Will media note increased gov borrowing in spring? - as a political story?

[papau]

I believe the cash flow pattern of the gov is such that today's borrowed $87 billion to give to Iraq will not hit the fan until 2nd qtr 2004.

To restate the process one more time: Government borrowing to cover the deficit is borrowed from SS Trust fund automatically. When we say "lockbox" what is meant is that the payroll surplus is "borrowed" for the General Fund who in turn pays down the national debt - thereby making room in the amount of the debt foe any borrowing that will be needed when the SS Fund turns in the bonds the General Fund gave it for its surplus, saying take these back cause I need real cash to pay benefits now. Assuming the General fund eith borrows or raising the FIT tax on the rich beginning in 2018 - when the SS will start to cash those bonds in - SS is solid - in great financial shape forever under the high growth senario and solid to 2043 under the medium growth in the economy senario.

Bush does not want to ever make the rich pay back the tax cuts that the Social Security Payroll tax is now financing for them - let the rich keep the SS money - so Bush says there is a crisis in 2015 to 2018 - meaning getting the money to pay back the bonds will not be done - so the only other solution is to cut SS benefits. Since this might lose votes we get change the system with private accounts - and hidden lower benefits. If equity returns was the answer there is nothing stopping us from investing the SS Surplus in equities - except doing so would mean a huge hit to the capiral markets as the funds are raised to allow the SS fund to own real assets, or a hugh tax increase on the rich to raise the monies to give the Trust fund for its bonds so the Trust fund can buy real equities.

We will therefore borrow now - as Bush hopes this will destroy the ability to borrow to repay the Bonds in the SS Fund.

2. Borrowing to cover the $87 B for Iraq will have to be done on the open market a weekly basis as needed in the form of the sale of T-Bonds or T-Bills in the spring of 04.

The sale of said bonds will NOT have a significant impact on credit markets - there will be only a marginal increase in rates - the capital markets are huge and Gov borrowing is small relatively. However Rubin and Clinton showed how important that slight increase in rates really is -

Folks running a business determine yes/no decisions based on an investment beating a "hurdle" rate - a rate that always starts with current T-bill and gov bond rates - mainly the 10 year rate. Risk that is not rewarded means screw the risk and buy the Gov bond with the cash building up at the bank! So there is then lower capital investment, and the usual feedback/accelerator theories say we now run the economy at a much lower speed than we would otherwise run it.

This not mean we do not get expansion - or low interest rates, but that 4.4% 10 year bond would be maybe be 4.2% with folks anticipating less gov borrowing, and the economy that grew at 4.5% in a year might grow at 5.0% if folks anticipated lower future gov borrowing.

Thus this is a political story.

Will the press cover it as a political story?