I can almost here the Wall Street and Conservative crowd saying "Let them eat cake"...
So is this the rebellion the Liberals have been talking about or just another passing fad?
Do you think the cell phones of the protesters say Motorola or LG/Samsung?
What about their cars? GM/Ford or Toyota/Honda?
How would us established citizens feel if our portfolios were cut in half because Wall Street stopped worrying about corporate profits?
Thoughts?
HP: Occupy Wall Street
CBS: Occupy Wall Street
CNN: Occupy Wall Street
TC Daily Planet: Occupy Movement in Mpls
Minnpost: Occupy Wall Street
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56 comments:
I guess I don't qualify as an established citizen because I don't really care if my paltry portfolio drops by 20% (which it has) or 50%. Even at peak value it offers me very little financial security.
I was an occupier for a couple hours after work on Friday (the light rail made it very convenient) Those participating were an interesting mix, fun to watch and talk with. I will be going back next Friday, assuming they are still there, which I expect they will be.
I think this occupy wall street protest is more than a passing fad, though I can't say what it is or what it can accomplish, because I don't really know.
For me the lack of clear, specific, achievable goals is really sort of positive. My protest is against greed in general and govt of and for the 1%. In a comment on another blog I said what I want is large scale spiritual transformation that results in a more caring and just society and I was only half joking.
I am really down there because I don't see a good future for my students. I think I can do more for them through activism than raising their level of basic skills, which is of course my focus for my 40 working hours.
"How would us established citizens feel if our portfolios were cut in half because Wall Street stopped worrying about corporate profits?"
Let's recall that nearly 50 percent of the population doesn't even pay income taxes. Vast swaths of the American people don't have "skin in the game" anymore, as Fox News never tires of telling us. Wall Street never mattered as much to the economy as it said it did, and it's mattering less and less each day. Really, the country will survive whether the paper Wall Street shuffles gets shuffled or not.
--Hiram
The spiritual transformation sounds good... However the cynic in me remembers that one important person who pushed that agenda ended up on a cross.
I keep thinking our society is becoming less caring instead of more.
I keep thinking our society is becoming less caring instead of more.
I think that's true. The Republican view, that we are on the brink of a class war in this country isn't necessarily wrong. There are just too many people without skin in the game. It's like we are living a 1970's era science fiction movie, like "Rollerball" or "Soylent Green". Their prophecies are coming true.
--Hiram
So John,
I agree that our leaders have become less caring, which seems to indicate a less caring electorate.
What our your thoughts on these statistics?
"we should not have 24 million people in this country who can’t find a full time job, that we should not have 50 million people in this country who can’t see a doctor when they’re sick, that we shouldn’t have 47 million people in this country who need government help to feed themselves, and we shouldn’t have 15 million families who owe more on their mortgage than the value of their home"
I think I have read enough of your perspective to kind of know your views, though I still don't understand them.
I dropped out of the Lutheran church as soon as my parents would allow at age 14, because so very few actually seem to attempt to follow the teachings of the leader as described in the new testament.
Do you have any trouble integrating your libertarian and Christian values? Sorry to ask questions from the typically out of bounds topic of religion, but you did bring it up and it is another of my major interests. Charity seems so inadequate to the scope of the problems.
So John,
I agree that our leaders have become less caring, which seems to indicate a less caring electorate.
What our your thoughts on these statistics?
"we should not have 24 million people in this country who can’t find a full time job, that we should not have 50 million people in this country who can’t see a doctor when they’re sick, that we shouldn’t have 47 million people in this country who need government help to feed themselves, and we shouldn’t have 15 million families who owe more on their mortgage than the value of their home"
I think I have read enough of your perspective to kind of know your views, though I still don't understand them.
I dropped out of the Lutheran church as soon as my parents would allow at age 14, because so very few actually seem to attempt to follow the teachings of the leader as described in the new testament.
Do you have any trouble integrating your libertarian and Christian values? Sorry to ask questions from the typically out of bounds topic of religion, but you did bring it up and it is another of my major interests. Charity seems so inadequate to the scope of the problems.
Who was it who said "liberalism is a mental disorder"? They were right. The only way to reconcile these people's worldview with reality is to recognize that they have no grasp of reality whatsoever. It's like PETA protesters standing around in fur and leather.
J. Ewing
"Do you have any trouble integrating your libertarian and Christian values?"
Absolutely not. If I feel charitable, I will select a charity and donate what I feel like giving (normally sizable). If government takes my money and gives it away, how am I being Christian? Is government "Christian" by stealing money from one person and giving it to another?
And if you don't like the taboo religion-state side of the argument, how about just considering it in practical terms? Take all transfer programs of the state and federal governments, and simply write checks to everybody below the poverty line in this country. If they have no other income (most unlikely), that single mother family of three is pulling down over $50,000/year, tax free! Does that seem reasonable to you ?
J. Ewing
Laurie,
I love talking politics and religion... Nothing taboo about it.
I am still a practicing Lutheran, but probably not a very good Lutheran. Organized religion vs spirituality sometimes get me a bit confused. Especially when I consider the number of humans that swear their religion is the right one...
As for how do I deal with politics and the church... No where in my religious teachings did I learn that Jesus expected us to be perfect or to live in poverty. Therefore each of us has to figure out that balance point that works for us.
I guess that is why I can understand the Conservative point of view. Giving is good... Forced redistribution is bad...
Maybe necessary... But bad none the less...
As for the stats, I would have to ask how many of those people choose that lifestyle because it is available? If starvation were the alternative, could they find a job then to avoid that sever consequence? We will probably never know.
As for healthcare, I am sure the Conservatives will say that everyone can go to HCMC... That's why it is so costly.
Tell us why forced redistribution is bad.
--Hiram
I think the clearest form of forced redistribution is Social Security. Current wage earners are forced to give up a portion of their paychecks which immediately goes to pay a retiree.
Is Social Security bad?
--Hiram
"Is Social Security bad?" -- hiram
Let's answer a question with a question: Is what Bernie Madoff did bad? If so, then notice that it is exactly the same thing, except that Bernie Madoff's clients /voluntarily/ put their money into his Ponzi scheme. FICA taxes come out of your check without so much as a by-your-leave.
J. Ewing
Is what Bernie Madoff did bad?
Yes.
So now that I have answered your question, do you have an answer for mine?
--Hiram
about "liberalism is a mental disorder," that is the title of a Michael Savage book. It was one of the books found in the home of the man who went into a Unitarian church and opened fire, killing 2 and wounding 6 others.
http://www.knoxnews.com/news/2008/jul/28/church-shooting-police-find-manifesto-suspects-car/
J Ewing, you must not know any liberal Unitarians, because they are some of the most reality based people to be found. And also, surprisingly, quite religious with their wide ranging/ predominately agnostic beliefs. The UU faith tradition of striving for meaningful individual spirituality with in a church community makes sense for me. I think, in general, most people believe there is more than one way to approach the sacred but stick to the tradition in which they were raised.
As for Christian teachings, to my understanding the central tenet is "love they neighbor as thy self." Now meeting this lofty goal does seem doomed to failure, but followrs could at least give a better effort, seems to me.
John, that is an interesting point related to giving vs forced redistribution. I think of the taxes I pay as a form of giving (rather than the latter.)
Perhaps individual sharing/charity has worked at different times and places on a small scale. I can't imagine it on large scale without govt and taxes.
Sorry if I sounded preachy, the mention that religion is not taboo sort of left it open to share some thoughts.
"about "liberalism is a mental disorder," that is the title of a Michael Savage book."
I always thought one of the most dangerous tendencies of the Bush years was the tendency to claim that differences on policy issues were the result of a mental illness and disorder. The intended effect of this talking point is to eliminate the need to defend one's policies rationally. Coincidentally, as a talking point, it tends to emerge when someone is making an effective and rational criticism of policy.
For myself, and with the experience of the Bush years, I try to avoid saying those who differ with me are nuts. I try to avoid the temptations of accusing those who disagree with me, the equivalent of what Charles Krauthammer calls "Bush Derangement Syndrome". I do that because it's destructive, dangeour and because it's lazy.
--Hiram
"..the tendency to claim that differences on policy issues were the result of a mental illness and disorder. The intended effect of this talking point is to eliminate the need to defend one's policies rationally. " -- hiram
In general and in principle I agree with you. Unlike applying labels to people or ideas, like "conservative" or "socialist," which are a convenient shorthand for an entire set of arguments, calling somebody "mentally disordered" is normally an insult and doesn't advance the discussion one bit.
BUT... How does one "defend one's policies rationally" when those opposing said policy refuse to do likewise and, in fact, have no rational basis for such opposition? I've had enough debates with liberals to know that these "rational discussions" rarely go beyond platitudes or feelings-- "talking points"-- unrelated to reality, and quickly degenerate into bluster, ad hominem and incoherence. The inability to defend one's policies rationally is a mental disorder characteristic of liberals. No insult, just fact. And these nutburgers in "Occupy X" prove it.
J. Ewing
How does one "defend one's policies rationally" when those opposing said policy refuse to do likewise and, in fact, have no rational basis for such opposition?
Presumably by making rational arguments for them, and pointing out the irrationality, of whatever irrational arguments are made for them, and the weakness of whatever rational arguments are made for them.
Really, responding to irrational arguments is by far the easiest part of advocates jog. It's the good opposition arguments that give me trouble, not the bad ones. One effective tactic in dealing with good arguments is simply to dismiss them as crazy. If you ever catch me doing that, you will know that rhetorically, I am in trouble.
--Hiram
For the most part, I've never known liberals to advance any rational argument for their views. They make a "talking point" case, and when challenged as irrational, or have it pointed out what the rational arguments against their view are, I find they simply repeat the talking point as if I had said nothing at all. When I make the same rational point another way, they generally change the subject, claim that "your side does it, too," or descend into ad hominem. If exposed to one more dash of rationality, I can almost promise they will descend into sputtering incoherence. Variations, of course, but never does discussion continue to a rational conclusion, not even to "agree to disagree." That is the province of the open-minded independent, not the committed liberal.
J. Ewing
Here is a rational liberal for your reading pleasure, J Ewing:
http://www.yesmagazine.org/blogs/david-korten/in-solidarity-with-occupywallstreet
http://livingeconomiesforum.org/author-bio
I know from past experience you are not open minded enough to be persuaded in the least by a liberal point of view, so my efforts are limited to posting a link that will likely draw a response, which I will read, if it is not too long, ranting or insulting.
"For the most part, I've never known liberals to advance any rational argument for their views."
Most people don't know much about politics, beyond the talking points. They have better things to do with their lives, presumably.
--Hiram
By the way, my question has gone unanswered except by another question.
"Is Social Security bad?"
--Hiram
Commenting more generally, there is coming to be a broad consensus emerging in the country, that something has gone very wrong. This is something that is common with the bases of both the left and the right. A lot of people have trouble putting their finger on exactly what that is, they can be very inarticulate about it. They don't have the tools to explain it, because part of what's gone wrong is that we have given people the tools with which to explain it. But in my opinion, they are not wrong.
--Hiram
I have a little time this morning as I watch Premier League soccer, and so I thought I would just touch briefly on Ponzi Schemes, how they are like and how they differ from other economic systems.
With Social Security and Ponzi schemes, money paid in is immediately paid out in benefits. So SS is a Ponzi Scheme, right? Well, the problem is, that description fits just about any economic system. Apple computer pays money it receives out more or less immediately to suppliers, employees, shareholders, etc. Much of the money you receive in your pay check is immediately paid out to various creditors. Are you a Ponzi Scheme? The fact is, the qualities that Ponzi Schemes share with Social Security, a business like Apple Computer, and you, are not what make Ponzi Schemes, Ponzi Schemes. So what are the qualities that bring the Ponzi?
Briefly, there are two essential qualities to the Ponzi. First, in a Ponzi Scheme the outflows must exceed the inflows plus any appreciation of value of the system itself. The system must be going broke. Nobody complains about making a profit. Shareholders may complain that management isn't making enough money, but no shareholder complains that a business is profitable or is likely to describe a profitable business as a Ponzi Scheme.
Secondly, and this is the critical issue, there must be fraud. Money comes and goes in all economic systemes and if more money goes than comes, eventually the system will go broke in a way that's perfectly legal. Bankruptcy is in itself, not a crime. What is a crime is misrepresenting the finances of the business. In the case of making promises of payouts, the promisor knows, and the promisee doesn't know, can't be kept.
Has Social Security made such fraudulent promises? I would say not. SS administrators have been totally candid and honest about the nature of SS finances. The only reason we know there is a problem is because they have explained it to us in great, excruciating and accurate detail. And while they have identified the problem for us, they are not to blame for it.. It isn't the result of corruption, embezzlement or any malfeasance of any kind on their part. The problem is in the numbers themselves. And the fact is, nobody reasonably disputes the fact that the SS has not committed fraud. Therefore, since Ponzi schemes require fraud as an essential element, SS is not a Ponzi Scheme. It's simply another economic system, which must make adjustments in order to remain financially stable over the long term. Business makes these kinds of adjustments all the time. This is basically, why Apple issues a new iPhone every year.. Making adjustments in SS to reflect changing assumptions is the same thing.The problem is that with the paralyzed state of our politics, SS doesn't have the ability to adjust, in the way successful businesses do, and that’s why Social Security’s problems in their slow and stately fashion, are getting progressively worse. Preventing such adjustments drives SS into bankruptcy, or at least, brokeness, the first of my two essential qualities of bankruptcy.
--Hiram
"I know from past experience you are not open minded enough to be persuaded in the least by a liberal point of view, so my efforts are limited to posting a link that will likely draw a response, which I will read, if it is not too long, ranting or insulting." -- Laurie
I suppose calling me close-minded is not an insult, and I will accept it as such though I deny its accuracy. I prefer "confirmed of my own opinions." It is not as if I could not rationally defend my positions if presented with facts and persuasive arguments for the other side. Feel free to try. I will review your link as time permits and respond accordingly.
And to be clear: I did not say there were NO liberals with the ability to advance reasonable-sounding arguments, and some of them are highly articulate. But they are uncommon. Perhaps you have found one, here. I still contend, however, that logic and the facts do not support a liberal worldview. Even factoring in human emotion on one side or the other, as I often do, logic always falls to the conservative side of public policy, IMHO.
J. Ewing
hiram:
Social Security is bad. It is a Ponzi scheme. Distinguish, please, between the politicians who made promises, the SSA who told them those promises cannot be kept, and those same politicians who then made MORE promises. That's fraud.
J. Ewing
"Distinguish, please, between the politicians who made promises, the SSA who told them those promises cannot be kept, and those same politicians who then made MORE promises."
It isn't a question of promises, it's a question of commitments and following through on commitments.
It simply isn't true that the promises Social Security has made cannot be kept. They can be. The question, rather, is whether we have the political will to keep them. Like any economic system, Social Security cannot extend indefinitely into the future, unless it maintained, unless adjustments are made to keep the system viable.
This sort of thing goes without saying in the private sector. Consider Apple Computer, in the news today. It's one of the most successful companies ever. However, in order to succeed it must change. It can't stay with the same product line year after year, it must update, and innovate, issue a new iPhone every 18 months. And nobody thinks that Apple is Ponzi scheme because no one thinks it's managers don't have a commitment to change the company to meet changing conditions in the future.
--Hiram
What is really at issue here isn't whether Social Security is a Ponzi scheme. Rather, the issue is whether it should be turned into one. Here is how you would do it, within the context of my two conditions.
First, politicians must refuse to make the necessary changes to maintain Social Security's viability. They must work to make sure Social Security goes broke.
Second, politicians must lie about those changes, and those lies must be widely believed. They must say things like we are acting the way we are to maintain SS's long term viability. Or just as commonly, they might say, we would make such changes, except that we are prevented by politics from doing it. In effect, we have to perform the trick of lying to ourselves, while at the same time believing those lies.
--Hiram
The most brutal and obvious way to prove Social Security isn't a Ponzi Scheme is to point to the fact that it works. With a few minor mid-course adjustments, it's lasted for 75 years, and will go along for another 25 years, quite nicely with no changes at all. Even after thaose 25 years, SS will pay 75% of the promised benefits for the indefinite future. That doesn't happen with Ponzi Schemes. Ponzi Schemes blow up, and they do it in relatively short order. If they didn'tblow up, we wouldn't have a problem with them.
--Hiram
--Hiram
Just in passing, I should note that while you complain that Social Security is a redistributionist scheme, and you think it's bad on that account, the problem you seem to be raising with it, the reason why you think it's bad doesn't have to do with it's redistributionist character. Rather, the problem you seem to be having is that it's an actuarilly unsound redistributionist scheme, a practical problem which certainly has a practical solution, if we are willing to employ it.
--Hiram
It's customary in these decadent times for politicians to seek to limit their responsibility for the consequences of their actions, even those which are entirely foreseeable. It's in the interest of politicians to find strategies, which allow themselves off to be let off the hook. I don't really understand why it's in the interest of voters to allow those strategies to succeed.
Anyway, we see that a lot with Social Security. Politicians tell us either that nothing can be done, or that there isn't anything they can do about it. Neither statement is true, and no politician should be allowed to get away with making them.
--Hiram
J. Ewing, perhaps my memory fails me but I do not recall any comments on this blog in which you have agreed with a liberal view point in the slightest degree. In my book of common courtesy calling an acquaintance insufficiently open minded is a lesser insult than saying another's pt of view is a mental disorder.
Labels like ponzi just distract from what I think is the real issue. Businesses must set aside funds to pay their employee's pension. They must be kept separate and diversified. They can not loan the money to themselves and claim that they will pay it back in the future. Somehow we agreed that the USA and its Citizens were good for it...
Man we were trusting. Our we just wanted to not have our taxes raised and thus were willing to accept the risk.
I am still up for withholding all SS payments until the debt is paid off. That would certainly have some citizens demanding that the Government stop spending and the Rich get taxed...
Kind of like a family who is threatened with foreclosure. They may quickly learn to pass by Starbucks and get an extra job.
I would rather pass along a debt free country to my kids.
As for why is wealth redistribution bad...
It often rewards slackards at the expense of the dedicated and hard working. This can not end well for a business, family or country since it will encourage sloth...
"Labels like ponzi just distract from what I think is the real issue."
Sure. We confuse labels with arguments. We think if we call someone a communist or a socialist, and do it loudly enough, we somehow have advanced an argument, or gained a deeper understanding of whatever issue is under discussion.
"As for why is wealth redistribution bad...
It often rewards slackards at the expense of the dedicated and hard working."
But wealth non redistribution often rewards slackers at the expense of hard working people as well. I can tell you from personal observation, and some personal experience on occasion that many of the majority of us who don't make enough to pay income taxes, work just as hard, and often do jobs far more valuable, than those who do.
"Businesses must set aside funds to pay their employee's pension."
They have to make Social Security payments, but other then that, I am aware of no legal obligation to provide pensions. The fact is, pensions will soon be a thing of the past, which is why the relative importance of Social Security is increasing.
--Hiram
hiram, perhaps you are not familiar with ERISA, the federal act requiring private company pension plans to have enough in assets to pay all retirement benefits promised. IF, which it doesn't, ERISA applied to SS, the government would need to immediately set aside something like $20 trillion. They could get this by raising Social Security taxes from 14% of wages up to 100% of wages for two years-- again approximate.
So, a Ponzi scheme that survives for 75 years is not a Ponzi scheme? How about one that lasts only 74 years before "blowing up" and getting to the point where income from new entrants to the scheme does not cover promised payouts to the earlier investors? Because Social Security IS broke, as of last year, and they are dipping into general federal revenues to pay current benefits which, of course, Ponzi didn't have the ability to do. The system will NOT be "just fine" for the next 25 years because the trust fund consists solely of
IOUS that the government wrote to itself-- worthless paper. Sorta like the bonds and stock in fictional companies that a Ponzi schemer would give you.
J. Ewing
Laurie, I am sorry to disappoint you, I really am, but "open-minded" means that I will listen to and attempt to understand a liberal argument if it is based in facts and reason. It does NOT mean that I will accept nonsense or irrationality, nor does it mean that I will agree with any of it, no matter how well-reasoned. Politeness and respectful dialog require only that I accept what is offered as the good faith opinion of others, and offer mine in the same spirit. If at the end we "agree to disagree" both sides have been successful in the process, even though truth may remain on one side or the other (the most likely condition). Still waiting for time to review your link...
J. Ewing
J. Ewing, aren't there any liberal arguments that you find persuasive?
Today I found myself partially agreeing with J. Soucharay in his Pioneer Press column that Big Education and Big government deserve partial blame for the student loan debt crisis.
Also, for those of you who were unable to attend the "Don't Foreclose on the American Dream" demonstration in Mpls on Friday here are a couple links (that don't fully capture the size, diversity and energy of the crowd.):
https://www.facebook.com/photo.php?fbid=10150328626423031&set=a.10150328623848031.354807.185753078030&type=3&theater
http://www.theuptake.org/2011/10/16/mn-occupy-wall-street-dont-foreclose-on-the-american-dream/
(while at the uptake website be sure to check out the livestream links to about 100 occupy wall street protests across the country. If you've never watched you may it interesting for a few minutes.)
"IF, which it doesn't, ERISA applied to SS, the government would need to immediately set aside something like $20 trillion."
Yes, but that's because Social Security is set up differently. Unlike private plans, it's a pay as you go system. Without going into a lot of detail, government can take on these obligations in the way it does because it's a permanent entity. Private businesses are not.
"So, a Ponzi scheme that survives for 75 years is not a Ponzi scheme?"
That is a strong piece of evidence, yes, that the entity concerned is not a Ponzi Scheme. Remember, the problem with Ponzi Schemes is that they blow up. Social Security hasn't.
"Because Social Security IS broke, as of last year, and they are dipping into general federal revenues to pay current benefits which, of course, Ponzi didn't have the ability to do."
Social Security has huge accumulated surpluses. They will be drawn down over the years and if nothing is done, will be exhausted by around 2035. It is not broke. With some minor changes now, those problems due to arrive 25 years from now can be averted altogether. The question before us really isn't whether Social Security is a Ponzi Scheme, rather it's whether it should be turned into one.
"Ponzi didn't have the ability to do."
Sure. Ponzi said he had guarantees but didn't. Social Security has guarantees. As long as they are kept, there is no Ponzi scheme.
"The system will NOT be "just fine" for the next 25 years because the trust fund consists solely of
IOUS that the government wrote to itself-- "
Whenever you hear a politician refer to a bond as an IOU, you know that politician is scheming to dishonor a legally binding obligation.
"Sorta like the bonds and stock in fictional companies that a Ponzi schemer would give you."
That sums up the difference between us on that issue. You regard the government as a fiction, I believe it is quite real, at least for the moment. But I grant you, there are people out there who want to destroy the government and the constitution that created it. Those are the people who want to dishonor legally binding obligations, who want to turn bonds into IOU's. They may succeed.
--Hiram
I thought the choice of TCF in the Soucheray column was interesting. TCF is a poor people's bank. That's their market niche. Their business model is to lure in small investors by offering cheap accounts, but with a expensive and punitive fee system.
Anyway, the problem with Soucheray is his laziness. As a journalist, he is an asker of questions, not a finder of answers, and that's a terrible thing for a journalist to be. He complains that people don't know stuff, which is nothing more than a statement that journalism in general, and Joe in particular have failed in their mission to inform. I don't think I have ever read anything in a Soucheray column I didn't already know.
The Wall Street protestors, and their fraternal twins, the tea party don't have all the answers. They don't even have all the right questions for that matter. But they do share a fundamental, powerful, and true insight, that is, that there is something profoundly wrong with this country, and the direction it is going. And maybe that is something Soucheray should explore, instead of doing what he doing, looking down on people he failed in his journalistic mission to inform.
--Hiram
"Social Security has huge accumulated surpluses. They will be drawn down over the years and if nothing is done, will be exhausted by around 2035. "
here is a test for you: let us say that you just turned 65 and are eagerly anticipating your first Social Security direct deposit to your checking account. But the government comes to you and says, "instead of cash or check, we would like to give you one of these bonds from the Social Security trust fund." Assume that the amounts are equal. But you cannot take a bond to the grocery store and buy groceries, you have to turn that into cash. How? You have a government bond – a promise to pay – and supposedly it is backed by the "full faith and credit of the United States," but when you present that bond for payment, where does government get the cash?
All of the money coming into Social Security isn't enough to pay their current obligations, so you can't be paid from the "pay-as-you-go" revenue stream. No, the government has three choices: they can take the money from general revenues, or increase the deficit (basically reissuing your bond to somebody else), or they can simply reduce Social Security benefits and you get nothing. That is what you call the "blowing up" of a Ponzi scheme and it is perfectly within the purview of Congress to do so. As more and more people retire with higher and higher benefits, redeeming the bonds in this "surplus" will become a larger and larger drain on the overall federal budget until Congress MUST cut benefits.
In short, there is NO MONEY in the trust fund, only bonds – promises to pay. At some point even the most well-intended promises cannot be kept.
J. Ewing
"How [do I cash a mature government bond]? I would present it to my broker or bank.
"You have a government bond – a promise to pay – and supposedly it is backed by the "full faith and credit of the United States," but when you present that bond for payment, where does government get the cash?
From the Federal Treasury, is the short answer. Of course, in practice, the government doesn't make Social Security payments from the bond surplus, the money comes from FICA taxes just paid into the system.
"All of the money coming into Social Security isn't enough to pay their current obligations, so you can't be paid from the "pay-as-you-go" revenue stream."
That's a recent development, the result of the slow down of the economy.
"the government has three choices: they can take the money from general revenues, or increase the deficit (basically reissuing your bond to somebody else), or they can simply reduce Social Security benefits and you get nothing."
Am I missing the third option. The one I would point to, is increasing the Social Security tax. Reduce to nothing? Bear in mind that even now, SS payments come from money coming in, not from the sale or redemption of bonds.
"As more and more people retire with higher and higher benefits, redeeming the bonds in this "surplus" will become a larger and larger drain on the overall federal budget until Congress MUST cut benefits."
Or raise taxes. The solution I would favor is to do both. Raise SS taxes, and take a tough look at Social Security benefits, in particular, the inflation adjustment formula. But I won't do one without the other.
--Hiram
"That is what you call the "blowing up" of a Ponzi scheme and it is perfectly within the purview of Congress to do so."
It is not within the purview of Congress to default on bonds. That's why people who advocate the doing of that, attempt the bait and switch of referring to bonds as IOU's. Somehow, the use of the term IOU connotes a less legally binding obligation. When a politician substitutes "IOU" for "bond", what he is trying to do is cheat you out of your rights.
--Hiram
"It is not within the purview of Congress to default on bonds."
If we were talking about ordinary bonds, bonds held by the public, you would be mostly correct. It Is within the purview of Congress to default on its obligations, but they try mightily, as we saw just recently, to avoid that. Social Security bonds, though, are "special" in that they are held by the same government. They are like IOUs you write to yourself; you aren't going to break your own kneecaps to collect.
Furthermore, Congress doesn't have to "default" on those special SS bonds in the "trust fund" for the Ponzi scheme to blow up, because the Supreme Court has already ruled that you, and everybody else, have no rights whatsoever to your SS benefits. They may be reduced or eliminated at any time, at the whim of Congress.
"Bear in mind that even now, SS payments come from money coming in, not from the sale or redemption of bonds."
No, you are WRONG. The minute the amount coming in is less than the amount going out, bonds from the trust fund must be redeemed to cover the shortfall. This redemption extracts funds from the general fund-- income taxes, etc.-- or must be covered by deficit spending. We've already raised SS taxes repeatedly, the last time to make SS "solvent forever." It's insolvent again.
I'm sure these OWS folks would scream at letting ordinary folks "gamble on Wall Street" rather than take the Security of SS. But even with the "Obama bear market," my investments will pay out 3 to 4 times what SS does. Those folks suffer from the fundamental liberal disconnect of imagining that good intentions and big government can repeal the laws of physics, economics and human nature.
J.Ewing
"Social Security bonds, though, are "special" in that they are held by the same government. They are like IOUs you write to yourself; you aren't going to break your own kneecaps to collect."
That's at the heart of the demagoguery. Bonds aren't like IOU's we owe to ourselves. They are like bonds, and that's true no matter who has custody of them. We loaned the government money in good faith. That was the deal Ronald Reagan made in 1983. It's now time for the government to pay the money back.
"But even with the "Obama bear market," my investments will pay out 3 to 4 times what SS does."
And speaking of the Obama bear market:
http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=DJIA&insttype=Index&freq=2&show=&time=11
You will note that stocks have done quite well under "socialist" Barack Obama. And even those results would look considerably better, had we not decided to inflict ourselves with the wounds of the phony debt ceiling crisis.
But, I admit, I don't expect those result. I view the re-election of President Obama as increasingly unlikely, and for various reasons, I am not sure I will even support him. But I also fear the return to the disastrous policies of the Bush administration, the ones that while not exactly ruining, did not stand in the way of the ruination of our economy by others.
--Hiram
--Hiram
Can we really afford another 4 or 8 years of Republican oscillation between stagnation and decline?
http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=DJIA&insttype=Index&freq=2&show=&time=20
--Hiram
Without looking at your chart and simply accepting your statement of the problem at face value, I would say no. This country cannot stand four more years of Obama's far leftist destruction, and aimless vacillation or nibbling about the edges of the problem aren't going to be good enough, either. Since our only choice will be between Obama and some Republican (thank goodness polls show any unnamed GOP candidate beating Barack Obama), what Republicans need to do is put forth a candidate with a bold vision, and elect congressional majorities that don't have a problem with solving a problem.
J. Ewing
"[SS] Bonds aren't like IOU's we owe to ourselves. They are like bonds, and that's true no matter who has custody of them. We loaned the government money in good faith."
You are still not understanding the scheme that was put in place. "We" did not loan the government anything whatsoever. We paid taxes, and the government collected them in a specially designated revenue stream called FICA. Out of this revenue stream they paid then-current Social Security benefits. The surplus, BY LAW, was used to buy SPECIAL US treasury bonds. These bonds could not be sold or traded, and the proceeds – i.e. the surplus – vanished into the general fund of the government and was spent. The only thing in those file cabinets in Virginia are promises the government has made to repay itself. I don't know what else you can call it.
What is certain is that these bonds do not represent an asset that can be tapped to provide present and future SS benefits. They only have value so long as Congress agrees to honor these promises and take money from the general fund (from other areas of spending or by adding to the deficit) to redeem them.
J. Ewing
"Without looking at your chart and simply accepting your statement of the problem at face value, I would say no."
What do others say? Those who aren't making a point of avoiding the truth? As for the specialness of these particular bonds, to me, all bonds are special.
"The only thing in those file cabinets in Virginia are promises the government has made to repay itself."
I am confused. At one time in your posting you call them bonds, at other times just promises, which you seem to believe the government isn't obliged to keep.
Which is it?
"They only have value so long as Congress agrees to honor these promises and take money from the general fund (from other areas of spending or by adding to the deficit) to redeem them."
Congress doesn't have the power to dishonor bonds. And I am not sure in these circumstances it has the power to dishonor IOU's or even promises.
--Hiram
"Congress doesn't have the power to dishonor bonds." -- hiram
But Congress does not have the power to HONOR bonds, either, unless the revenue is there to honor them WITH. Try redeeming your Greek bonds about now, if you doubt this; then remember that the US is almost to the same point of debt to GDP already.
And if I am right that these bonds are simply representations of promises made by past Congresses-- politicians all-- then remember what a politician's promise is worth. You are correct that these promises are "special," however. They are worth the paper they are printed on.
SS bonds are special in another way, too, in that they cannot be traded on the open market. They are therefore not an "asset" to the "trust fund" because they can ONLY be redeemed at maturity, and by the government. When Chile reformed their SS system years ago, they took their trust fund bonds and distributed them. Those bonds immediately became assets to the individuals, as they never were to the government, because they could be openly traded, or "cashed out" without having to wait for maturity.
Here's one more way to look at it. The official interest rate on these "special" SS bonds is set low, currently about 2.5%. The rates aren't set by market mechanisms. so it seems like the simplest solution to making the trust fund last forever is to arbitrarily increase the interest rate to, say, 100%. Any reason why that wouldn't work? After all, Congress has never failed to redeem a bond with full interest.
J. Ewing
"But Congress does not have the power to HONOR bonds, either, unless the revenue is there to honor them WITH."
Sure they do. And if they don't, courts can order them to fulfill their constitutional duties.
"And if I am right that these bonds are simply representations of promises made by past Congresses-- politicians all-- then remember what a politician's promise is worth."
You seem to be struggling very hard to present bonds as something other than they. What they are is a legally enforceable, and transferable, obligation of the federal government. My guess is that these obligations were put in the form of bonds because Ronald Reagan wanted to make sure they were enforceable independently of the whim of any future politician. Up until July, basically, no one ever thought Congress would dishonor America's debt. Now we all work on the assumption that some day it will, since we now understand that a significant portion of Congress is composed of dishonorable men and women.
I don't live in Chile.
--Hiram
"Sure they do. And if they don't, courts can order them to fulfill their constitutional duties."
It would certainly be interesting to have a court order the Congress to do something which is impossible. Especially when, in the case of Social Security, the SCOTUS has already ruled that you have no rights whatsoever to your Social Security benefits. If Congress decides they do not want to or cannot pay, you do not get paid. End of discussion. That they have always had both the means and the strong political incentive to make payments does not mean it will always be true.
The SS surplus should have been returned to the people and SS continued as a pay-as-you-go program, but the Ponzi scheme was going to blow up, with more payments promised than new revenues coming in, so taxes were raised and the "trust fund" was set up to give the impression SS was more of an investment. Special bonds were created to further this illusion, and it was necessary because the government cannot hold investments. Every dollar of the surplus was spent as it came in, and a bond created to represent the promise to pay some future SS benefit. A bond is a promise to repay, nothing more. It is irrelevant to the ABILITY or desire to repay.
Too bad you don't live in Chile. Their SS reform-- complete privatization-- has been a resounding success. I've seen it.
J. Ewing
"It would certainly be interesting to have a court order the Congress to do something which is impossible."
Possibly, and your point is well taken. But defiance by Congress of the Constitution makes the government illegitimate. And courts have other remedies as well. They could for example order tax increases.
"The SS surplus should have been returned to the people and SS continued as a pay-as-you-go program, but the Ponzi scheme was going to blow up, with more payments promised than new revenues coming in, so taxes were raised and the "trust fund" was set up to give the impression SS was more of an investment."
This isn't a question of what President Reagan's policy should have been, it's a question of what President Reagan's policy was.
It's a question of whether America should be dishonored. I say no. For some accountable and needless reason, Republicans say yes, on an issue of entitlements of all things, of what Americans have a right to, and have counted on.
--Hiram
Again, SCOTUS has ruled that the "American people," individually or severally, have absolutely ZERO "right" or "entitlement" to Social Security benefits. You can ascribe all kinds of magic to the term "bond" but it cannot negate economic reality. SS is a bad investment all the way around and eventually it will become insolvent, the date dependent only how you define insolvency and what increasingly drastic steps you take to forestall it.
The simple solution would seem to be to make it voluntary-- to allow those who wanted to put aside their SS payments into a private account to do so, while those who wanted the "security" of SS could continue to pay in and those already receiving benefits could continue receiving them. Of course, that's just like Chile's highly successful system, but I don't mind copying what works.
J. Ewing
"Again, SCOTUS has ruled that the "American people," individually or severally, have absolutely ZERO "right" or "entitlement" to Social Security benefits."
I don't think that would be the court's view today. If, for example, someone were denied Social Security benefits by the government, I feel pretty confident they could sue and win.
"The simple solution would seem to be to make it voluntary-- to allow those who wanted to put aside their SS payments into a private account to do so, while those who wanted the "security" of SS could continue to pay in and those already receiving benefits could continue receiving them.""
That's a very complicated suggestion, and it's not a solution. Remember current recipients are paid out of funds received currently. If payors into the fund were allowed to divert their payments into private accounts, there wouldn't be enough money to fund the system.
I know the mandatory nature of Social Security bothers people, but let's remember, in all likelihood, Social Security is the only retirement program young people will have.
--Hiram
"I don't think that would be the court's view today. If, for example, someone were denied Social Security benefits by the government, I feel pretty confident they could sue and win."
Actually, that was a recent decision, and it was fairly one sided. The Constitution does not guarantee anybody the right to receive money from the government, and in general we are precluded from suing our own government in all matters.
"That's a very complicated suggestion, and it's not a solution. Remember current recipients are paid out of funds received currently. If payors into the fund were allowed to divert their payments into private accounts, there wouldn't be enough money to fund the system." But that was exactly my point, that there isn't enough money to fund the system RIGHT NOW, and that money is being diverted from the general fund (by way of Social Security bond redemptions) to make up the difference. There is no reason this could not be continued an enlarged (as it will be anyway), so long as the transition to private accounts does not happen too rapidly.
"…in all likelihood, Social Security is the only retirement program young people will have." Except by the time those now entering the workforce retire, the SS trust fund will be gone and, in most likelihood the Social Security system itself, having long since been found unsustainable and an awful investment, to boot. What young people CAN count on is a personal retirement account that they own and can pass to their heirs, even if they die before reaching the "new" official retirement age of 77.
J. Ewing
"The Constitution does not guarantee anybody the right to receive money from the government, and in general we are precluded from suing our own government in all matters."
But it does require debts to be paid. And really it's hard to imagine that someone denied Social Security couldn't successfully sue. Do you have a link for the Supreme Court decision?
"Except by the time those now entering the workforce retire, the SS trust fund will be gone and, in most likelihood the Social Security system itself, having long since been found unsustainable and an awful investment, to boot."
Conservatives argue that there won't be Social Security because they are unwilling to fund it, a circular kind of argument reminiscent of the kid who kills his parents and asks for mercy because he is an orphan. But as a matter of practical politics, I don't think conservatives will be any more willing to cut Social Security in the future then they are now. Particularly since the elderly at that future time won't have other retirement savings.
--Hiram
See:
http://www.cato.org/pub_display.php?pub_id=5776
Social Security is not an insurance program, nor is it an investment. The sooner we get rid of this huge regressive tax and acknowledge that fact, the sooner people can start planning for their own retirement.
Of course, no one with a heart or a mind would eliminate SS for those already retired, or near it. But it could easily be phased out over the next 40 years simply by stopping the "contributions"-- the tax-- into the program. Now, if you're really worried about people's retirement, you do what Chile did and mandate that a certain percentage of income be put into a personal retirement account, and if you're worried about "the market" (you shouldn't be) you simply require the investments be approved by the government as safe for preservation of capital. That would be better than Social Security, right there.
J. Ewing
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