The $17 Trillion Delusion: The Absurdity of Cutting Social Security to Reduce the Federal Debt

[marmar]

from Dollars & Sense:


The $17 Trillion Delusion
The Absurdity of Cutting Social Security to Reduce the Federal Debt

BY MARTY WOLFSON | January/February 2014


Shortly after the ceiling on federal debt was raised on October 17, 2013, the conservative Heritage Foundation notified its readers that the outstanding debt of the United States had “rocketed past $17 trillion,” and that “entitlement spending—the key driver of spending and debt—remains unaddressed.” The three assumptions in that statement—that the true measure of our debt is $17 trillion, that the cause of the buildup of debt is entitlement spending, and that therefore the appropriate policy to “address” this problem is to cut Social Security benefits and other “entitlements”—are endorsed by many politicians and policy pundits in Washington. But they’re all wrong as economic analysis and disastrous as policy recommendations.

Seventeen trillion dollars certainly sounds like a big, scary number, especially when national debt clocks tell us that this translates into more than $53,000 for every person in the United States. But we shouldn’t be focusing on that number.

The $17 trillion figure is a measure of “gross debt,” which means that it includes debt owed by the U.S. Treasury to more than 230 other U.S. government agencies and trust funds. On the consolidated financial statements of the federal government, this intragovernmental debt is, in effect, canceled out. Basically, this is money the government owes itself. What is left is termed “debt held by the public.” It is this measure of debt that is relevant to a possible increase in interest rates due to competition for funding between the private and public sectors. It is also the category of government debt used by the Congressional Budget Office and other analysts. (Of course, the full economic significance of any debt measure needs to be considered in context, in relationship to the income available to service the debt.) The total debt held by the public is $12 trillion.

The Social Security Trust Fund owns $2.7 trillion of the $5 trillion of Treasury securities held in intragovernmental accounts. In fact, Social Security is the largest single owner of Treasury securities in the world, surpassing even China’s significant holdings of $1.3 trillion. .....................(more)

The complete piece is at: http://www.dollarsandsense.org/archives/2014/0114wolfson.html

[DJ13]

1. Kick for the truth

[Thinkingabout]

2. What does it take to get Conseratives to understand Social Security Trust fund is plush.

How big is the Defense Fund,yea, I know, don't be funny. How big is the subsidies funds for oil companies, etc. They would not tell the truth when they can lie and their little sheep believes everything FOX puts out.

[Cha]

3. That's what fuels the republicon/teabagger engine..

the absurd.

[Demo_Chris]

4. The author is claiming the intragovernmental debt doesn't count?

That 5 Trillion in intragovernment Debt he is casually dismissing, is money borrowed from things like the Social Security Trust Fund, the Medicare Trust Fund, and other similar trusts. In other words, it's absolutely REAL debt in every sense of the word.

[Turbineguy]

5. It doesn't matter.

Their economic theory is based on fiction. If you let them take control and it fails, it's God's will.

[rocktivity]

6. The only Social Security rate that should be cut

is the 6.2% payroll tax -- which is easily accomplished by eliminating the salary cap.


rocktivity

[Squinch]

7. Kick. Good explanation!

[Dustlawyer]

8. K&R! We cannot let them get away with this!

In addition to the subsidies to the oil companies and other big interests, we absolutely need to cut the Defense budget. That is the biggest welfare program of all. There is no reason for us to have a military of this size. The Plutocrats need to be kicked out and control of the government should be returned to the people!