Debt may be a long term problem, but it certainly isn't an emergency

[eridani]

http://www.nytimes.com/2012/01/02/opinion/krugman-nobody-understands-debt.html?_r=1


Deficit-worriers portray a future in which we’re impoverished by the need to pay back money we’ve been borrowing. They see America as being like a family that took out too large a mortgage, and will have a hard time making the monthly payments.

This is, however, a really bad analogy in at least two ways.

First, families have to pay back their debt. Governments don’t — all they need to do is ensure that debt grows more slowly than their tax base. The debt from World War II was never repaid; it just became increasingly irrelevant as the U.S. economy grew, and with it the income subject to taxation.

Second — and this is the point almost nobody seems to get — an over-borrowed family owes money to someone else; U.S. debt is, to a large extent, money we owe to ourselves.

This was clearly true of the debt incurred to win World War II. Taxpayers were on the hook for a debt that was significantly bigger, as a percentage of G.D.P., than debt today; but that debt was also owned by taxpayers, such as all the people who bought savings bonds. So the debt didn’t make postwar America poorer. In particular, the debt didn’t prevent the postwar generation from experiencing the biggest rise in incomes and living standards in our nation’s history.

[Tansy_Gold]

1. You might want to take a look at this thread from a couple days ago on the same topic --

http://www.democraticunderground.com/11161896

This is not, in fact, debt we owe ourselves. We did not borrow it from ourselves -- we borrowed it from banks and other governments.

I'm beginning to wonder if Krugman himself understands debt. . . . .



TG

[A HERETIC I AM]

2. What you apparently fail to grasp, is that a Treasury Bond isn't money "borrowed".

It is a security that it SOLD.

No one at the US Treasury went hat in hand to the Chinese or "the bankers" or anyone else and said "Please PLEASE lend us 12 Trillion dollars!"

The overwhelming amount of debt the US Treasury has outstanding is in the form of commonly issued bonds - bonds that are regularly AUCTIONED and no one, NOT ONE SINGLE PERSON OR ENTITY, is obligated to participate in the auctions or buy the bonds.


"we borrowed it from banks and other governments."

Wrong.

Banks and other governments PURCHASED US Treasury securities because they are seen as just about the safest, most liquid security in the world. They pay their interest payments on time and they are redeemed at par on schedule, completely predictably.

Here's a question for you;

China (or whoever) holds X amount of 30 year US bonds with 25 years to maturity. Now all of the sudden they decide they don't want them anymore, for whatever reason. Can they demand their money back from the Treasury?


"I'm beginning to wonder if Krugman himself understands debt. . . . ."

And I have wondered for quite a while if you understand the bond market at all, how bonds work, how they are issued, the difference between yield and coupon, what a callable bond is, what a putable bond is, par, discount, premium, yield to maturity, yield to call, current yield, etc.

[Tansy_Gold]

3. Actually, I know very little about bonds

Except that if they have to be redeemed they are not "sold." They are still loans. They still have an interest charge that means, essentially, they have to be bought back for more than they were "sold" for. The Chinese aren't just giving the US government free money; they expect to get it back and they expect to get more than they put in.

If the US, or any other country, isn't exactly begging hat in hand, the fact that they have to sell bonds, whether Treasury bonds or savings bonds, indicates that they need more money than they have. They are selling a debt, selling a promise to repay the money at a stated point in the future. That's still money that's coming from someone else.

Why do you think they call it debt?

[A HERETIC I AM]

5. Then I'll do my best to help you understand them just a little more.

"Except that if they have to be redeemed they are not "sold." They are still loans."

While it is true that a bond represents a debt, it is also and more importantly, a security, just as a share of stock is a security. It has a value. It is tradeable. That last item is most important. If you have a mortgage, YOU can not trade it to someone else. Same with your credit card debt. The issuer in those cases can sell it, but YOU can not.

"They still have an interest charge that means, essentially, they have to be bought back for more than they were "sold" for."

You are confusing two basic types of bonds. Look at this page from Bloomberg;

http://www.bloomberg.com/markets/rates-bonds/government-bonds/us/

Note under the column "Coupon" that the first three - the 1 month, 3 month and 12 month show "0.00". These are what are known as "Zero Coupon Bonds" which means that they pay no regular interest payments. They have no "Coupon" payment to them. They, just as every other bond the US Treasury issues and the OVERWHELMING number of bonds issued in the USA, be they corporate, municipal, mortgage or government, have a "Par" value of $1000.00. With a zero coupon, you buy them at a discount to that par and they mature at par. In the case of the 90 day quoted at the link, the amount one of them would cost you at that quote is roughly $999.975 and in 90 days you would get $1000 back. The yield quoted for that 90 day note is 0.01% and that is an ANNUAL yield. Since there are 4 - 90 day sections in a year, you have to divide the .01 by 4 to get the figure for what one would cost you. If you rolled that over when the 90 days was up and bought another at the same yield, and then did that twice more, you would realize a grand total of ten cents in gain over the course of a year on your $1000 investment.

Note that the first one on that page with anything in the coupon column is the two year, and the coupon quoted is 0.125%. This bond pays point one two five of a percent in interest based on that $1000 par. In other words, it pays $1.25 in interest per year for two years and these interest payments are evenly split into two installments paid 6 months apart. On the date the bond matures, you would get the second half of the buck and a quarter owed for the year and your thousand dollars back. All coupon rates are based on that $1000 par figure, REGARDLESS of what the bond is selling for.

The 30 year has a coupon of 3.125%, so it pays $31.25 a year, again, split in two, for 30 years and on the last day, just like above, you would get $15.625 and the par deposited to your account.

The vast majority of bonds work in a similar fashion. They have a set coupon (That is why they are often referred to as "Fixed Income" investments) and a set maturity date.

Some bonds have what is known as a "Call" provision or are "Callable" bonds which means that the issuer can call them in, give you your money back in a fashion specifically spelled out in the original offering documents and you have no recourse. The US Treasury DOES NOT ISSUE Callable bonds. A bond can also be "Putable" meaning that the holder can demand payment of principal, but these are EXCEEDINGLY rare and the only US Treasury bonds that fall into this category are certain series of US Savings bonds that are generally sold directly to individuals and represent a tiny fraction of the overall outstanding debt obligation of the Treasury.

I want to expand on the idea of callable bonds. I have read repeatedly over the years on DU, both in GD, in the Economics forum and indeed in the much vaunted "Stock Market Watch" thread that the Chinese could "Call in their markers" (as one nitwit long ago put it) or that they could somehow come to the Treasury with a stack of their bonds in hand and demand payment. NOTHING COULD BE FURTHER FROM THE TRUTH. The Treasury would laugh them out the door. They can sell them on the open market till their hearts content, but, with the exception of the aforementioned certain series of US Savings bonds, no US Treasury Bond is redeemed by the Treasury before it matures. NONE.


"The Chinese aren't just giving the US government free money; they expect to get it back and they expect to get more than they put in. "

Yes, they expect to get it back and yes they expect to get back more than they put in, just as you do when you put money into an interest bearing account at your bank. But for the most part, they are getting (currently, anyway) a pittance more in relative terms. At the beginning of Clinton's first term, the COUPON on the 30 year was 8%. EIGHT! That's $80.00 per year per bond. You can still buy those bonds because they have ten years to go, it's just that they have been bid up to the point that they would cost you between $1200 and $1550 per bond, depending on the maturity date and the yield pressure on the day you bought them. I should note here, BTW that When Clinton came in to office, he was left with that 8% bullshit by the previous REPUBLICAN administration. By the time he left office, not only had the coupon fallen to less than 5.5%, he had eliminated issuing 30 year paper. Why? Because he got the Congress to balance the damned budget and ran a surplus. Under Dimson, shortly after 9/11 the government started spending money like it was free and the Treasury started to issue 30 year bonds again, (To fund two wars and the other crap) and the coupon rose to 5% in 2006.

"If the US, or any other country, isn't exactly begging hat in hand, the fact that they have to sell bonds, whether Treasury bonds or savings bonds, indicates that they need more money than they have."

Absolutely correct. Blame that on Congress who historically seems to love to spend money on bombs, missiles and hundred million dollar airplanes and billion dollar submarines with no mission but refuses to ask those who all that crap most benefits to pay for it through taxes.

"They are selling a debt, selling a promise to repay the money at a stated point in the future. That's still money that's coming from someone else."

And that someone else is essentially the American Taxpayer, which is exactly what Krugman was saying in his piece.

[Tansy_Gold]

6. Excuse me, but I think you just agreed with me, except where you misunderstood me

I wrote: "They are selling a debt, selling a promise to repay the money at a stated point in the future. That's still money that's coming from someone else."

You responded: And that someone else is essentially the American Taxpayer, which is exactly what Krugman was saying in his piece.


To clarify my antecedents and make my point clearer than I originally did, allow me to elaborate:

"They" are the US government, the Treasury, whatever, and they are selling this debt, selling their promise to repay. The money that's "coming from someone else" was not referring to the money coming from the taxpayers to repay the debt but rather that the money spent to purchase the debt US is selling is coming from someone else, whether it's the Chinese or the Saudis or the Israelis or the Paraguayans. Whoever is buying those bonds is doing so with their own money. They are lending it to the US, in the same way that a family or individual "lends" their own funds to a bank when that individual opens a savings account or buys a certificate of deposit.

The only place the money can come from to repay the debt is from the American taxpayers. The government is not in the business of making money (printing, yes; making, no) and therefore it is the taxpayers who must repay the debt. But they are are NOT repaying a debt they themselves incurred; there is none of this "lending it to themselves" business Krugman alluded to. The money isn't borrowed from the taxpayers; it's borrowed from whoever bought the bonds, the securities, the debt. Call it what you will, it's still debt. It's still money that the US government borrowed from someone else and is then going to turn around and ask the taxpayers to repay. The taxpayers are not repaying themselves, because they didn't borrow from themselves.



But going back to the beginning of your response, I really don't understand why you would make the comparison to a home mortgage and say bonds/securities are different. I don't see that they are. The LENDER can sell the debt/security in both cases; the borrower cannot. In the case of the bonds, the buyer is the lender. While they may not be able to "call in their markers" the same way a penny ante poker player might, they do have some leverage. Tightening exports of rare earths, for example. Is that directly related to the bonds? Of course not. But in the grander scheme of things, it's a way of letting us -- the government of us that is -- know that they, the Chinese, do have leverage.

The problem is that the government has mortgaged the future and, because of current fiscal policies of exporting jobs (tax base) and then lowering taxes, there is not only no way to reduce the debt but there is also no way to prevent more borrowing. This is like going to the loan shark aka payday lender and constantly refinancing the 450% APR loan with another one. It's a hole you can't dig your way out of. You can't borrow your way out of debt, or something like that. Rolling the interest into the principal does not reduce the principal.

And while Krugman may have it right about Republican taxation philosophy(?) being part and parcel of the problem, I think he('s misleading when he says the national debt is a debt we owe ourselves. If that were true, debt and "security" would cancel each other out.

(Edited to fix typos and insert missing words, all due to someone having the football game on too loud for anyone else to think straight.)

[westerebus]

4. It depends on which debt.

Bills and bonds sold to foreign governments, their banks and persons are debts we don't owe to ourselves, but that has nothing to do with taxes.

All the MBS paper owned by the FED and held as collateral provided it is US Government MBS paper could be destroyed and we still would not have to raise taxes.

All this has to do with sovereign authority. The ability to pass laws, make treaties, coin money, stand up an army, impose tarriffs and tax the citizens are what makes the US Government the sovereign authority of our sovereign nation. All that Constitution Bill of Rights stuff just codifies what we are, a nation of laws.

The authority to tax is necessary to keep people vested. In a democracy you want people to pay something toward the bill. We pay all our bills with dollars. You will not be getting your social security check in yen. If a country has yen to spend they must convert the yen into dollars if they want to buy part of the nation's debt. They will be paid back with interest in dollars. Like the game Monolopy, the bank has all the money and its the only money the bank will take. You get money up front interest free when you start the game. Works the same with the a sovereign nation. It gets complicated when you don't own your own printing press which is the case of the Euro Zone.

Taxes actually removes the amount of money from circulation. Increasing the debt levels increases the amount of money in circulation. In a deflationary depression the government increases its debt level to keep money circulating. If you don't want the economy to inflate to fast, you hold large amounts of reserves which is what the FED has done. In order to keep money available it keeps its rates low and this lessens the interest to be paid on the debt that was issused by Congress. We can actually borrow as much as we want at low rates to fund government spending. Neither has anything to do with bailing out banks or how you would structure the laws of who and what gets taxed.

I know it's confusing.

It all has to do with sovereign money. We use dollars. Pure fiat. Backed by the full faith of the peoples of the United States. Part of the confusion starts with the concept of taxation. We don't need to tax ourselves to pay for anything we want our government to do. Our government has the ability to print as much money as we require to meet our needs.

The mechanism we use is issusing debt and printing money. Ask the FED chairman where does all the money come from? Thin air is what he will tell you. There is nothing behind the dollar but the full faith of the peoples of the United States.

So what's all the shouting about the National Debt? Politics and wealth. Those with wealth want to dictate politics.

They know the people can change the who and the what that gets taxed. They know as long as they keep us divided and fighting amongst ourselves that's not going to happen. They know we can revise how we print money, how we issuse money, how we regulate money and all that effects how much debt or how little debt we will assume. They know the last thing they want is for people to understand how money works. There is a reason they don't pay taxes. They know they don't have to in the current system. As soon as people talk about changing the system what do you hear? Socialism will destroy the American peoples!!
Which is pure bullshit. They have socialism and it works for them because they have the money, the banks, and the politicians.

The reason governments have the power to tax is to keep from being corrupted by those with too much wealth. We are way down the road on that one. Once the wealthy took up politics and saw the profits that were to be made, well it's all history now.
That's why they called FDR a traitor to his class. That's why they killed JFK. It's why LBJ refused a second term.

The system is absolutly corrupt.

And the crazy is on the way.

[Po_d Mainiac]

7. Dear Westerebus,

Are you insinuating that an option of increasing the money supply and/or paying US gov't D2D expenses wood be to "just print?" You can't possibly expect such a process to succeed without giving "Gods workers" the fiat to purchase interest bearing paper backed by the full faith of the peoples of the U$A. That wood certainly lead to overheated markets (such as tech stocks or real estate) as investors go mining for higher returns.

Think of the turmoil if those markets crashed! Before one wood have a chance to catch a breath, we could have pieces of parchment replacing precious metals, petroleum, or food grains. Or worse, those items could be morphed into 1's and 0's!

Think of the heartbreak in DC if the major financial institutions couldn't augment the pittance elected officials receive as salaries. Taxes collected from the bloated 95% of the population (who also control nearly 15% of the wealth) have always been meant for the privileged few amongst us

How could our economy possibly organically grow if so-called ‘forward looking’ persons were rewarded with interest on their savings that exceeded the rate of inflation?

It’s taken our Federal Reserve led banking system close to a century to become the pillar and model of the capitalistic system. Failure must not go un-rewarded. The courage to take excessive risk with OPM (other peoples money) is what built this great nation.

Laws must only be followed by the lesser civilian base. To do otherwise wood simply lead to the formation of a banana republic in the center of the North American continent.

No doubt the founding fathers wood never have included verbiage such as ‘habeas corpus’ or ‘rights of assembly’ in the Constitution had they known such words wood spawn such movements as OWS. Blessed be the Officer Pike’s who man the trenches in a gallant effort to preserve the status quo.

In order for our financial system to survive, as well as this great nation, risk must be part of the public domain while privatizing any and all gains.

Yours truly,
Jamie, Lloyd, Ben, Tim, Larry, Pat, Alan, and the rest of the gang.

Ps..What is the meaning of KYPD?

[westerebus]

8. The reason to Keep Your Powder Dry is on the way...

As an FYI, Dr Ron leads everybody in Va.

Not sure how that's all gonna work out as the govnur is a wantin to be Romies' VP.

Strange days upon us.

Next dip $20? Y/N

[Po_d Mainiac]

9. $20?

Ag-Nope
U$D/EUR-maybe
JPY/U$D-WWBSF
WTI-Nyet

CYA

[westerebus]

19. Randon notation AG.

Two ramp down jobs in the same year 2011. Off the peak of $48 to $33. Second off $35 to $26.

The robots are trading this market too. $27 to begin last year $27 to end last year.

Ride the wave. Look for the next down ramp. $20? Peak $61?

The Morgue nevers sleeps.

U$D/EUR 1.08

JPY?

WTI 140

Then again I'm sure to be incorrect. I will buy the dips non the less.

ymmv

[Po_d Mainiac]

23. I tend to fergets the $40-48 ramp job. Dog farts have lingered longer than that.

I do not believe the Au/Ag ratio will hold at 56:1. It just doesn't make sense. So either Au tumbles with the EUR or we are now at or near the bottom. That MFG didn't crash the price harder, still baffles this aged cranium.

The Morgue may never sleep, but when real people get corn-holed hard, for the sake of keeping the Morgue awake, 220gr projectiles may seek/find carbon based targets.

WTI @ $140? Good bet. Safer still if an attempt is made to turn the sands of Iran to glass.

Tight lines!

[westerebus]

24. Curious and curiouser.

What if MFG was allowed to dissipate having completed its mission?

How do you close the money trail?

Q: Do you know who authorized the transfer of...?

A: I never intended to...

2011 version of the Honorable..

Q: Who authorized the transfer of...?

A: That was made at a higher pay grade than mine...

1987 version of the Lt. Col.

History may not repeat itself but it may rhyme.

[Po_d Mainiac]

25. Assassinations, 9/11's and other 'Black Swan' cover-ups don't come cheap

Does Ahmadinejad know what he's about to catch the blame for? Such bad behavior, esp. after the U$N saves his navy from a band of pirates

Tinfoil hat trivia
Prior to carrying the Rothchild's water, the original Morgue (J.P.) got his start with a George Peabody and Company. George Peabody (1795-1869) did business in the Georgetown district dealing in wholesale dry goods, and operating the Georgetown Slave Market.

[Po_d Mainiac]

10. datum can suck

The following are 34 shocking facts about U.S. debt that should set America on fire with anger....

#1 During fiscal year 2011, the U.S. government spent 3.7 trillion dollars but it only brought in 2.4 trillion dollars.

#2 When Ronald Reagan took office, the U.S. national debt was less than 1 trillion dollars. Today, the U.S. national debt is over 15.2 trillion dollars.

#3 During 2011, U.S. debt surpassed 100 percent of GDP for the first time ever.

#4 According to Wikipedia, the monetary base "consists of coins, paper money (both as bank vault cash and as currency circulating in the public), and commercial banks' reserves with the central bank." Currently the U.S. monetary base is sitting somewhere around 2.7 trillion dollars. So if you went out and gathered all of that money up it would only make a small dent in our national debt. But afterwards there would be no currency for anyone to use.

#5 The U.S. government spent over 454 billion dollars just on interest on the national debt during fiscal 2011.

#6 The U.S. government has total assets of 2.7 trillion dollars and has total liabilities of 17.5 trillion dollars. The liabilities do not even count 4.7 trillion dollars of intragovernmental debt that is currently outstanding.

#7 During the Obama administration, the U.S. government has accumulated more debt than it did from the time that George Washington took office to the time that Bill Clinton took office.

#8 It is being projected that the U.S. national debt will surpass 23 trillion dollarsin 2015.

#9 According to the GAO, the U.S. government is facing 34 trillion dollars in unfunded liabilities for social insurance programs such as Social Security and Medicare. These are obligations that we have already committed ourselves to but that we do not have any money for.

#10 Others estimate that the unfunded liabilities of the U.S. government now total over 117 trillion dollars.

#11 According to the GAO, the ratio of debt held by the public to GDP is projected to reach 287 percent of GDP by 2086.

#12 Others are much less optimistic. A recently revised IMF policy paper entitled “An Analysis of U.S. Fiscal and Generational Imbalances: Who Will Pay and How?” projects that U.S. government debt will rise to about 400 percent of GDP by the year 2050.

#13 The United States government is responsible for more than a third of all the government debt in the entire world.

#14 If you divide up the national debt equally among all U.S. taxpayers, each taxpayer would owe approximately $134,685.

#15 Mandatory federal spending surpassed total federal revenue for the first time ever in fiscal 2011. That was not supposed to happen until 50 years from now.

#16 Between 2007 and 2010, U.S. GDP grew by only 4.26%, but the U.S. national debt soared by 61% during that same time period.

#17 During Barack Obama's first two years in office, the U.S. government added more to the U.S. national debt than the first 100 U.S. Congresses combined.

#18 When you add up all spending by the federal government, state governments and local governments, it comes to 46.6% of GDP.

#19 Our nation is more addicted to government checks than ever before. In 1980, government transfer payments accounted for just 11.7% of all income. Today, government transfer payments account for 18.4% of all income.

#20 U.S. households are now actually receiving more money directly from the U.S. government than they are paying to the government in taxes.

#21 A staggering 48.5% of all Americans live in a household that receives some form of government benefits. Back in 1983, that number was below 30 percent.

#22 Back in 1965, only one out of every 50 Americans was on Medicaid. Today,one out of every 6 Americans is on Medicaid.

#23 In 1950, each retiree's Social Security benefit was paid for by 16U.S. workers. According to new data from the U.S. Bureau of Labor Statistics, there are now only 1.75 full-time private sector workers for each person that is receiving Social Security benefits in the United States.

#24 The U.S. government now says that the Medicare trust fund will run out five years faster than they were projecting just last year.

#25 Right now, spending by the federal government accounts for about 24 percent of GDP. Back in 2001, it accounted for just 18 percent.

#26 If the U.S. government was forced to use GAAP accounting principles (like all publicly-traded corporations must), the U.S. government budget deficit would be somewhere in the neighborhood of $4 trillion to $5 trillion each and every year.

#27 If you were alive when Christ was born and you spent one million dollars every single day since that point, you still would not have spent one trillion dollars by now. But this year alone the U.S. government is going to add more than a trillion dollars to the national debt.

#28 If right this moment you went out and started spending one dollar every single second, it would take you more than 31,000 years to spend one trillion dollars.

#29 A trillion $10 bills, if they were taped end to end, would wrap around the globe more than 380 times. That amount of money would still not be enough to pay off the U.S. national debt.

#30 If the federal government began right at this moment to repay the U.S. national debt at a rate of one dollar per second, it would take over 470,000 years to pay off the national debt.

#31 If Bill Gates gave every penny of his fortune to the U.S. government, it would only cover the U.S. budget deficit for 15 days.

#32 According to Professor Laurence J. Kotlikoff, the U.S. is facing a "fiscal gap" of over 200 trillion dollars in the future. The following is a brief excerpt from a recent article that he did for CNN....

The government's total indebtedness -- its fiscal gap -- now stands at $211 trillion, by my arithmetic. The fiscal gap is the difference, measured in present value, between all projected future spending obligations -- including our huge defense expenditures and massive entitlement programs, as well as making interest and principal payments on the official debt -- and all projected future taxes.
#33 If you add up all forms of debt in the United States (government, business and consumer), it comes to more than 56 trillion dollars. That is more than$683,000 per family. Unfortunately, the average amount of savings per family in the U.S. is only about $4,735.

#34 The U.S. national debt is now more than 5000 times larger than it was when the Federal Reserve was created back in 1913.

[eridani]

11. What's wrong with transfer payments going up?

Productivity has increased by a factor of 4 since WW II. What did you plan to do with the surplus three out of four people if the government doesn't write checks to them? Put them in gas chambers?

[Po_d Mainiac]

20. That wood be an option

or we could just hand out Blackberry's and car keys and let nature run its coarse.

OR

We could give 'productivity' another look, and maybe deal with the absurd differential between executive compensations and that of the work force.

R/E productivity, I'm literally looking at a job site that could have 10+ times the work force than currently employed. That site being a major power transmission line expansion, and the tree clearing associated with it. Instead of man power much of the labor is being done mechanically. Instead of wages, the expense is fuel and equipment costs. There is no savings, just a shift in expenses.

A good friend had a foundation installed in Central America a decade ago. He could get the job done in a day with an excavator, or a half dozen locals could do the job manually in a couple weeks. The expense was the same either way. He gave the locals the job.

[eridani]

22. Or we could shorten work weeks and raise or maintain pay

Lavorare meno! Lavorare tutti!

[Tansy_Gold]

12. #23 is deceptive -- makes me distrust the rest of the claims, ayuh.

#23 In 1950, each retiree's Social Security benefit was paid for by 16U.S. workers. According to new data from the U.S. Bureau of Labor Statistics, there are now only 1.75 full-time private sector workers for each person that is receiving Social Security benefits in the United States.

a. Part-time employees pay into FICA as well as full-time
b. Public sector employees -- firefighters, teachers, police officers, county clerks and auditors and assessors and sheriffs, judges, DMV employees, postal clerks, military personnel, national park service employees, IRS auditors, USDA helth inspectors -- pay FICA taxes the same as private sector employees.

If this one datum can be debunked so easily, by someone with as little knowledge as I have, the others have to be suspect as well.

Once again, someone is trying to manipulate our minds with fear. . .. but it's fear of the wrong things.

[Po_d Mainiac]

13. The key words are 'private sector'

The point being, with the export of our manufacturing base we also exported the FICA base.

Ten States do not pay into FICA. Maine is one of them, as is California. This group of exempt labor relates (size-wise) to the entire adult working age population of Michigan.

[Tansy_Gold]

14. But the numbers are still deceptive

And that's my point --

16 workers in 1950
2> today in the private sector.

But were the 16 in 1950 private sector, or just employees in general? If we're going to compare, then let's compare apples to apples, not grapes to grapefruits.

What other groups may be exempt from FICA? What percentage of earnings are over the FICA cap today as compared to 1950 or 1960 or 1980? What's the percentage of covered retirees/survivors on SS to non-beneficiaries? How has the ratio changed with changes in benefits over the comparison period, i.e. Medicare, surviving spouse, etc.? In the 1960s I had a friend who was going to a fairly expensive private college with all her tuition and basic expenses paid out of SS because her father had died. What effect has disability payments made?

I certainly understand the devastation that the loss of manufacturing jobs has created, and I'm not arguing that. You know how I've argued for JOBS JOBS JOBS over the time I've been in this group!

My point though, is that when someone throws out "data" like this and it's easily seen to be subject to question, then the whole thing becomes suspect. And I'm not saying the numbers are wrong, but they just don't make sense the way they're presented now.

Social Security benefits have changed dramatically over the last 60 years, and it's not fair to compare them to today's without that qualifier. 1950 was less than a generation after the creation of Social Security. How many retirees were covered by SS in 1950? And the post-war boom was in full swing, not only with high civilian employment but with the resulting construction and consumption due to the baby boom.

It seems like a very simplistic "statistic" that can be easily ripped to shreds and yet at the same time screams for expansion. Can the same be said for some of the other statements? I dunno. Yet. . ..

[Po_d Mainiac]

16. You are talking money (which is worse)

The line simply states the number and make-up of contributors.

Getting into the tax cap and change in benefits is a whole different story. And yup, it's ugly. DC has already shown how willing and able they are to act like adults when the issue comes up.

To take into perspective the problem with the low number of full time private sector contributors, you have to take into account that at current spending levels, $0.40 of every dollar is borrowed. Due to FED intervention along with fear in the Euro-zone the interest on this debt has been kept artificially low. (killing people with savings, but that's another story in itself). So regarding contributions from Federal workers into the system, for every $1 in wages we add 40 pence to the already $15T of accumulated debt. This also means 40% of the match is borrowed money as well. That is not sustainable, and CONgress ain't dealing with it.

Now set down for a couple minutes with a calculator and plug in 4% instead of 1% as interest on that debt and see how that compares to the total Federal budget/GDP. Plug in 7%

Scary huh

[Tansy_Gold]

17. But even the number of contributors isn't apples to apples

The 1950 number is just a number, with no qualification.

the later number is qualified -- full time private sector. We don't know how many FTE part timers are out there. We don't know how many public sector employees were counted in the 1950 number. Even if not counting the $$ involved -- which is really SHOULD be included because that's how you can compare each worker's contribution -- you have to have comparable numbers of employees. Not just a grand total on one side and a qualified segment on the other. It's not [s]a fair[/s] an accurate comparison.

We also don't know how many self-employed people are involved.

Again, I'm not saying the numbers are WRONG, but that they don't give an accurate comparison. They're more skewed in favor of a political agenda -- and whether it's from the right or from the left, it should be accurate.

[Po_d Mainiac]

21. It ain't a left or right thing

The numbers are what they are. The difference between left and right is how the problems are dealt with.

[Demeter]

15. You're All Having a Par-tay, And Didn't Invite Me?

I'm going to go off in a corner and eat worms for breakfast....sheesh!

[Tansy_Gold]

18. It didn't start out as a par-tay

More like a bash-tay.

But you're here now, so let the games begin!

[Sam1]

26. As long as the debt is denomonated in dollars it makes no difference.

For example if China present all of the treasury bonds they hold to the treasure for payment what happens?

Answer: Not much! the treasury issues a check to China which China then deposits in its account at the Fed. Net result the amount of treasuy bonds outstanding falls and the amount of reserves at the fed increases. this happens because the dollar is not convertable or pegged! The American Government does not have to "beg, borrow, or steal" dollars, it merely creates them!