Wednesday, July 13, 2011

What government spending means



This interview from yesterday shows another master stroke in the president's ongoing negotiations over raising the debt ceiling. Scott Pelley asks President Obama for reassurance that if the parties can't make a deal, people will still get their Social Security checks. Not only does the president refuse to provide that reassurance, he reminds us that it's not just Social Security checks. It's also veterans' checks, disability checks, in all about 70 million checks that are due to go out on August 3 that might not go out.

Whoa there! This is serious. It's all very well and good to talk about reducing government spending. Nobody likes government spending. We think of government spending as money that goes to support all those bureaucrats and wasteful programs that don't do anyone any good. We're not talking about money that goes out to actual Americans. Can't we cut spending enough to eliminate the deficit and still give everyone their Social Security check or their disability check or their Medicare reimbursement? The answer is no.

I have a modest proposal. Nobody should be allowed to talk about reducing government spending without specifying what spending they want to reduce. Government spending is not some kind of bogeyman that we can use to mean whatever it is that people are afraid of. Because the truth is that we don't agree on what kind of spending we think is bad. One person might think that Medicare spending is a waste, while another will defend Medicare to the death. One person thinks there is a lot of waste in the Pentagon, while another thinks we need to spend more to support our troops. If there were a rule that no politician were allowed to talk about reducing spending without telling us what spending he wants to reduce, we could have a lot more honest debate about the budget. President Obama is helping make the debate more honest by reminding us that government spending is actually something that all of us want, at least when it takes the form of a benefit that we receive.


12 comments:

  1. Hi Joe! I really enjoy reading your blog and your posts are always so well thought out. I just wanted to say "thanks" for putting a link to the Common Progressive on your site. Keep up the great work!

    Best regards,

    Jason, The Common Progressive

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  2. "Scott Pelley asks President Obama for reassurance that if the parties can't make a deal, people will still get their Social Security checks. Not only does the president refuse to provide that reassurance, he reminds us that it's not just Social Security checks."

    But I thought that Social Security doesn't contribute to the general deficit? Why would it be affected? According to Democrats like Paul Krugman and Robert Reich, Social Security is well funded, has a surplus and should not be touched with the vile hands of reform. It's a successfully stocked trust fund sitting on trillions and shouldn’t it continue to send out checks to old people without a hitch? No? Hmmm...what is going here? Hilarious.

    Even if the debt ceiling gets raised it won't stop the inevitable decline of the American Dollar and our government bond ratings. It's just being put off for a bit. The American public is being played with good old fashioned fear mongering from their own President. BTW, the interview almost looked like a DNC funded propaganda piece. Sweet.

    Enjoy the decline.

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  3. Social Security does not contribute to the deficit, but if Congress refuses to raise the debt ceiling, the government has to get the money to pay its bills from somewhere. And Social Security does not sit on trillions of dollars. It takes in more than it needs to pay its obligations, so much so that in the past it was able to lend the rest of the government its surplus. But since sometime in the last year, Social Security started running a cash deficit, and needs the government to pay back what was lent in order to keep up. So Social Security is yet another creditor of the rest of the government. And if the government doesn't have enough cash to pay its bills, and is not allowed to borrow or raise taxes, it has to stop paying some of those bills. That could include Social Security.

    Thanks for asking VH.

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  4. Regarding Social Security, it's really pathetic that a U.S. president would lie to the public.

    How sad a man Obama is.

    Mr. Goss told Congressman Huelskamp: “The responsibility of the Social Security Administration per se, my boss, Commissioner Astrue, is to in fact determine how much in the way of benefit payments people are supposed to receive. We send that information actually over to the Department of the Treasury. They are the ones who actually send out the payments, whether it’s electronic funds, transfers, or check.”

    http://www.thegatewaypundit.com/2011/07/confirmed-chief-actuary-says-obama-could-pay-social-security-checks-during-a-shutdown-obama-caught-playing-politics/

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  5. Where was the lie? All the president said was that he could not guarantee that Social Security checks would all go out. If the government doesn't have the cash to pay all its bills, it will have to make choices about what it can pay and what it can't pay. It would be irresponsible for the president to say at this point that he would choose to pay all Social Security benefits, and decide not to pay something else. Who are you or I to say that the government must pay all seniors' benefits but should withhold checks from defense contractors or government employees or something else it has the obligation to pay? There is going to be a default somewhere if the debt limit is not raised.

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  6. John Boehner agrees with Obama by the way. http://www.youtube.com/watch?feature=player_embedded&v=GKd5EAsSKW8

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  7. Joe, you can't have it both ways. Either the Social Security trust fund is solvent--it can make payments to beneficiaries without help--or it is insolvent--it can't make payments to retirees without an infusion from the general fund.

    If the Social Security "trust fund" relies on funds from the federal government (which could default on its debt obligations) to make payments then it is really NOT solvent as you and its liberal allies claim AND it is therefore part of every fiscal year budget deficit scheme.

    Currently, politicians can raid the fund with a promise (Bonds) to pay back what was borrowed (with taxpayer funds to pay the interest!)--it's an accounting trick that only the government can get away with, Joe. No company in the private sector that isn't in bed with the feds can get away with such an obvious shell game--they usually call such an arrangement FRAUD. If an insurance company can't pay out benefits after a major hurricane, it goes bankrupt. Sorry, but its the same with Social Security.

    In the 1990's, Al Gore spoke of a "lock box" for Social Security exactly due to the above mentioned shell game. He got it right for a change.

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  8. The trust fund is solvent as long as the government continues to honor its obligations to the trust fund. That is no different from any private pension fund that has loaned or invested its assets and depends on the repayment of those loans or investments in order to meet its obligations. What is astounding is that people are seriously contemplating the idea of the government not honoring its obligations. And then suggesting that if the government were to go into default that would somehow show that there is a problem with Social Security.

    You're the one who is trying to have it both ways VH. Years ago conservatives were arguing that the problem with Social Security was that it should be putting its money into the stock market instead of loaning it to the government. The response was that loaning the money to the government promised a more steady and safer return on trust fund assets and we should not risk Social Security trust funds on the volatility of the market. Now you're suggesting that if the government commits the incredibly stupid, unnecessary and reckless act of refusing to allow itself to continue to borrow to meet obligations that have already been incurred, that proves that Social Security is somehow insolvent or has committed fraud? How can it be fraudulent to loan money to the United States government and rely on the credit of the United States government, considered the safest investment in the world? If that were true then everyone who has purchased a T bill has committed fraud.

    By the way, plenty of private companies have defaulted on their pension obligations. That will never happen with Social Security. The worst that will happen is that checks will be delayed until Congress finally understands that the government must either borrow or raise revenues enough to meet the obligations that the government has already incurred. There is no other alternative.

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  9. << The worst that will happen is that checks will be delayed until Congress finally understands that the government must either borrow or raise revenues enough to meet the obligations that the government has already incurred. There is no other alternative. >>

    No other alternative? Only borrow or raise revenues? Are you sure about that?

    On another note, where is that fine looking mountain road that begs to be climbed on a bike?

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  10. The only other alternative is that the government doesn't pay some of its bills. I don't think any serious person who has looked at the issue disputes that.

    That fine-looking mountain road is what the Sepulveda Pass looks like today with the 405 shut down. Good luck trying to get access on your bike!

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  11. I get it but that doesn't answer my question. It only assumes that not paying some of our bills is not an option. Cancelling some debt to ourselves is an option. Any serious person understands that.

    Nice picture! I am surprised.

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  12. “The trust fund is solvent as long as the government continues to honor its obligations to the trust fund. That is no different from any private pension fund that has loaned or invested its assets and depends on the repayment of those loans or investments in order to meet its obligations.”

    In that case, no wall or real demarcation exists between the “trust fund” and general federal revenue (including deficits)--it’s only source of liquidity. No private pension fund, unless it is seriously mismanaged, would depend on one investment source to supply repayment of benefits. And the money burning “investments” that the federal government loves to make like expensive wars, “green” energy, Cash for Clunkers, high speed rail, etc. crowd out repayment funds that should go to pay back all the IOU’s that sit in the SS Trust Fund. Who the hell would want to enter into such an arrangement willingly? Retirees will not be getting their SS checks if the federal government doesn’t raise the debt ceiling to borrow more money for fanciful schemes. Yes, there is something seriously wrong with Social Security.

    “Years ago conservatives were arguing that the problem with Social Security was that it should be putting its money into the stock market instead of loaning it to the government. The response was that loaning the money to the government promised a more steady and safer return on trust fund assets and we should not risk Social Security trust funds on the volatility of the market…”

    Current events clearly demonstrate that loaning the government money may mean you may not get it back. I’m sure that German bondholders of the 1920’s had the same amount of confidence that you do in T-Bills and Treasury Bonds today. Yes, it can happen here too. Even if the debt ceiling is raised it does not mean that a fiscal crisis won’t happen. And most fiscal conservatives prefer private property rights concerning Social Security—the right to make your own decisions regarding where your retirement funds are invested and also safe from the sticky fingers of know-it-all political types in Washington, D.C.

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