Don Levit
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If we substitute the ability to print versus the ability to tax, we abandon our exclusive status of our full faith and credit.
It is the taxes that serve as collateral for loans, for example.
Anyone can print money. Only those worthy of full faith and credit status have a significant percentage of taxes to back their interest, and don’t forget, their loan principal.
Don LevitAt least federal employees’ retirement is safe, secure, and snuggly.
From a paper entitled “Fiscal Exposures Improving Cost Recognition in the Federal Budget, published by the GAO.
http://www.gao.gov/assets/660/658620.pdf
Page 34 “All Civil Service Retirement and Disability Fund Investments are in U.S. Treasury and Federal Financing Bank Securities. The government does not set aside assets to pay future benefits or other expenditures associated with designated funds.”
(Apparently, even 16 cents on the dollar is not set aside for retirees – nothing is set aside).
But not to worry…
Page 36 “As of Sept. 30, 2012 the CSRS accrued liability is $1.2 trillion and the FERS accrued liability is $484 billion. The system has a sizeable unfunded liability. The unfunded liability is dealt with by the FERS Act, which provides for annual credits to the CSRDF out of any money in the Treasury general fund not otherwise appropriated to amortize any supplemental liability of the CSRDF for current or former federal employees.
The term unfunded liability refers to gaps between the projected financial commitment to a program and the earmarked revenues available to fund that commitment. However, no federal obligation can be truly considered ‘unfunded’ because of the government’s sovereign power to tax to meet its obligations.”
Don LevitOne of the most leveraged “pension funds” in the U.S. is the Social Security trust fund. Almost $3 trillion has been borrowed ffrom the trust fund to pay for government expenses. The government found a creative way of way for battleships, etc. other than raising revenues or cutting expenses, or, simply making discretionary annual appropriations.
Treasuries were issued as collateral for the loans. When redeemed (needed when cash flow is negative, such as the last few years), new general revenues are needed. That is why, from a cash perspective, the trust fund for Social Security is empty.
Don LevitThanks so much for posting the key elements of this report, as well as the link to the entire report.
I have evacuated the stock market, but am still linked to it through fixed-indexed annuities.
The 4 annuities are indexed to the S&P.
If the index goes down, I lose nothing, and start from a lower level, making it easier for a gain the following year.
If it goes up, I capture part of the gain.
I think this is a good product for a volatile market.
Don LevitI really like your categorizing the statement as the economic version of the Golden Rule.
That really provides some objectivity and accuracy to that incredible statement.
You know, there are 2 ways people are disappointed: The first, is not getting what they want. The second, IS getting what they want!
Don LevitOne of the more egregious manipulations is the accounting for Social Security. The surplus FICA and SECA taxes were supposed to be invested in nonmarketable Treasury securities, dedicated exclusively for Social Security beneficiaries. Instead of being a store of wealth, these real dollars were borrowed by the Treasury to pay real current expenses, and lower the deficits.
All that remains is a hollowed artifact of wealth, collateral due by the full faith and credit of the U.S. Government.
The actuary of the SS trust fund, Stephen Goss, implies in a recent trustees report that all is well until the trust fund is exhausted. Long before that occurs, we are already seeing the trust fund interest being used to make up for the cash shortfalls. This has the same financial effect when the trust fund is exhausted: the use of general revenues to pay for the trust fund interest, the same way we pay all government expenses, either from a trust fund or from a general appropriation.
Don Levit
