It seems Beat the Press columnist Dean Baker missed the housing bubble. He once again used a year 2049 projection that was made during the height of the bubble, when Social Security looked incredibly solvent if you extrapolated the bubble out and assumed it would never burst.

MissedTheHosuingBubble,

actually, it looks like one major outcome of the bursting bubble is a downward redistribution of wage income, which will substantially improve the program's prospects by putting a larger share of wage income under the payroll tax cap.

I don't know of anyone who has lowered their long-term growth projections because of the bubble collapse, but if anyone sees any downward revisions, please call them to my attention.

Saw you on Lateline tonight in Australia. Although I certainly didn't agree with everything you said, it's good to know that economists with more integrity are now beginning to be listened to more in the US...What are the scientific reasons why there couldn't be an inflationary depression/recession in the US? You seem to assume that this is not a plausible eventuality?

Surely, by now you have a macro for paragraphs 2&3...

There is nothing projected about the increasing health care costs--above cost of living increases. They've been happening for 30 years.

You're right Health Care (Medicare) is the bigger more immediate problem.

www.medicynic.com

Everyone should be more careful about using projections; they are usually doctored up for political or other reasons. Budget projections always show the deficit decreasing beyond the point at which expenditures and revenues are set in stone - neither the President nor Congress has an interest in other than absolute best-case estimates. No matter who makes the projections, the numbers come from either the White House or Congress. GDP did not reach its 1929 level until 1936 (deflation adjusted), so it is not wise to assume even average levels of growth for the next few years. The Bush administration was in the habit of using different projections; favorable ones for judging the success of their economic policies and unfavorable ones for raising the alarm about a Social Security "crisis".

But all this has little to do with Social Security. What people on Social Security in 2049 get will have everything to do with what workers are earning in 2049, and without another baby boom, very little to do directly with current policy. And as Dean often says, what workers earn is a matter of productivity and income distribution. The Trust Fund will be gone in 2049, which was what the plan always was - it was only intended to take care of boomers. They paid the money in and they should get it back, and this will proceed according to a demographically-determined schedule which does not depend much on economic projections (except interest rates on the Trust Fund).

Apart from the Trust Fund, which is a temporary setup to prevent boomers from subsidizing pre-boomers, Social Security is a program which takes money from current workers and gives it to disabled and retirees. Those who want more money on retirement can save and invest themselves - there is no need for the government to do it for them. For conservatives to insist that the government must do this saving and investment is bizarrely hypocritical.

Missedthehousingbubble maybe should rename himself Getaclue. Though Dean was too polite to say so he has been calling out the housing bubble since 2004 publicly and often. With Roubini he was maybe the first public figure to really do so in a consistent way. A search on 'Dean Baker Housing Bubble 2004' gets you 97,000 hits including this one from August 2004 Bush's House of Cards

As bad as the Bush economic record is, it would be far worse if not for the growth of an unsustainable housing bubble through the three and a half years of the Bush Administration.

The housing market has supported the economy both directly--through construction of new homes and purchases of existing homes--and indirectly, by allowing families to borrow against the increased value of their homes. It is just that no one in a position to do anything about it was listening. At the time I thought Dean was seeing something real but overstating the case. Oops, bad on me.

Oops again. I closed the tag in the wrong spot. Everything through "increased value of their homes" is Dean. While I start up with "It is just..."

The "dire predictions" are so cyclical. I remember the late journalist John Hess fighting the social security demise myth years ago. Like vampires, the "dire predictions" and lies keep coming back.

The Trust Fund will be gone in 2049, which was what the plan always was - it was only intended to take care of boomers.

And while it is convenient to talk in terms of Trust Fund Depletion in in 2041 (SSA) or 2049 (CBO) and the percentage of scheduled benefits payable (78% vs 84%) after those dates that is just shorthand. Under the Act the Trustees officially call for Congress to take action at the point the Trust Fund falls out of 'Short Term Actuarial Balance', that is not having a projected one year reserve in each of the following ten years. For the combined Trust Funds that event will happen in around 2028 (SSA) giving us ample time to tinker with the tax/benefit formulae. (Even that is a simplification, officially the OAS and DI components are tracked separately and have different depletion dates). The Trust Fund will not go away, it can't. Instead action will have to be undertaken to get it back to its mandated target of one year of reserves (TF ratio of 100). But there is no reason at all for any action to be taken in the next two decades.

That the Trust Fund has expanded to its current size was not really planned in 1983, instead that outcome was at the very upper range of their projection. It really wasn't until the late nineties that it really came clear that Social Security was not really in crisis at all. Something that Dean (and colleague Weisbrot) were on once again well ahead of the crowd. If more people (including reporters and the editorial board at the WaPo had actually read and understood their 1999 book Social Security: the Phony Crisis about a zillion absurd articles on SS could have been avoided. (And it is not too late, the link goes to an online copy of the Intro to the book)

"the spending time bomb for health and retirement programs."

Slightly OT: I know the SS hysteria is nonsense, but has anyone honest done an analysis of state, local, and federal retirement plans? As with SS, I see assertions tossed around, but not from any source I trust.

"The Congressional Budget Office (CBO) projects that the program can pay all scheduled benefits for the next 40 years with no changes whatsoever. Even after the program is first projected to face a shortfall in 2049, CBO projects that it would always be able to pay retirees a higher benefit than current retirees receive."

I don't read the Post so I don't know if their article is partisan hysteria or an actual analysis so I am not defending anything written there, but the CBO estimates are, how do we put this nicely, total crap.

The trust fund is an accounting trick where SS is separated from the general government expenditures. It holds only IOUs from the government which are treated as assets. When you do this it makes the SS scheme look solvent (or at least relatively stable) while ignoring the fact that it is totally dependent on the federal government being solvent during that period. SS receipts (numbers off the top of my head) are around $200 billion more than payouts right now, because the federal government isn't actually saving that money, but spending it when SS receipts become shortfalls the gov will have to find a way to cover both the shortfall and the loss of the excess receipts.

"actually, it looks like one major outcome of the bursting bubble is a downward redistribution of wage income, which will substantially improve the program's prospects by putting a larger share of wage income under the payroll tax cap."

Well that depends on the rate at which people pay taxes. Tax delinquency (fraud, avoidance) doubled during the early years of the great depression.

Dean,

Excellent post. Little to add as both you and Bruce Webb have pretty much taken apart the nonsense spewed by MissedtheHousingBubble.

Oh, to skeptonomist,

It certainly can be argued that the early 80s social security reform amounted to boomers subsidizing pre-boomers, as well as paying up for themselves.

tom wrote, It holds only IOUs from the government which are treated as assets.

Those bonds are assets, just as much as bonds held by private entities are assets.

People who'd love to transfer wealth from working folks to rich parasites by defaulting (formally, or effectively) on the SS trust fund don't want it to be true, but it is.

"The trust fund is an accounting trick ..."

The IOU argument is baffling. The Trust Fund is mandated to invest only in special issue U.S. Treasury bonds, which are backed by the full faith and credit of the U.S. Government. Therefore, how is it that a $100 U.S. Treasury bond held by entities or persons other than the Social Security Trust Fund will be worth $100 on the maturity date but a special issue Treasury bond, issued by the same U.S. Government, will be worth $0 on the same maturity date?

(If anyone cares Anonymous above was me)

As to the surplus. In point of fact only about half of the surplus is truly borrowed. The number typically cited of $200 billion includes accrued interest and currently make up over half of that surplus. That interest creates a very real debt and shows as an increase in Intergovernmental Debt and so after combining it with Public Debt shows up in Total Dept (i.e. that $10 trillion). Interest also shows up as a positive in the Unified Deficit. But it never appears in cash form in a way that the Treasury could borrow it.

In fact under current assumptions (SSA) Social Security will still be running surpluses from 2017-2023 even as real cash is flowing the other way.

Per the monthly Trust Fund Reports SS ran a $190 billion surplus for 2008 (Q4 hurt, projections were for more) of which only about $80 billion represented cash surpluses that actually offset public borrowing. And even without the recession/depression this dollar figure is projected to decrease over time.

So 2017 is not going to come as any kind of shock, 2016 will have been marked by a very small surplus while 2018 will project out as a very small deficit. The notion that any future date will be marked by a sudden discontinuity and subsequent shock is just to misunderstand both the cash flow and the accounting involved.

"Those bonds are assets, just as much as bonds held by private entities are assets."

"The IOU argument is baffling. The Trust Fund is mandated to invest only in special issue U.S. Treasury bonds, which are backed by the full faith and credit of the U.S. Government. Therefore, how is it that a $100 U.S. Treasury bond held by entities or persons other than the Social Security Trust Fund will be worth $100 on the maturity date but a special issue Treasury bond, issued by the same U.S. Government, will be worth $0 on the same maturity date?"

The accounting trick is that the SS administration is counted (essentially) as a separate entity from the rest of the government. For the US treasury to pay back its debt to the SS administration it will have to increase revenues or cut spending or some combination of both. When an advocate of SS says that the program is 'solvent' until 2049 because transfers from the Treasury will keep it afloat, what is really being said is that for SS to continue in its current way other government institutions must cut spending or raise revenues. It matters little if the taxes are payroll, income, property, sales or whatever else you come up with.
When a company or individual redeems a $100 T-bill they don't have to turn around and raise $100 to pay it to themselves.

Dean Baker has been writing about the housing bubble since 2003. I have been reading him since before 2003.

"MissingTheBubble", seek to find the bubble in your own head and don't seek to mislead anyone again. We know more than you.

Dean Baker,
Thank you so much for all those years of insight my family got from reading your writings. While there is an economic downturn, because of your writings, we worked hard to protect ourselves from the housing, credit, and oil-price bubbles, to good effect. We are not financially hurting, as we go into this short and cleansing economic down-turn. And we are alert to other economic bubbles as they arise.

Know that you have fans out here who appreciate your labors and efforts on our behalf.

To Anonymous,

Let me try to summarize your argument as I understand it. When the Trust Fund presents their $100 special Treasury Bond for payment, the U.S. Government has to raise taxes, cut spending or issue more debt to pay off that $100 obligation. But when a company or individual presents their Treasury to the same debtor on the same day for payment, the U.S. Government does not have to raise taxes, cut spending or issue more debt to retire that Treasury note.

If my summary is correct, where does the U.S. Government get the $100 to retire the Treasury presented by the company or individual?

Anonymous wrote,

The accounting trick is that the SS administration is counted (essentially) as a separate entity from the rest of the government.

Legally, it is separate.

Morally, it's also separate: it was paid for by extremely regressive taxes (viz, payroll taxes).

When a company or individual redeems a $100 T-bill they don't have to turn around and raise $100 to pay it to themselves.

Right. The money to pay them back just comes out of thin air. (Though if the government monetizes the debt, I guess that would literally be true.)

I can't help but notice that no one has endevoured to answer my above question.

This is what the article says: defuses the spending time bomb for health and retirement programs.

With respect to Social Security, it seems to me like a decent description of a situation where at some point in the future retirees will get 78% or 84% of what they were getting the year before. Recent and soon to be retirees will think this is unfair. The law will be difficult to change as nobody likes to see promises (or perceived promises) unfulfilled.

I think the trust fund is a terrible idea. It's not like the government really saves any money for future generation to use.

Ultimately what future retirees enjoy are good and services provided by future workers regardless of how we account or save for it.

Dean

You write:
There is nothing that resembles a time bomb in the case of Social Security. The Congressional Budget Office (CBO) projects that the program can pay all scheduled benefits for the next 40 years with no changes whatsoever. Even after the program is first projected to face a shortfall in 2049, CBO projects that it would always be able to pay retirees a higher benefit than current retirees receive.

Once again you are perpetuating a fundamental conceptual misunderstanding of the relationship between Social Security and our overall fiscal imbalance. As I've explained several times on your blog (and elsewhere), even if -- just hypothetically, arguendo -- SS were projected to be fully solvent, that wouldn't change the fact that every dollar of SS spending contribures to our overall fiscal imbalance. The fact that SS is funded via a dedicated tax doesn't change that fact. A dedicated tax does NOT equal self-funding. It just means that we are carving out a portion of overall taxation and earmarking it for SS spending. The degree of SS "solvency" has almost no relevance to the degree to which SS spending contributes to our overall fiscal imbalance, nor to the degree to which reducing projected SS spending would reduce our overall fiscal imbalance (and PLEEEEEASE don't reply once again with that baloney implication that the only way we could reduce projected SS spending would be to default on the bonds in the SS Trust Fund, because that's absurd, not as a matter of opinion, but as a matter of basic math).

As I wrote recently on another thread http://www.prospect.org/csnc/blogs/beat_the_press_archive?month=01&year=2009&base_name=wsj_editorializes_against_soci&12#comment-6251340 (getting no reply) in response to a comment from Skeptonomist:
--------------------
Skeptonomist,

You write:
Social Security...is not in any difficulty whatever

What does that really mean?? I know what you mean by it (that it is largely or fully "solvent" based on projected SS FICA revenues under the current SS FICA tax rate applied to currently applicable income), but if you pull back and think about it conceptually, it is really a meaningless statement.

SS is a program, a category of spending, within the overall scope of all spending. Similarly, SS FICA taxation is part of our overall taxation. So what if the current SS FICA tax rate applied to currently applicable income would provide (just arguendo) enough revenue to cover projected spending under current SS eligibility and benefit formula? We can raise or lower SS FICA taxation as we wish, according to whatever level of SS spending we choose, based on our fiscal policy priorities. To contend that we should leave projected spending as is because a dedicated tax as currently structured provides enough revenue to cover it is to put the cart before the horse -- it's nonsensical.

I'll offer my "Defense Tax" illustration for your consideration:

Let's assume, arguendo, that you favor cutting Defense spending as part of the solution to our long-term fiscal imbalance. Now let's assume that tomorrow a "Defense Tax" is put in effect, with revenues dedicated to the Defense budget, projected to fully provide for a continuation of the current annual level of Defense spending for the next several decades, and let's assume that some other taxes that go into the general fund are lowered such that all the changes end up revenue-neutral. Now, all of a sudden, presto! -- Defense is "solvent" (without a net tax increase). Would you now say "Well, it doesn't make sense to look at cutting Defense spending as part of the solution to our fiscal imbalance, because Defense is "solvent" or because "Defense is not in any difficulty whatsoever" ????? Hopefully you would NOT say that, because that would be nonsensical. We can adjust the Defense Tax rate up or down as we wish, in accordance to any increases or decreases we choose to make in Defense spending, and if we choose to reduce projected Defense spending, we can reduce “Defense taxation” and offset that revenue loss with increases in other taxes, thus lowering projected overall spending, keeping projected overall revenues unchanged, and thus reducing the projected overall fiscal imbalance. And the same applies to SS.

See what I mean?
Posted by: Brooks | January 19, 2009 9:44 PM
-----------

I've been thinking about your thinking about Social Security, and it occurred to me that we can apply it to the problem of the projected enormous growth in Medicare costs over the next several decades that are most responsible for our long-term fiscal imbalance. It works perfectly -- and it's so simple! Here's all we need to do: Raise the Medicare FICA high enough to make Medicare "solvent" forever (and offset by lowering other tax rates -- e.g., individual income, corporate income, capital gains, dividends, etc.) enough to make it all revenue-neutral (i.e., no net tax increase). Ya' see? Once we did that, Medicare would be "solvent", which would mean that even with the projected increase in costs, it won't be contributing to our fiscal imbalance problem and it won't make sense to look at ways to reduce these projected costs because it wouldn't be necessary and wouldn't help solve the problem, which would be with the general fund. So no need to get into all that difficult stuff to look for ways to reduce the excess cost growth of Medicare, only to look at the rest of the budget (non-Medicare, non-Social Security).

Whaddaya think? Applies the same "reasoning" (for lack of a better word) that you and others here apply to the question of whether or not we should reduce projected spending on Social Security, so what's wrong with it?

Here’s another illustration, let’s call it the “Medicare Illustration”. What if we raise the Medicare FICA high enough to make Medicare "solvent" forever, and offset by lowering other tax rates -- e.g., individual income, corporate income, capital gains, dividends, etc., enough to make it all revenue-neutral (i.e., no net tax increase). If you apply the same nonsensical reasoning to such a situation that you currently apply to the analysis and debate over SS, you (Dean and others with a similarly nonsensical view of the policy implications of SS “solvency”) would say “Medicare is fully solvent. Medicare revenue will cover Medicare spending. That means Medicare won’t contribute to our overall fiscal imbalance, which is entirely due to the imbalance in the general fund. That means, in turn, that reducing projected Medicare spending can’t reduce our overall fiscal imbalance, and that we should only look for solutions to the imbalance where the problem is, in the general fund and operating budget. So no need to get into all that difficult stuff to look for ways to reduce the excess cost growth of Medicare, only to look at the rest of the budget (non-Medicare, non-Social Security) for savings and raise taxes.”

Whaddaya think? Applies the same "reasoning" (for lack of a better word) that you and others here apply to the question of whether or not we should reduce projected spending on Social Security, so what's wrong with it?

Note:

I meant to delete the two paragraphs below before posting the above comment. The second paragraph appears as it should only at the end of the comment.

I've been thinking about your thinking about Social Security, and it occurred to me that we can apply it to the problem of the projected enormous growth in Medicare costs over the next several decades that are most responsible for our long-term fiscal imbalance. It works perfectly -- and it's so simple! Here's all we need to do: Raise the Medicare FICA high enough to make Medicare "solvent" forever (and offset by lowering other tax rates -- e.g., individual income, corporate income, capital gains, dividends, etc.) enough to make it all revenue-neutral (i.e., no net tax increase). Ya' see? Once we did that, Medicare would be "solvent", which would mean that even with the projected increase in costs, it won't be contributing to our fiscal imbalance problem and it won't make sense to look at ways to reduce these projected costs because it wouldn't be necessary and wouldn't help solve the problem, which would be with the general fund. So no need to get into all that difficult stuff to look for ways to reduce the excess cost growth of Medicare, only to look at the rest of the budget (non-Medicare, non-Social Security).

Whaddaya think? Applies the same "reasoning" (for lack of a better word) that you and others here apply to the question of whether or not we should reduce projected spending on Social Security, so what's wrong with it?

Al,

Inflation has to come from either demand or supply pressures. It doesn't come out of the air. At the moment, there is neither excess demand to cause inflation, nor any cost push that will cause inflation.

The idea that we will get inflation just because we have printed money doesn't make sense. Businesses don't raise prices just because the government has printed money.

Eventually, there will be some inflation because we have an over-valued dollar that has led to an unsustainable trade deficit. But the dollar will fall even if we never printed any money. The problem is the trade deficit, which is the result of it being over-valued. This has nothing to do with the amount of money we print.

Brooks wrote,
Raise the Medicare FICA high enough to make Medicare "solvent" forever (and offset by lowering other tax rates -- e.g., individual income, corporate income, capital gains, dividends, etc.) enough to make it all revenue-neutral (i.e., no net tax increase). Ya' see? Once we did that, Medicare would be "solvent", which would mean that even with the projected increase in costs, it won't be contributing to our fiscal imbalance problem and it won't make sense to look at ways to reduce these projected costs because it wouldn't be necessary and wouldn't help solve the problem, which would be with the general fund. So no need to get into all that difficult stuff to look for ways to reduce the excess cost growth of Medicare, only to look at the rest of the budget (non-Medicare, non-Social Security).

Illogical.

Your supposed refutation of "our" reasoning would worsen the general fund deficit.

The point, which you refuse to acknowledge, is that SS has a dedicated source of funding, the SS payroll tax.

If you want to consider all sources of revenue and all sources of taxation and general fiscal balance, just answer me this: why not maintain the curren level of SS taxes, but entirely eliminate SS benefits, now and in the future. Your reasoning is silent on that.

If you were honest, you'd say that as long as you're considering cutting SS benefits, you're willing to consider cutting SS taxes. But that wouldn't pay proper homage to your god of fiscal balance.

Answer me this, Brooks: what's happened to the SS tax rate over the last 50 years? And what's happened to the top marginal rate on income?

liberal,

You are not getting it. I am making a conceptual point that just because a program is "solvent" based on a dedicated tax, that doesn't mean that that program is not contributing to our overall fiscal imbalance, nor that we shouldn't consider reducing spending on that program as part of our effort to reduce that imbalance.

Re: If you want to consider all sources of revenue and all sources of taxation and general fiscal balance, just answer me this: why not maintain the curren level of SS taxes, but entirely eliminate SS benefits, now and in the future. Your reasoning is silent on that.

No, my reasoning has always been very clear on that. It would reduce our overall fiscal imbalance. But as I've said repeatedly, we can't (or at least we shouldn't) either default on the bonds in the SS Trust Fund or use SS FICA revenues for any purpose other than SS benefits, so I would oppose the policy in your hypothetical, as I think would almost anyone. So at the very least -- i.e., just to meet those two bare minimum requirements -- we must (or at least should) spend about $2 trillion (plus interest) over time on SS, and if SS FICA revenues are collected in the future, we must use them for SS benefits, although we could change the benefit formula theoretically all the way down to barely above zero benefit per dollar of SS FICA collected. And I'm just answering your question -- again, my hypothetical above is just to state the extreme (while meeting those two conditions), not to advocate that we do so.

Of course, another way to understand what I'm saying conceptually is the following: If we eliminated SS FICA and just raised other taxes to offset it or just sent that part of the payroll tax into the general fund(i.e., not net tax increase or decrease), and limited SS spending to the amount of the SS Trust Fund plus interest, we would enormously reduce our long-term fiscal imbalance, because there would be no change in projected revenues, but an enormous reduction in projected spending. It's just simple algebra. Get it? (Again, I'm not advocating that we do so, just offering an illustration to try to get you to understand what I'm saying conceptually).

If you were honest, you'd say that as long as you're considering cutting SS benefits, you're willing to consider cutting SS taxes. But that wouldn't pay proper homage to your god of fiscal balance.

First, the fact that you still don't understand the simple point I'm making, combined with your discomfort that I'm saying something that doesn't conform with your hyperpartisan talking points, doesn't mean that I'm dishonest. I've been perfectly honest and always will be. Whether or not you are honest with yourself is another matter entirely. Hyperpartisanship seems to do funny things to people's minds.

Second, your argument is a non sequitur. It simply makes no sense.

Third, by referring to my supposed "god of fiscal balance" you imply that I have some irrational (or perhaps dishonest, scheming) attachment to "fiscal balance". That charge is absurd. You, my friend, are the one being irrational, by not considering the numbers (long-term projections of overall budget numbers and of debt-to-GDP), analysis by less partisan experts, and trade-offs involved in policy choices, as well as by not applying basic logic. I just want us to take a rational and honest approach, determining as best we can what trade-offs are associated with which policy alternatives, and then debating which trade-offs we wish to make based on our respective (and collective) values and priorities.

Answer me this, Brooks: what's happened to the SS tax rate over the last 50 years? And what's happened to the top marginal rate on income?

SS tax rate has gone up; Top marginal rate has gone down.

Any discussions of the funding mechanisms for Social Security are completely pointless, since there is no way the US can cut out the only 100% dependable source of retirement income for it's citizens. Witness the collapse of Wall Street and it's destruction of the private retirement nesteggs of tens of millions of people, coupling that with a steady reduction in the number of employer financed defined pension programs. It will be an extraordinary long time before any sane person will put their complete trust back into the stock market, nor is it possible for the average American family, with a median household income of around $40,000.00 a year, to sock away in a bank account enough money to live even modestly for the average 20 year post retirement projected life span. And suggesting that people extend the retirement age many more years beyond the current age limits fails to recognize the problems created by reduced entry level employment opportunities for the next generation of younger workers. So whether the money to finance Social Security comes from a special SS tax or the general fund or a series of new surcharges, it will come. Any politician proposing otherwise will not survive a re-election effort.

"Let me try to summarize your argument as I understand it. When the Trust Fund presents their $100 special Treasury Bond for payment, the U.S. Government has to raise taxes, cut spending or issue more debt to pay off that $100 obligation. But when a company or individual presents their Treasury to the same debtor on the same day for payment, the U.S. Government does not have to raise taxes, cut spending or issue more debt to retire that Treasury note."

No, when the Ford Motor Company cashes a $100 bond from the treasury that is it for them. The FMC doesn't have to go out and raise that $100, a completely separate entity has to do that.

The legal distinction between SS and other government programs is largely semantics. When SS receipts run short of obligations the same people who can vote to change SS will be faced with budget shortfalls in other areas. There is no real separation beyond the rules that they must follow to change SS.

Tom,

I and others are asking for an explanation about how the U.S. Government gets $100 to pay, in your example, FMC.

The answer is that the U.S. Government has to get the $100 to pay FMC by using one of the same three sources that the U.S. Government will use to retire the Special Issue Treasuries when presented for payment by the Trust Fund; raise taxes, divert spending or issue more debt.

FMC will take the $100 for its own purposes. The Trust Fund will use the $100 for immediate distribution to Social Security retirees to make up the shortfall between tax receipts and benefit payments. The Treasuries may be different (FMC - typical; Trust Fund - Special Issue) but the financing method to raise the $100 is the same. From the U.S. Government's perspective, it owes a total of $200 to two creditors: FMC and the Trust Fund. The process used to settle those obligations is the same.

Respectfully,

Bobcanuck

Bobcanuck: EXACTLY!

Dean wrote:

"I don't know of anyone who has lowered their long-term growth projections because of the bubble collapse, but if anyone sees any downward revisions, please call them to my attention."

Problem is, the business of making such projections is firmly in the hands of economists, who unfailingly _assume_ a world of permanent growth. But there are good reasons to hold that the official projections in these cases are not even within the bounds of reasonable speculation. Take the CBO document with the serious-sounding title "Quantifying Uncertainty in the Analysis of Long-Term Social Security Projections" (Nov. 2005). It clearly states that the estimated probability distributions for the values of the variables used as inputs are "generally based on the historical values for that variable." The problem here is that the trends represented by economic performance in recent decades are "patently unsustainable," to quote the executive summary of the 2008 World Energy Outlook of the IEA, which simply means that it is patently unrealistic to project those trends into the future. The latter report represents something of a downward revision of expectations, evidently, though the fundamental biases of the "disabling discipline" of economics continue to infect its own projections - namely the assumption of permanent economic growth, and the assumption of growth in net energy availability out to the end of its 2030 planning horizon. What is urgently needed is critical analysis of the existing "projections."

Brooks, your argument was refuted in a prior thread of comments on this blog which grew to enormous length while discovering that your policy logic led to a decisive scientific impossibility.

To locate the thread, google "picayune sufflaminations."

Lee,

I thought perhaps you were on LSD when you wrote that stuff. I guess not (unless you are again). That was some twisted stuff -- lol. Needless to say, you did not by any means refute any point of mine, your hallucinations notwithstanding. But I did get a good laugh out of it.

You should study science and economics and stop pretending you know things that you do not, while casting insults upon what I wrote.

Lee,

What you wrote was just plain silly. So silly that even I didn't bother pointing out how ridiculous it was. Go ahead and throw in a link here from this thread to that/those comment(s) of yours so folks here (if there are any visiting further) can get a quick look and see for themselves how absurd it was.

It was Alice in Wonderland, spaced-out nonsense. Something roughly along the lines of (very rough paraphrasing from memory) "we can't predict everything perfectly, so the idea of trade-offs is inapplicable to our policy decisions", if I recall correctly. But go ahead and link to it. Others could use a good laugh, too.

Lee and ALL,

Here ya' go. Here's a link to Lee's first comment re: his amazing revelation, followed by other comments http://www.prospect.org/csnc/blogs/beat_the_press_archive?month=01&year=2009&base_name=there_is_no_plausible_scenario#comment-6249768

Oh, and correction: I did tell you it was absurd; I just didn't bother getting into trying to deconstruct all that nonsense and explaining to you how silly it was.

It's your idea, Brooks. You should have no trouble listing all the tradeoffs to be made in the lives of people who are on both Social Security and Medicare.

So, start giving us that list of tradeoffs here, now.

Then you should be able to calculate how much money is to be allotted to each program. Tell us that, too.

Lee,

I'm sure you can find online the U.S. federal budget in whatever level of detail you want, as well as figures on our federal debt and GDP, projections for all of the above, and analyses and discussions of various scenarios involving policy alternatives and the associated trade-offs.

How about you start making sense if you want to have a discussion? Get a hold of yourself, man. Your talking like some institutionalized guy in a rubber room.

You're sure I can find...?
Aren't YOU the one supposed to do the heavy lifting?
After all you proposed it.

Lee,

I have to think that this is all probably a put on. It's just hard to believe someone can be this idiotic (actually thinking that fiscal policy choices don't or shouldn't involve consideration of trade-offs across, as well as within, spending categories, programs, etc.). Good luck wasting someone else's time.

Brooks, actually it is harder to believe that anyone can be so idiotic as to suppose that legislators haven't been preparing budgets for years -- and that you have felt a need to complain on this blog about a mental block everyone has upon the subject.

So, if you can find it online, go over the federal budget, start making your own recommendations, and stop wasting OUR time. Nobody is preventing you from throwing Social Security into your calculations, if you want to.

But it will reveal more foolishness:

Because you CANNOT finitely prestate the tradeoffs among the contingencies in the lives of people dependent upon social spending categories, whether five years out or fifty years out.

Therefore, the best way to handle these categories is to fund them and hold them as solvent.

Nevertheless, plough onward! You can start by startting a list of all the real tradeoffs in people's lives between social spending categories, Social Security and Medicare in particular.

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Social Security is a program which takes money from current workers and gives it to disabled and retirees. Those who want more money on retirement can save and invest themselves - there is no need for the government to do it for them. For conservatives to insist that the government must do this saving and investment is bizarrely hypocritical.