Deficit Commission Co-Chair Simpson proposes government default on Social Security trust funds!

[Better Believe It]

Catfooder Simpson Pushes Sovereign Default as Social Security “Fix”
By: masaccio
July 12, 2010

The Catfood Commission and its sister, AmericaSpeaks, never talk about the Social Security Trust Fund, which currently holds about $2.54 trillion in Treasury bonds. That’s because they don’t want to pay those bonds. They can’t publicly admit they want the Treasury to default, so they resort to word trickery. Here’s Alan Simpson, co-chair of the Catfood Commission (aka the “deficit commission,” and, officially, the National Commission on Fiscal Responsibility and Reform), explaining away the bonds in the Trust Fund:

LAWSON: But what about the $180 billion in surplus that it brings in every year?
SIMPSON: There is no surplus in there. It’s a bunch of IOUs.
LAWSON: That’s what I wanted to actually get at.
SIMPSON: Listen. Listen. It’s 2.5 trillion bucks in IOUs which have been used to build the interstate highway system and all of the things people have enjoyed since it has been set up.

Simpson’s position is indeed nonsense. Here’s his explanation of how the bonds in the Trust Fund get repaid:


SIMPSON: Let me say things in a way so your fans will understand this, so you can go and be a hero. There is not enough in the system by the month to pay in, to pay out what comes in. In other words, there is more going out, than coming in. That happened 3 or 4 weeks ago.

So, what do they do? They go to that trust fund and say, ‘We need the IOUs out of it.’ And they say, ‘You can have them, but you have to pay for them.’ So you’re taking a double hit on your own government. Makes no sense. The government goes and says, ‘Hey, here’s that 2.5 trillion IOUs, now we need some money out of that system because we haven’t got enough to pay this month.’ And they say, ‘Great.’ So the government gets a double hit.


Nonsense. I’m guessing that hidden in that fusillade of words, Simpson is saying that the Treasury can’t pay those bonds until it finds a new source of money. If we can’t find a new source of money, we have to default on the bonds in the Trust Fund.

Simpson’s explanation for repayment of Trust Fund bonds is nonsense. The bonds could be repaid by issuing new Treasury bonds, and canceling Trust Fund bonds. That won’t affect deficits, because borrowed money isn’t part of the deficit calculation.

Simpson can’t just say he wants to default. Instead, he cloaks default by increasing taxes and cutting benefits so that between the two, the Trust Fund will continue to run surpluses every year. The Trust Fund won’t ever call the bonds because FICA taxes will be enough every year to pay benefits. That way the Cat Foodies can pretend that there isn’t a default. The surplus can be used to fund wars or bank bailouts, with no possibility that it will ever be paid off.

And where does Simpson propose to find this new money? He won’t tax the rich. Instead, he increases taxes on the very same people who have been paying excess money into the system so it would be available today. We get to pay twice: once to fill up the Trust Fund, and once more so we don’t have to draw down the Trust Fund. That isn’t nonsense. It’s fraud. And it’s a sovereign default by the US against its own citizens.

Read the full article at:

http://news.firedoglake.com/2010/07/12/whether-burrowed-inside-bureaucracy-or-appointed-to-commissions-social-security-cutters-circle/

Social Security is funded by taxes created by the Federal Insurance Contributions Act (FICA). Those taxes are deposited into the Social Security Trust Fund. All payments of Social Security benefits come from the Trust Fund. The excess of FICA taxes over benefits is invested in special Treasury bonds. That works in the same way that you buy Treasury notes for your IRA. Those bonds pay interest, and the interest is deposited into the Trust Fund. Since 1983, working Americans have paid extra FICA taxes and built up the Trust Fund so that we could fund Social Security benefits as the Baby Boomers retire. That worked. There is plenty of money to fund Social Security for years.

[Mnemosyne]

1. KnR! Thanks, BBI. n/t

[alstephenson]

2. K & R

[girl gone mad]

3. k & r

[indepat]

4. Whoever the f*ck appointed that f*cker to the Deficit Commission shore got a f*cking

hatchet-man mother-f*cker! :P

[Stinky The Clown]

5. R

[blindpig]

6. This snow job will make the run up to the Iraq war look like a psa

Gotta keep the facts up front.

k&r

[blindpig]

7. This snow job will make the run up to the Iraq war look like a psa

Gotta keep the facts up front.

k&r

[Hannah Bell]

8. fuck that lying bastard & fuck the orwellian catfood commission. black is white, up is down,

we're truly in orwell's territory.

the barrage of lies about this and all things

disgusting, sickening, mind-fuck.

[IndianaGreen]

9. And who appointed this POS as co-Chair of Cat Food Commission?

The other co-Chair Erskine Bowles is another POS. Who appointed him?

And why?

[AngryOldDem]

10. Rec.

[pa28]

11. The idea of a commission is to present a non-partisan guidance.

Their integrity (the coin they are supposed to deal in) is already shot to pieces with Simpson's partisan axe grinding and outright lies about the status of Social Security. As if that is not enough co-chair Bowles just smiles and nods instead of correcting.

As it appears that Senator foot-in-mouth is now the alpha male leading the discussion it does not take crystal ball to see the conclusion; a conclusion that will certainly scare the hell out of older Americans and piss off the younger ones who have already built a stake in the system. Since Simpson can't be removed under the rules Obama should do himself a favor and disband the entire committee now.

If saving equity holders in Social Security does not move the President maybe the prospect of further political damage and embarrassment will.

[inna]

12. K&R

Thanks, Obama, for creating the Commission by Executive Order (against the wishes of Congress) and appointing these two notorious privatizers/looters as Co-Chairs.

We really needed that.

Unreal.

:nuke: