . .

Submitted by gob on

Yes, there are plenty in my circle. Full of justifications of policies that would have been anathema if perpetrated by Bush.

Paul Lukasiak was right.

letsgetitdone's picture
Submitted by letsgetitdone on

Might be where you live. I live around DC. Most of the people I meet outside of the professional Obama defenders who get paid to do that are either rightist, or are are very upset with him. I haven't met an honest defender for awhile now.

letsgetitdone's picture
Submitted by letsgetitdone on

send the link.

Submitted by regulararmyfool on

Where does the money go? To the ones least likely to spend. Where should the money go? To the ones most likely to spend.

The wars that are mangling so many American lives have now reached a point that if we withdraw all troops, mercenaries and collaborators from the middle East, the American economy will collapse. All of the people in the "defense" industry would be hitting the streets.

If we continue the wars, we will bankrupt America.

People are being distracted because almost every politician is crying about something that is not even a tiny problem at this time. Whether they are for or against raping social security, it is still simply a distraction from where the money is pure waste.

The United States could eliminate 90 percent of the military spending and not be one whit less safe.

letsgetitdone's picture
Submitted by letsgetitdone on

We could bring all the troops home from Europe and Asia tomorrow and no be one whit less safe.

Submitted by jawbone on

my deep concerns about how Dems were handling SocSec, gave the one minute summary. Silence. Then I asked it they wanted to know my location. Pause...OK.

Then I asked if they wanted to know my name. No. OK, said I, I haven't changed my registration yet, but when I do I'll send you a copy so you'll know I mean it when I say Dems have lost me as a voter if they muck around with SocSec.

Silence...then I hung up.

202 863-8000, for those of you with unlimited calling and/or the desire to tell the DNC to get a clue.

Hookfan's picture
Submitted by Hookfan on

we're all going to be getting alot of the silent treatment--Gibbs is just the ongoing invitation to the sound of silence. They really hate us ya know. . .

letsgetitdone's picture
Submitted by letsgetitdone on

Good thing I don't give a shit about what Gibbs have to say anyway. I mean, why listen to a pack of lies?

chicago dyke's picture
Submitted by chicago dyke on

over at facebook. not being smarmy; i don't have an account and didn't know what 'farmville' is either. still, you should be reaching out to all the younger folks there, seeing as how it seems to be where they all are these days.

letsgetitdone's picture
Submitted by letsgetitdone on

Under Joe Firestone, but I don't advertise it. I'm mostly visited by my daughter's friends and my extended family and have not tried to go Sarah Palin with it.

Fredster's picture
Submitted by Fredster on

It's too damned nosy and they've been caught sharing/giving out your info or whatever. Most of the friends I have would not be interested in farmville, including the friend who grew up on a farm.

Submitted by lambert on

But then real gardens are better, aren't they? Or real anything.

You get "points" in Farmville and with the points you can buy stuff like plants and tractors and buildings and more stuff.

And you can get points in two ways:

1. By planting and "harvesting" plants by clicking on them, that is, by labor.

2. By using actual money ("exogenous").

Guess which way gets you a bigger farm faster?

So the moral of Farmville is that people with money always win over people who only have labor. Yay!

Oh, and I think Veblen would have a lot to say about spending money to purchase little digital images to show off to your "neighbors."

Submitted by Elliott Lake on

squatters here, and more breakins. But then our unemployment (the reported level) is around 20%, so we may be in the vanguard.

I think the uninterested under 40 crowd are just doing what they see; it's not like the mainstream media are reporting how dire things are in the economy, or how big a load of bollocks the supposed problems with social security are.

letsgetitdone's picture
Submitted by letsgetitdone on

don't give a shit about market credibility because they've got close to a 200% debt to GDP ratio and they know very well that doesn't result in higher interest rates since theirs are among the lowest in the world.

Hookfan's picture
Submitted by Hookfan on

They're not completely crazy. I think the US is certifiably insane. . .

letsgetitdone's picture
Submitted by letsgetitdone on

Australia, Canada, New Zealand, UK etc. they're all crazy when it comes to paying interest on government bonds.

letsgetitdone's picture
Submitted by letsgetitdone on

The Japanese have tolerated a down economy as "normal" for two decades now. They've preferred inadequate economic stimulus, very low inflation, an export-led economy, and gradually increasing debt-to-GDP ratios, to the very strong stimulus and increasing domestic consumption that would have created a growth economy for them and while producing immediate increases in the debt-to-GDP ratio would eventually have led to declines in that area. So, Japan hasn't been a model of rational economic policy.

Nevertheless their central bank has controlled interest rates in the face of downgrades from the international rating agencies representing "the bond Gods." And they've shown that the bond market has no power over a determined Government sovereign in its own currency. After looking at the Japanese case, it's hard that anyone can believe the BS that deficit spending by our Government will cause our interest rates to rise, unless we deliberately allow that to happen.

letsgetitdone's picture
Submitted by letsgetitdone on

You're caught in their economic frame. Begin with Warren Mosler's economic program here, and also lower the standard work week to 35 hours, while raising the minimum wage to $10 per hour. These measures will take away the jobs and faux entitlement projection problems pronto, and begin to share out the productivity gains of the past 30 years. Then use the Federal Jobs Guarantee to staff reconstruction of the nation's economic foundation. While doing it insist projects performed using Government money must source products needed for their projects in the US. These things will be a start to solving all the problems you've mentioned.

Submitted by lambert on

Nice frame. Push that.

In fact, that whole comment puts "doing the right thing" in operational terms about as succinctly as I've seen it. Make that into a post, because to me, it sounds like a platform.