Does anyone else see a correlation behind Debt / GDP

Let's blow up the moon to save the magestic gazelle!

 

Wow... if you know more than anyone else here ...well we all must be really stoopid because you don't know...

Social Security has a trust fund, and that trust fund is supposed to have $2.6 trillion in it, according to the Social Security trustees. If there are real assets in the trust fund, then Social Security can mail the checks, regardless of what Congress does about the debt limit.

President Obama’s budget director, Jack Lew, explained all this last February in USA Today:

“Social Security benefits are entirely self-financing. They are paid for with payroll taxes collected from workers and their employers throughout their careers. These taxes are placed in a trust fund dedicated to paying benefits owed to current and future beneficiaries. … Even though Social Security began collecting less in taxes than it paid in benefits in 2010, the trust fund will continue to accrue interest and grow until 2025, and will have adequate resources to pay full benefits for the next 26 years.”


FEDERAL "BORROWING" OF SOCIAL SECURITY FUNDS

The following excerpt is from the 1998 Senate Budget Committee session.

BEGIN EXCERPT

U.S. FEDERAL RESERVE BOARD CHAIRMAN ALAN GREENSPAN: .....making sure that surplus is there.

U.S. SENATOR ERNEST F. HOLLINGS (D-SC): Yeah, making sure that surplus is there. I'm telling you, Dr. Greenspan, that's music to my ears.

GREENSPAN: Well, I remember you taking this song a long way over recent years, and I must say, Senator, a number of us were skeptical that was even discussable, figuring we would never get to unified surplus that we said which you were preaching was very interesting, scientifically sound, but unrealistic. I apologize.

HOLLINGS: Well that's all right, because your Greenspan Commission report in section 21 says just exactly what you're saying here. That was in 1983; here now, in 1999, on page two, "simply put, enough resources must be set aside over a lifetime of work to fund retirement consumption." Now that section 21 said set it aside. President Bush, in section 13 3 01 on November the 5th, 1990 signed that into law. And we making headway. Let's understand, though, that we're still running deficits. 'Cause I'm not going along with this monkeyshine about unified. 'Cause unified is not net, the debt still goes up, is that correct?

GREENSPAN: If you're...it depends on whether or not you wish to create the savings...

HOLLINGS: I'm not asking what you're trying to create. The simple fact is the debt has been going up at least $100 billion for the last several years.

GREENSPAN: Outside, on budget, that is correct.

HOLLINGS: That's right, on budget, you're spending a hundred billion more than you're taking in.

GREENSPAN: Correct.

HOLLINGS: And this president's budget spends another hundred billion more than we take in.

GREENSPAN: I haven't seen it yet.

HOLLINGS: You haven't seen it? You're testifying about it now.

GREENSPAN: I haven't seen the budget. You haven't seen it either.

HOLLINGS: Well, you know his plan. Look you think he's going to spend less than a hundred billion more?

GREENSPAN: I will wait to see what the numbers look like.

HOLLINGS: Well, the truth is...ah, shoot, well, we all know there's Washington's math problem. Alan Sloan in this past week's Newsweek says he spends 150%. What we've been doing, Mr. Chairman, in all reality, is taken a hundred billion out of the Social Security Trust Fund, transferring it over to the spending column, and spending it. Our friends to the left here are getting their tax cuts, we getting our spending increases, and hollering surplus, surplus, and balanced budget, and balanced budget plans when we continue to spend a hundred billion more than we take in.

That's the reality, and I think that you and I, working the same side of the street now, can have a little bit of success by bringing to everybody's attention this is all intended surplus. In other words, when we passed the Greenspan Commission Report, the Greenspan Commission Report only had Social Security in 1983 a two hundred million surplus. It's projected to have this year a 117 million surplus. I've got the schedule, I'll ask to put in the record the CBO report: 117, 126, 130, 100, going right through to 2008 over the ten year period of 186 billion surplus. That was intended; this is dramatic about all these retirees, the baby boomers. But we foresaw that baby boomer problem, we planned against that baby boomer problem. Our problem is we've been spending that particular reserve, that set-aside that you testify to that is so necessary. That's what I'm trying to get this government back to reality, if we can do that.

We owe Social Security 736 billion right this minute. If we saved 117 billion, we could pay that debt down, and have the wonderful effect on the capital markets and savings rate. Isn't that correct? Thank you very much, Sir. Thank you, Mr. Chairman.

END EXCERPT

It should be obvious from the above that the government has for decades been taking the money intended to pay Social Security benefits and spending it as general revenue. The Social Security trust fund is filled with Government IOUs, and those people who insists Social Security is solvent are operating in the faith that T-bills are always good, because the taxpayer can always be forced to redeem them.

But there is a problem. There are so many T-bills in the Social Security fund that when the baby-boomers start applying for benefits, the sudden surge of T-bills being presented for payment would collapse the Federal System, because there are not enough young taxpayers to carry the extra load.

Regardless of the mechanism, the bottom line is that the government looted the retirement funds of Americans, and that means one of two things has to happen (and maybe even both). Either Americans will be taxed twice for the same benefits, or the benefits will be cut.

 

This is all stuff that has been understood for decades. All surplus money in social security was to be stuck in "trust funds". Because honestly, you don't want them to just hold cash. So what do they do? They invest in treasuries? But who issues treasuries? The Govt. So the Govt gives themselves an asset (a treasury) and a liability (a treasury). It is a wash and doesn't make any sense why it is included in the national debt.

Social Security is a pay as you go system. When there is more expenditures than receipts, then they will have to borrow or tax just like they do for all other expenditures above receipts (taxes). All it will do is transfer public debt to intragovernmental debt. So we really have borrowed $9.9 trillion (the public debt) and we have an allowance of $4.5 trillion (intragovernmental debt). To pay off intragovernmental debt requires public debt.

This is not new knowledge, there was nothing else the Government could do since they aren't going to invest and manipulate the stock market or real assets, and they aren't going to sit on cash, so they simply invest in themselves and put the money in the general fund. They didn't raid anything like a criminal. They did exactly what the laws says they do. There was never a single dollar ever in the actual Trust Fund. It has always been a bunch of worthless IOU's that give the Govt a marker of how much it can spend in the future.

 

Come on... don't you know that when the government takes REAL money from me that I have sweated and worked long hours to save for my retirement and buys bombs and pays folks to frisk kids and little old handicapped ladies at the airport... the money is GONE... SPENT SPENT SPENT and it's not going to be there when I try to take it out.

Your problem is that you are trusting a government that is run by campaign contributors and other special interest who buy influence to (mis) manage taxpayer's money. ...really, you don't know this? The entire economic system is failing right before our eyes... well at least the eyes of those of us who can see.

The government will not reduce spending so they have no other choice but to counterfeit and confiscate everything of value to keep running... and unfortunately the funds in Social Security and federal pension funds are the easiest picking right now.

 

The Government has not missed a Social Security payment yet. When they do, then I'll believe your uneducated assessment on the macro-economy. When those folks get paid to frisk handicapped ladies they pay taxes, when they buy goods and services, those people pay taxes, when those people hire people, those people pay taxes. That money comes back indirectly and you will get paid. The only thing that might change is the age in which you get paid.

I'm trusting the Government that has never missed a Social Security payment and is in charge of the largest economy in the history of mankind. I much rather trust them then you.

THERE IS NO MONEY IN THE SOCIAL SECURITY TRUST FUND!!! I don't know how to explain logic to people like you. You guys think you have ALL the answers, yet you have absolutely no clue how the real world of economics/finance work. But you will dismiss real economists and listen to people like Ron Paul or Sarah Palin. It is embarrassing!! I'm trying to explain to you how the system works in reality... you should just listen and adjust your knowledge accordingly.

 

It will be too late then. You can be an ant or a grasshopper. Tip... the grasshopper dies when bad weather comes and it has not stored food.

You say...

Ok... I'm stoopid and ignorant because I don't trust the nanny state government to always provide for me. If I'm wrong I'll eat the tunna fish and rice I've stored for hard times and you can laugh at me... but if I'm right.... don't come begging for me to share my stash.

You know... sometimes the Bible has wisdom that better conveys a concept that I can do myself..

And as it was in the days of Noe, so shall it be also in the days of the Son of man. People were eating, drinking, marrying, and being given in marriage right up to the day when Noah went into the ark. Then the flood came and destroyed all of them.

There must be some left... the checks they send out aren't bouncing. (YET)

It will be even more embarassing for you when the checks start bouncing.

I tell you... THAT DAY IS COMING. We are on couse for economic failure. It's mathmatically impossible to repay the national debt. The federal government will economically collapse - according to the Congressional Budget Office - by 2037.... and most smart people like you say that's very optimistic.

 

Bring it on, arrogance boy. I've stepped over bigger than you on my way *to* a fight.
You still have yet to answer my direct and undeniably appropriate question: What is your model for causality?

 

Man... I just can't believe that you don't get it. Here let me try to help..

THEY ARE PAID BY THE GOVERNMENT - by funds the Government raided from the Social Security fund when they took it out and left bits of paper with IOU written on them .... therefore, any taxes they pay back are NOT PROFIT or a surplus.. any taxes they pay back simply delays the failure of the system.


You pay me $300 a day (to give you much needed advice) and I'll give you $100 back in taxes and let's see how long you can keep me on the payroll. Your economic system will soon fail. If you are the federal government and have a mony printing press you can last longer by counterfeiting... and raiding other funds like the Federal Pension fund... and sell off parks and public resources... but eventually the day of reckoning will arrive.

I wonder if I'm the only one here in this forum who knows this???

If the government could profit by collecing taxes on the people on their payroll then why don't they just hire every citizen and solve he economic crisis?

Actually this would be funny if not for the fact that it's what they seem to be trying to do.

 

Oh please, I can tell this is going to be child's play. Causality between the relationship of debt and GDP is simple. First off Government spending is included in GDP, second off I believe that deficit spending is how assets in America are created in which all money creation stems off of.

I believe that the Govt credits the nonbank public's accounts before we purchase the debt "required" for them to spend.

So the causality is simply Government spending increases net assets for the private sector in which we use to pay our taxes and buy Government debt.

What is your lack of causality found between a very obviously correlated set of data between debt/GDP?

 

There was never any funds in the Trust Fund. How do you not understand this??? It's a pay as you go system, regardless they are going to have to "borrow" money whenever there is a shortfall. The Trust Fund is simply a number that determines how much the Government can borrow to fund it's programs. It has never and will never actually have money in it to withdraw from.

The money doesn't disappear like I was trying to illustrate above. The $200 surplus in your situation gets put back in to the economy, which it will run it's course and end up being back in the Governments hands.

Government spending/employment serves two purposes in our society.
1) To provide a necessary function (such as teaching/military/etc)
2) To increase the supply of assets/money in to the system

I'm trying to show you that Government spending doesn't stop at the first recipient. That is just the start. It's like someone finding gold under the gold standard. They didn't do anything special to get the gold, but that gold ends up being placed in to the system and could end up in the hands of people that do create wealth. This is where you guys get lost. All that money the Government spends does not end up in the welfare recipients savings account.

It's the reason why we have 400+ billionaires. So if you want that money the Govt has borrowed back you should ask those that actually have it.

 

Oh, c'mon mister "macronomics guru". Surely you at least know how to establish a proper model for causation. Bein' all smart and all.
Must I tell you what form your response is to take?
*Hint* nobody cares what you "believe".
/did you seriously just ask me to prove a negative?

 

It's not a belief. It's reality.

C+I+G

I wonder what G stands for?

 

Now the question of the century is... why is Government spending included in GDP?

I will give you a gold star if you answer that correctly.

 

Just as I suspected.
You obviously don't know how to express a hypothesis, let alone support it. I recommend shutting your mouth and opening your ears until you do.
/piss·ant also (*)(*)(*)(*)-ant (psnt) Slang
n.
1. One that is insignificant.
2. Obsolete An ant.
adj.
Not important; insignificant: "Some pissant Texas court wants to make [the company] pay . . . more than $10 billion in reparations" (New Republic).

 

Lol, so you don't know do you?

 

It was REAL FUNDS when they took it out of my check.... how do you not understand this? Haven't you ever paid into Social Security? What did you use? Monopoly money? Coupons? Green Stamps? Pesos? Whatever you paid... they converted it to "special" bonds

For a bond to be a real bond, there needs to be at least two parties, for example, the U.S. and a citizen who owns a U.S. treasury bond. The U.S. cannot issue "bonds" to itself and have their terms bind future Congresses. Bottom line: These social security "bonds" are neither assets of the U.S. nor property of workers and their families.

It's not there now. Elected officials have spent it.

That's working great in the bloated, socialist governments that tried to put the entire population on governmental payroll.. like Portugal, Ireland, Greece, and Spain.

Many experts predict the US is going the same course.

Well not exactly... it's more like flushing it down the toilet.

You are right... it ends up in the profits of Halliburton and other billion dollar multi-national conglomerates. That's why they "contribute" billions to campaign finance... and get lucrative contracts in return.

That's like saying I gave the $20 you loaned me to a friend of mine... go get them to repay you.

I didn't pay social security into "them" I paid it into the Government.

 

Okay, big leagues....what is our productive capacity?

 

Now you are changing up your story. I said there is no real money in the trust fund, I did not say real money is not debited from the economy. The point is that it is debited and then instantly credited back, essentially leaving the macro-economy at a wash. The dilemma is what are the Government's other possibilities? $4.5 trillion would send markets like the stock market, commodities market, etc in to turmoil. The only viable option the Government has is to just invest in themselves since that money is guaranteed.

You have nothing to worry about. They are not talking about people not receiving SS payments from the Trust Fund. The argument is what are they going to do when the Trust Fund allowance runs out. It has nothing to do with them not paying SS payments.

Very true. They are nothing but a magical figure in the sky. The one benefit is they do pay magical interest to themselves!

It was never there

Those aren't experts than if they think we are going the same course. The United States is nothing like those European country's that are tied to the Euro. They are revenue constrained based on how much of the Euro they have. America is a sovereign nation with complete control over it's own currency. Just ask Warren Buffett.. I would consider him an expert.

There's no guarantees in Social Security. If they run out of money than the gig is up. But they will forever be able to fund Social Security by just changing up legislation. You have nothing to worry about. In the worst case scenario they are projected to be able to pay $.80 on the $1 even after the entire Trust Fund is used up.

 

Around 76% now.

 

So, are you attempting to tell us that the government determines the interest rate they will pay on interest?

What if bond holders want higher interest?

 

No no no no....what is our productive capacity in dollars? You know: so you don't go outspending our productive capacity or anything...

...and - since you seem to think that you or any nutball in the FED knows how to measure such things - why is our interest on our debt the fastest growing segment of our budget?

 

What are you smoking?



Treasury yields across all years are at record lows. Interest rates are at 0%. The Government can borrow cheaper now than they ever could. You guys are crazy!!

 

No, I'm saying the yields on treasury's are at an all time low. An interests rates being 0 plays a role in the banks demand for low-yielding treasury's.

 

You're not smart enough to recognize that what you offered was not an answer to my question. In addition: the debt we carry isn't at a fixed interest rate. We could easily borrow a ton right now - because the "rates are good" - and get buried later when the rates increase, as they inevitably will.

Keynesian policy sucks and is irrational.

 

Yes, when we roll over the debt and interest rates are high, that will make rolling the debt over more expensive. But interest payments on the national debt stay in the economy... it isn't like interest is some magical money that gets taken away from America.

You guys try to apply to much household logic to a Government that does not have any relation to how you handle your finances. Leave intelligent decisions up to intelligent people!