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Copernicus · #99 11-29-2007, 07:37 PM

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I haven't stated a position on spending, other than that it doesnt belong in this discussion, because (other than the policy decision to have a national retirement system and that spending) spending has nothing to do with Social Security. Except you called it an investment. I did no such thing. I called the purchase of Treasuries an investment, which it undeniably is. I never said that the spending by Congress on hookers and blow is an investment, and have specifically stated numerous times that spending is a totally different issue than investment. You compared it to taking money out of a savings account and putting it in a better investment. Your words, not mine. If you take money out of your savings account and spend it on hookers and blow, but write yourself IOUs, the only way to pay for those IOUs in the future is to increase your revenue to meet your typical obligations along with paying back your IOUs. Correct, but it is not the SS system that has to increase its revenues its the other branches of the Government that SPENT BORROWED MONEY. THE SOURCE OF THAT MONEY IS IRRELEVANT. 

On the parenthetical I disagree that spending on a national retirement system is analagous to "hookers and blow", any more than your IRA or 401(k) plan is.I never compared the retirement system to hookers and blow, I compared it to the government spending the money taken frmo the SS Trust Fund to it. Where the money comes from doesnt matter, its the spending that matters. I can't believe your this gd dense. (And if youre still spending your money on hookers and blow in retirement age, more power to you!)

With regard to the Government investing, I don't think the Federal Government should have any net financial assets other than short term cash flow needs. Introduction of financial assets to the government of a capitalist country creates a myriad of issues with regard to how to allocate those investments so it doesnt distort the markets, issues with regard to risky assets and the inter-generational transfer of risk, fiscal and monetary issues that overlap with the Federal Reserve policy decisions and may in fact be in conflict with good fiscal and monetary policy etc. So how is this an investment? You really are claiming its an investment, but its just a way to postpone the repayments that the funds are used for into the future. (Hookers and blow + IOUs) the Treasuries are an investment of the SS system, not an investment of other branches of the government. On the Social Security books its (Taxes + interest income - benefit payments minus expenses = surplus cash) (Surplus cash - purchase of new Treasuries = 0 Cash) (existing Treasuries + new Treasuries = total investments) Straightforward, visible, approriate accounting

Of course once you believe that the Government should have no net financial assets, the only way to deal with a cash flow surplus such as Social Security generates is to have Social Security invest in Treasury issues (ie have the government "borrow from itself"). Of course the alternative of making Social Security completely pay as you go, and have no surplus whatsoever would eliminate the investment problems. However that violates basic accounting principles in that you are deferring the entire cost of current worker's benefits to future generations, that are not directly benefiting from those workers' efforts. So the IOUs are an Asset or not? You can't make up your mind. horse manure. I have consitently said that Treasuries are an asset of the SS system, and they are. Normally when I buy a bond, I would consider it an asset. But when you buy bonds against yourself, you aren't doing a damn thing. You are doing something or you wouldnt be doing it. Your current net worth is unchanged but that isnt the same as doing nothing. You have avoided transactions costs, youve improved your net return on your investments, youve accessed money when you may have had no other source, whatever. You have done something. What the Social Security system does is invest in the safest asset available. 

And of course the cries of "scam, Pyramid scheme, Ponzi scheme" would be even louder, to compensate for the rhetoric of "there is no Social Security Trust Fund". Have they fooled you, or would your consulting business go away if the real way it was run became more well known and it was all accounting shenanigans.

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[/ QUOTE ] My business has nothing to do with SS and isnt effected in the least. You are the one who has been fooled into thinking that one government agency borrowing surplus cash from another agency is somehow worse than borrowing on the open market.