[IP] more on social security investment accounts, was Cutting Only Peanut Butter

[David Farber <dave@farber.net>]

------ Forwarded Message
From: DV Henkel-Wallace <gumby@henkel-wallace.org>
Date: Wed, 16 Feb 2005 09:33:51 -0800
To: <johnl@iecc.com>
Cc: <dave@farber.net>
Subject: Re: [IP] more on social security investment accounts, was Cutting
Only Peanut Butter

On 16 Feb 2005, at 03:40, David Farber wrote:
> ------ Forwarded Message
> Date: Wed, 16 Feb 2005 03:16:33 +0000
> From: John Levine <johnl@iecc.com>
>
> I haven't seen any good economic analyses of the effect on both the
> stock market and the rest of the economy of simultaneously borrowing a
> trillion dollars as government bonds, force feeding that money back
> into the stock market, then buying and selling on a demographically
> determined schedule that everyone will know years in advance.  Has
> anyone else?

Hard as it may be to believe you actually understate the math involved.
  Decouple SS from the mechanics of government funding and you suddenly
have to revisit all the "entitlement" programs too,

Currently, SS taxes are "invested" by paying out obligations from
current collections and throwing the rest into the general fund.
There's some political theatre (as you nicely put it) about
"investment" and "government borrowing" and having a special line item
on your W-2, but if you lay it out that's how it works.  Frances
Perkins ( in the Roosevelt cabinet) basically built a pyramid scheme
that depended on a growing population; the entitlement programs were
funded with the surplus.

Depending on how you choose to view it you can consider it mendacious,
naive, or enlightened.  Whatever you may think of it today, the system
worked (wiped out a structural problem with poverty among the aging) so
I personally have a hard time calling it bad names.

You mentioned all the borrowing necessary to fund private accounts.
The elephant in the room is all the _other_ government borrowing that
would be added once the SS cash flow is eliminated.

Forget Greenspan's Fed driving interest rates up a quarter point or so.
  Cast your memory back to the Paul Volker era.

-d



------ End of Forwarded Message


-------------------------------------
To manage your subscription, go to
  http://v2.listbox.com/member/?listname=ip

Archives at: http://www.interesting-people.org/archives/interesting-people/