Foreign and Defense Policy

Beef jerky and the nation’s defense

Image Credit: Official U.S. Navy Imagery (Flickr) (CC BY 2.0)

Image Credit: Official U.S. Navy Imagery (Flickr) (CC BY 2.0)

So, Senator Coburn, if only the Pentagon stopped funding beef jerky, we’d have enough to pay for the deficit or something? We could save $67 billion? And what about those who say we ought to cut a trillion? Because that’s the plan.

There are plenty who believe our military is profligate, bloated, and inefficient. Sure, they’re the best fighting force the world has ever seen, but a little fat, no? Volunteers, sure, but a tad sloppy with the taxpayers’ hard earned cash. And fighting wars that, really, we don’t need to fight. We have drones, don’t we? Special forces, right? The CIA, don’t we? What are we, the world’s policeman, needing to be everywhere at once? Can’t the Chinese and Japanese fight their own fights? The Europeans deal with their own petty troubles? And those Arabs. They’re rich. Let them fuss over Yemen and Syria. Let the Israelis worry about Iran. The world’s problems aren’t America’s problems.

And the answer is, sure. We can cut a few things from the Defense Department. Even more than beef jerky. Some stupid stuff that isn’t DoD’s business anyway. But that won’t yield the rivers of cash we need to fill the Chinese debt repayment maw. For that, we’re going to have to gut the Pentagon. But… does it really matter that Hezbollah now has precision guided munitions that were the wonder of the world when America started using them late last century? Do we need to have a force strong enough to deter nations and terrorists from challenging the global order? So what if the Philippines, Singapore, Vietnam, and South Korea are worried about China? Let them manage. We can hop in maybe if we’re needed, but we won’t be. I could go on here. And still, those cuts won’t be a drop in the bucket of our deficit.

When you count up the four pennies on the dollar that we now spend out of our GDP for the finest defense any nation can buy and the global preeminence that has guaranteed a world in which we no longer need to fight in global conflicts, remember that we won’t be saving that money in order to do something better, like cut your taxes or pave your roads or improve your schools. We’ll be moving toward ending a way of life the world has known since 1945 in order to fund the largest deficit in American history – and an explosion of entitlements that is already costing the average family $29,000 a year. When we go over the fiscal cliff in January, 43% of the cash will come from the defense budget despite the fact that it represents only 11% of all budget authority. Yeah, the Pentagon doesn’t need grocery stores. But if we’re basing soldiers where there are none, what do you want to do? Base them closer to Safeway? Talk about strategery.

There are people who want America to stop being a global power. I respect their honesty, if not their views. But there are others who hide behind fiscal responsibility in order to further their isolationist ideals. Plenty on the left. Plenty on the Ron Paul right. We’re not going to right our economic ship by cutting defense. Period.

Here are the facts. Here are the numbers. Think about the implications of what we’re planning to do to our fighting forces and the people who support them. Then act.

42 thoughts on “Beef jerky and the nation’s defense

  1. we need to remain the biggest, badest global power on the planet.

    but we also need to be honest about how much we are bringing in – in income taxes – and how much we are spending for DOD and National Defense and we have to make some realistic – reality-based decisions about how much we can afford and how much we are willing to pay in taxes to support the biggest, badest military on the planet.

    we cannot have the lowest taxes in 50 years, lower than when Reagan was President and still have the biggest, baddest global power on earth.

    This is where folks slip into idiocy mode.

    advocate for what you want -yes – but be honest enough to admit what you have to pay in taxes to get it.

    that’s the problem.

    • Why do we “need” to be? You’ve stated it here, but stating something is not the same as proving it. At least try to justify why we “need” to be “the biggest baddest global power on the planet.”

      • re: biggest and baddest.

        I understand why but you simply cannot be the biggest/baddest with an unlimited supply of money.

        there has to be a number and that number has to be a percentage of your total revenues.

        otherwise you have no real budget at all.. and that’s our problem… we keep spending on everything when we don’t have the money to do it.

        My point in asking folks to look at this chart:
        http://en.wikipedia.org/wiki/File:U.S._Federal_Receipts_-_FY_2007.png

        is to pointedly ask – what percent of this do you think we should devote to defense.

        that’s real. that’s reality. lets stop dancing around pretending something different.

  2. the armed forces are too top heavy. the ratio of brass to grunts need to be widened. too many chief and not enough indians. a reduction of brass would save quite a few $$.

    these are the musings of an old man who busted his ass for too many years.

  3. The pro-military arguments are deceiving because they do not look at all military related spending as a percentage of the tax revenues coming in. If you paid attention you would find that the US spends about half of what comes in as taxes on its military each year. Tax revenues are only around $2.2-$2.3 trillion. The Pentagon spends about $700 billion or so. Add the CIA drone programs, intelligence ops, etc., and you get another $50 billion plus. Add the $60 billion or so to the VA, the $5-$10 billion satellite program that goes through the NASA budget, the $250 billion (or more) to service debt accrued from all of the past wars and peace time military expenditures, the budget for the FBI counterterrorism, the NSA spying, the DHS, and you are looking at a country that spends more than half its tax take on military related spending.

    The US is the best country in the world. Ironically, it will be brought down by the people who claim to be patriotic but support all that spending that could bring the whole system down.

    • the 2.2-2.3 trillion is deceiving because $820 billion is FICA taxes that can only be spent on Social Security/MedA.

      that takes you down to about 1.5 trillion.

      if you INCLUDE ALL of National Defense to include the VA, Homeland Security, NASA military satellites, and Military retiree entitlements – we spent far more than 1/2 of our actual revenues.

      the question I continue to ask is – what percent of our revenues should be spent on DOD?

      • the 2.2-2.3 trillion is deceiving because $820 billion is FICA taxes that can only be spent on Social Security/MedA.

        It does not matter. The fact is that is how much money gets taken in from all sources. The fact that some of the revenue is supposed to be used for some specific uses is not very important because everything is up to Congressional discretion. We do not have to bring it up and get into debating tangential issues because the numbers are very dire even if we treat all of those supposedly allocated taxes as general revenue.

        The whole ‘let’s hide behind the direct spending as a percentage of GDP’ argument is deceptive. The numbers above show that deception clearly. Yes, if we did everything absolutely properly we could conclude that the picture is far worse than I said but the is not needed because it is already so bad that the promoters of more military spending cannot make an effective counterargument.

        Note that some of us took the same approach when we pointed out to you that socialism cannot work. We knew that the vision of a New Socialist Man was faulty and could not be true in the real world but we still started from the assumption that you would have people who worked very hard even if they were not compensated more than those that were lazy and unproductive. But we gave you your assumption because even if you were right on that part you still could not make socialism work even in theory. We take the same approach now because we do not need every little allocated expenditure to show that the militarists arguments are just as shallow as your own when you promote socialism.

        • re: it does not matter.

          it sure does. No one single elected official has ever said they would take the money devoted to Social Security and spent it on other things.

          if they did – they’d be “unelected” in short order.

          you have to talk about realities here guy – not theology.

          you have to proceed from the premise of what revenues are readily available first – and what you are spending relative to what you actually have available – without changes.

          expanding the argument out does not lead to solutions but worse than that it lets people ignore the fundamental reality of our actual available revenues.

          anyone who thinks that FICA taxes are going to be used to pay for other things is not on this planet at all – they’re off in LA LA Land.

          Not even Ron Paul or Paul Ryan proposed that.

          • it sure does. No one single elected official has ever said they would take the money devoted to Social Security and spent it on other things.

            But they did. The excess contributions were spent by Congress and the liabilities were not booked. Presidents loved the scam because they could hide the extent of the deficits while the ignorant taxpayers failed to notice the problems that were building.

            if they did – they’d be “unelected” in short order.

            you have to talk about realities here guy – not theology.

            That is the reality. Why do you think that there are no marketable securities in the SS trust fund? They money that was taken out was spent by Congress and all that is left behind are ‘special’ securities that promise to use future taxes to pay recipients. (If Congress does not choose to cut benefits later.)

            I guess that you are so dim that you forgot the fact that you admitted that the programs were pay as you go and that the government may not honour those IOUs. Go to Mark’s old site and read your own comments.

            http://mjperry.blogspot.ca/

          • re: the trust fund

            is one of a hundred – to included the federal fuel tax, Medicare Part B and C, Military and DOD pensions, etc, etc,

            they all work the same way where revenues are exchanged for treasury notes and then redeemed when the time comes to send cash to beneficiaries.

            beyond that the primary funding for SS comes from FICA – not the “trust fund”.

            ever year, FICA generates over 800 billion dollars and every penny is spent on claims – not defense or other things.

            it’s just place disingenuous, dishonest to not stand for the truth on this.

          • re: the trust fund

            is one of a hundred – to included the federal fuel tax, Medicare Part B and C, Military and DOD pensions, etc, etc,

            they all work the same way where revenues are exchanged for treasury notes and then redeemed when the time comes to send cash to beneficiaries.

            The government run trust funds may work the same way but none of the private sector equivalent funds do. A condo corporation cannot spend its reserve fund on utilities and replace it with an IOU that promises to pay the reserve fund back. When a private pension plan promises benefits it has to have marketable assets that can pay beneficiaries, not IOUs from the company treasurer. If the company does that its management group winds up in jail. Of course the rules that apply to you and me do not apply to Congress so it is OK for politicians to take out the money and leave IOUs behind. In the private sector the pension funds have to purchase marketable treasuries, not accept IOUs that cannot be valued.

            If you want to see how this will finally be resolved look to the EU where many pensioners are finding that there was nothing in their funds that could be sold in the market to maintain their benefits. Most are looking at significant cuts in benefits that depend on the ability and willingness of current workers to pay. Given the fact that the US looks a lot like Greece did three or four years ago expect some interesting events to happen in the next four years.

            beyond that the primary funding for SS comes from FICA – not the “trust fund”.

            Correct. It cannot be any other way because the ‘trust fund’ has no assets that can be sold to make up shortfalls.

            ever year, FICA generates over 800 billion dollars and every penny is spent on claims – not defense or other things.

            Unless there is a surplus, when Congress takes it and spends it on general operations while it leaves behind IOUs.

            it’s just place disingenuous, dishonest to not stand for the truth on this.

            The truth is actually very clear and not in dispute. We know that FICA contributions are used to pay benefits. We know that the surplus goes into the ‘trust funds’. We know that the trust fund exchanges this surplus for ‘special’ treasury notes that promise to pay it back some time in the future but are not marketable and cannot be sold to anyone else. We know that not long ago Obama said that SS benefits would be cut because contributions could not cover all of the benefits.

            What we disagree on is not the facts but the interpretation. You claim that the government trust funds are just like other trust funds. I point out that if that were the case SS benefits would not have been in danger of being reduced because the ‘trust fund’ could have sold its notes on the open market, as private plans do, and made up the difference. I am pointing out that since there is no market for those ‘special’ treasury notes, they will be the first to default. Where I agree with you is that once that happens the government will do what Greece and Spain want to and default on their bonds either by an outright refusal to fully honour its treasury notes or more likely by sharply devaluing the currency. Yes my intellectually challenged friend, there is a big bubble in sovereign debt. You might want to wake up and pay attention.

  4. the “trust fund” holds the excess FICA that has been generated over the years and is not what “funds” social security and MedA.

    what “funds” SS and MedA is the FICA Tax – and no elected official, not Ron Paul, not Paul Ryan not anyone has suggested that FICA payroll taxes be spent on other government or DOD.

    Van – I don’t know what your momma taught you about lying but either your momma was/is a dumbass or you are or both of you are.

    Lying is not something to be proud of. It reflects on you and your character. You are lacking in character my friend and that is unfortunate.

  5. the “trust fund” is no different than the fuels tax trust fund or the military’s pension trust fund.

    If you want to say the trust fund(s) have been “spent” go ahead and be a weasel.

    you just lack simple scruples boy.

    every single trust fund – over 100 from airport fees to flood insurance to excise taxes – all work the same way.

    the money gets exchanged for treasury notes (just like the public buys treasury notes)

    then later, when the money is needed, the notes are redeemed – just like when people cash in their treasury notes.

    If you believe weasel Van here – when the public buys a treasury notes – the money is spent – and cannot be retrieved later.

    imagine what would happen if that was the truth.

    a person or China presents their treasury note for redemption and the govt says ‘sorry, we spent it’, too bad.

    Van – your mama taught you bad, boy.

    • the “trust fund” is no different than the fuels tax trust fund or the military’s pension trust fund.

      If you want to say the trust fund(s) have been “spent” go ahead and be a weasel.

      That is the point. They have been spent. And as I showed on the links I provided you admitted that they were spent when you talked of pay as you go and cutting the benefits because the contributions were no longer enough. If the trust funds had marketable securities they would be sold so that the benefits would be paid. There would be no need to cut the benefits.

      every single trust fund – over 100 from airport fees to flood insurance to excise taxes – all work the same way.

      No they do not. When you set up a trust fund for your kids the investments that go into that fund are not sold off and replaced by IOUs. You are confused by thinking that the government’s use of the words ‘trust fund’ means the same thing as it does when normal individuals use them in the traditional sense of the word.

      http://www.investopedia.com/terms/t/trust-fund.asp

      • re: ” No they do not. When you set up a trust fund for your kids the investments that go into that fund are not sold off and replaced by IOUs. You are confused by thinking that the government’s use of the words ‘trust fund’ means the same thing as it does when normal individuals use them in the traditional sense of the word.”

        I’m not confusing anything. I’m reading the govt’s explanation of how govt trust funds work and they do not work the same way that consumer trust funds work.

        they tell you that and then they further explain JUST HOW THEY DO WORK.

        your problem is that even after you’ve been told you choose to believe something else instead.

        that’s just plain ignorant – on purpose.

        you can disagree with the govt policy on ALL of their trust funds – that would be a principled opposition.

        but instead, you just lie.

        that’s a lack of character.

        you just believe what you wish to believe even after you’ve been shown the explanation – that’s delusional.

        in case anyone else in reading this – upthread there are multiple links to government and other credible sites that explain the govt usage of the term “trust fund” in the government context.

        here’s two:

        http://www.gao.gov/assets/210/200562.pdf

        http://www.cbpp.org/cms/index.cfm?fa=view&id=3299

        Van is so tied up with his ideology, he just cannot admit the truth … he’s willingly ignorant…

        • I’m not confusing anything. I’m reading the govt’s explanation of how govt trust funds work and they do not work the same way that consumer trust funds work.

          they tell you that and then they further explain JUST HOW THEY DO WORK.

          I told you how they work. The excess contributions are taken and spent. Instead of treasuries, stocks, or real assets the funds hold IOUs that can only be made good by new taxes. That is exactly what the government also says. It does not tell you that the trust funds can sell their IOUs to make up shortfalls. No, they have to rely on the government coming up with new tax revenues that can be used to pay back all the money that was already spent.

          That makes the whole pay as you go system one giant Ponzi scheme that is bound to collapse.

          • No.. it makes you a liar for all the things you said before you said Ponzi Scheme.

            and now that you’ve said ponzi scheme..it boils down to what you believe – even though most all insurance is pay-as-you-go also.

            but you did not understand govt trust funds from the get go and then lied about what they did and did not do then when presented with the fact – you say they are a ponzi scheme – as if just about all insurance sold – works the same way,.

            When you pay a premium – it goes to pay other people’s claims. When you have a claim other people pay you.

            that apparently troubles you as a concept – and it explains why you goes are basically opposed to insurance also.

            to you: insurance is socialism

          • It seems that you are confused by logic so let us try something a bit simpler.

            1. What happens to the cash from the excess contributions?

            2. What happens when there are shortfalls? Where does the cash used to pay the beneficiaries come from?

            That is enough for now. Let us see what your government pamphlets tell you that is different from what you were told by Ron, me, and a number of other posters here and on Mark’s previous blog.

          • 1. What happens to the cash from the excess contributions?

            it is handled according to the law and ALL trust funds work exactly the same way according to law.

            you disagree but that does not allow you to lie about it.

            2. What happens when there are shortfalls? Where does the cash used to pay the beneficiaries come from?

            By LAW – the benefits must reduce. Have you read the Social Security Trustees report that explains this?

            It says clearly that if changes are not made, that the law requires reduction of the benefits.

            Again – you seem to like to make up your own way of thinking about this – lie about it.

            just because you do not agree does not give the right to lie.

          • it is handled according to the law and ALL trust funds work exactly the same way according to law.

            you disagree but that does not allow you to lie about it.

            Answer the question. What happens to the cash from the excess contributions?

            2. What happens when there are shortfalls? Where does the cash used to pay the beneficiaries come from?

            By LAW – the benefits must reduce. Have you read the Social Security Trustees report that explains this?

            It says clearly that if changes are not made, that the law requires reduction of the benefits.

            Again – you seem to like to make up your own way of thinking about this – lie about it.

            just because you do not agree does not give the right to lie.

            Why must it reduce? If there is a trust fund and the fund has kept the excess contributions it can keep paying out benefits for a very long time.

            I really do not believe that is what the law says. I believe that when I read it last year the implication was that all marketable assets held by the fund would have to be exhausted first. My point is that there are no marketable assets held by the fund.

            You do realize that this response means that you believe that the excess funds were spent on war, highways, welfare, etc. Otherwise they could be used to make up those shortfalls.

            Try reading and understanding Larry. And please answer the questions.

          • re: ” implication was that all marketable assets held by the fund would have to be exhausted first. My point is that there are no marketable assets held by the fund.”

            that’s true for ALL trust funds.

            they are not marketable but the treasury notes that the govt sells to the public to get more money ARE and that money is used to repay the special issue internal treasury notes.

            if you had bothered to really read the materials guy – it does explain that – in detail.

            you’re just so bound up with your ideological beliefs that you simply refuse to accept what are just plain facts and choose instead to misrepresent it.

          • your main problem here is that you have been suckered by propaganda mills like AEI.

            You read their sound bite explanations of trust funds and you believe it.

            If you want me to agree with you that the govt should not be in deficit and should not be selling debt to the public and the Chinese, I would agree with you

            but what you’re doing with the trust fund narrative is just flat wrong

            you apparently believe that if the govt is selling debt and you disagree with it that you can then lie about the mechanics of trust funds.

            that’s dumb Van… why lie about something like that in the first place?

            How the trust funds REALLY work is WELL DOCUMENTED.

          • your main problem here is that you have been suckered by propaganda mills like AEI.

            If that were the case why am I so critical of most of their positions?

            You read their sound bite explanations of trust funds and you believe it.

            No. I simply know the definition of the term “trust fund” and understand economics. I also know my monetary history.

            If you want me to agree with you that the govt should not be in deficit and should not be selling debt to the public and the Chinese, I would agree with you

            But that is not what the debate is about.

            but what you’re doing with the trust fund narrative is just flat wrong

            As Ron pointed out to you before, a picture of a chicken is not a real chicken. Calling something a trust fund does not mean it is a real trust fund as accountants and actuaries understand the term.

            you apparently believe that if the govt is selling debt and you disagree with it that you can then lie about the mechanics of trust funds.

            Not at all. I am simply telling you that you don’t understand the mechanics. They work for you the same way that the Greek government pensions worked for Greeks.

            that’s dumb Van… why lie about something like that in the first place?

            How the trust funds REALLY work is WELL DOCUMENTED.

            That is my point. The documentation shows a Ponzi scheme that depends on the government’s ability to keep borrowing painlessly. There are times when that is not possible.

    • the money gets exchanged for treasury notes (just like the public buys treasury notes)

      No. The trust funds do not hold marketable treasuries like those bought by the public.

      then later, when the money is needed, the notes are redeemed – just like when people cash in their treasury notes.

      No. People can sell their treasuries on the market. The IOS do not have marketable securities, just IOUs that promise that the government will find money somewhere to pay it back. Since the government has no way to earn money if it plans to pay back the trust funds it has to increase taxes again.

      If you believe weasel Van here – when the public buys a treasury notes – the money is spent – and cannot be retrieved later.

      The money is spent. But as long as there is a market you can sell your treasuries at the going bid price. The ‘special’ purpose notes held by the trust fund are not treasuries and have no market.

      imagine what would happen if that was the truth.

      a person or China presents their treasury note for redemption and the govt says ‘sorry, we spent it’, too bad.

      Here we go. You seem to have a much bigger problem than understanding the details of the ‘trust funds.’ Let me ask you a few questions and see where they lead.

      If government does not spend the money why does it issue bonds in the first place?

      Where do you think that the cash goes?

      Van – your mama taught you bad, boy.

      Sadly, my mamma, who did not have a great education because she grew up during two wars, seems to be a lot more educated on this issue than you are.

  6. re: ” confused by logic”

    Lord you are thick.

    The trust funds and the laws that created them has nothing to do with “logic” much less your version of it.

    They are what they are.

    when the govt is in deficit, it has to borrow money to pay bill. If there were no trust funds – they would just sell treasury notes to the public – and redeem them when presented.

    If the Federal govt collects revenues then it will spend that money rather than sell more treasuries to the public but it has to pay that money back just like it has to pay the public when they redeem their notes.

    the trust funds just allow the govt to borrow from itself temporarily but then it has to go ahead and sell more treasury notes anyhow to pay back the internal treasury notes when redeemed.

    this is not rocket science but it does require you to agree with the law and the way the law is carried out even if you do not agree with the policy.

    lying about it is dishonest.

    • when the govt is in deficit, it has to borrow money to pay bill. If there were no trust funds – they would just sell treasury notes to the public – and redeem them when presented.

      But there are trust funds. And the ‘special purpose’ securities cannot be sold. They are not treasuries or any other marketable instrument.

      If the Federal govt collects revenues then it will spend that money rather than sell more treasuries to the public but it has to pay that money back just like it has to pay the public when they redeem their notes.

      Come now Larry. The picture is much simpler and there is an easier way to say it. The government spends more than it takes in. To make up for the shortfall it can sell treasuries or take the money from accounts that it controls but have a surplus. The two are not exactly the same thing because with treasuries there is a market where owners can sell them and get some or all of their money back from new purchasers. Redemption only comes into play at the end of the term. The IOUs in the government controlled accounts have no market and cannot be sold.

      the trust funds just allow the govt to borrow from itself temporarily but then it has to go ahead and sell more treasury notes anyhow to pay back the internal treasury notes when redeemed.

      But the government does not borrow from itself. It borrows from the contributors who expect the government to make good on its promises. The trustees are not supposed to look after the best interest of the government but of the contributors who put in the money. The simple fact is that other than the usual monthly contributions the trust funds have nothing that his marketable.

      this is not rocket science but it does require you to agree with the law and the way the law is carried out even if you do not agree with the policy.

      lying about it is dishonest.

      The facts are what they are. The funds contain no marketable securities and future beneficiaries are entirely on the mercy of politicians being honest.

      re: ” implication was that all marketable assets held by the fund would have to be exhausted first. My point is that there are no marketable assets held by the fund.”

      that’s true for ALL trust funds.

      No it is not. A typical trust fund holds a mixture of marketable assets that are selected by the trustees. I think that you meant to say, “that’s true for ALL GOVERNMENT trust funds.”

      they are not marketable but the treasury notes that the govt sells to the public to get more money ARE and that money is used to repay the special issue internal treasury notes.

      That was also true for the treasury notes issued by the Greek government. But that is no longer true. You are missing the bigger picture about trust accounting and management. The idea is not to look at yesterday or today and project the same environment long into the future but to protect the contributors for the life of the plan. You assume that the government will always be able to borrow painlessly and at low cost to repay the trillions that it owes to the various funds. But history shows that the assumption is not always valid. All it takes is one crisis and those surplus contributions will vapourize forever.

      if you had bothered to really read the materials guy – it does explain that – in detail.

      I do not dispute the fact that the surpluses are taken out and replaced with IOUs. I do not dispute the fact that beneficiaries are dependent on the largesse of government bureaucrats rather than on the decision making abilities of the trustees.

      you’re just so bound up with your ideological beliefs that you simply refuse to accept what are just plain facts and choose instead to misrepresent it.

      Get this straight. The debate is strictly about accounting, financial analysis, and history. Ideology has nothing to do with it.

      • re: ” No it is not. A typical trust fund holds a mixture of marketable assets that are selected by the trustees. I think that you meant to say, “that’s true for ALL GOVERNMENT trust funds.”

        not a “typical” govt trust fund – which as you well know does not work that way.

        the basic issue here is that if there were no trust funds OR there were rules preventing the use of the money in them – the govt would then have to sell treasury notes to the public to finance debt.

        the trust funds let them temporarily defer selling treasury notes to the public – but the key phrase if “defer”. Ultimately as long as we are in deficit – they have to sell those notes and all the trust funds do is let them use other govt revenues temporarily until they need to be paid back.

        It would be like you having a set aside fund that you preferred to use for buying something instead of buying it on credit and paying interest.

        The circumstance of the US selling notes to finance debt is something we should not be doing – I agree.

        but you are using that as an excuse to attack the concept of FICA and Social Security which is dishonest.

        If you disagree with Social Security you should attack it on principle and be honest about the facts.

        your whole approach is disingenuous and dishonest.

        It’s not a principled argument; you purposely misrepresent the facts and purposely follow the AEI approach of misinformation and disinformation …

        you say the debate is strictly about accounting but it’s not.

        The trust funds are fully accounted for in the way they operate – by law – you just disagree with it and then you proceed to distort simple facts.

        re: ” I do not dispute the fact that the surpluses are taken out and replaced with IOUs”

        Van -what the HELL do you think US Treasury notes are that are sold to the public?

        All the govt is doing here is taking money from one source and giving them the same type of IOU that they give to the public when they sell a note to the public.

        • not a “typical” govt trust fund – which as you well know does not work that way.

          That is my point. The government ‘trust funds’ are not actual trust funds in the formal sense. They do not hold marketable assets and are entirely dependent on the charity of governments once contributions fall below payouts. Real trust funds do not. They use the assets held by the trust to maintain payouts without needing to depend on external redemption of IOUs.

          the basic issue here is that if there were no trust funds OR there were rules preventing the use of the money in them – the govt would then have to sell treasury notes to the public to finance debt.

          But there are surpluses that go into the funds. The government takes them but does not issue treasuries that can be sold by the trustees. Instead it gives them IOUs.

          the trust funds let them temporarily defer selling treasury notes to the public – but the key phrase if “defer”. Ultimately as long as we are in deficit – they have to sell those notes and all the trust funds do is let them use other govt revenues temporarily until they need to be paid back.

          But the contributors don’t care. They want their contributions to be there for their retirement, not spent because the government wants to make itself look more responsible. Sooner or later that money will have to be ‘borrowed’ or printed. The problem is that if such a period is one in which there is economic turmoil the borrowing may not be possible and contributions will have to be cut. That is called stealing in the non-government sector.

          And let me point out that this has been going on for a while. I would not use the word ‘temporary’ if I were you because it does not fit the scenario.

          It would be like you having a set aside fund that you preferred to use for buying something instead of buying it on credit and paying interest.

          But it isn’t. It is like giving your savings to your irresponsible brother-in-law who gives you an IOU.

          The circumstance of the US selling notes to finance debt is something we should not be doing – I agree.

          While I agree that is not the point of this discussion. This is strictly about the mechanics of government pensions.

          but you are using that as an excuse to attack the concept of FICA and Social Security which is dishonest.

          If you disagree with Social Security you should attack it on principle and be honest about the facts.

          This is not my argument here. I am accepting that SS, which I would eliminate, exists and generates revenues. This debate is about how the surplus revenues are handled. If the government gave the funds treasuries and let the trustees be independent I would not have much of a case because they are marketable. But that is not what happens. The funds get IOUs that give no options to the trustees, which means that they cannot fully protect contributors.

          your whole approach is disingenuous and dishonest.

          Note that I am simply sticking to the simple facts and do not bring in other issues as you do. I am simply pointing out that the excess contributions are spent and that instead of cash, treasuries, or other marketable assets the funds are holding IOUs.

          you say the debate is strictly about accounting but it’s not.

          The trust funds are fully accounted for in the way they operate – by law – you just disagree with it and then you proceed to distort simple facts.

          Yes they are. The law says that the accountants have to assume that the IOUs have a value even though they have no market. It is a lot about the mark to model accounting that the law permitted the holders of mortgage backed securities to use. When the crash came we all found out just how valid those assumptions were.

          Van -what the HELL do you think US Treasury notes are that are sold to the public?

          They are marketable securities. If I buy one and want to dump it if things start looking bad for rates I can sell a treasury to buyers in the bond market. There is no IOU market.

          All the govt is doing here is taking money from one source and giving them the same type of IOU that they give to the public when they sell a note to the public.

          But it is not the same type of security. If you had read the material that you are telling others to read you would know that.

          • That is my point. The government ‘trust funds’ are not actual trust funds in the formal sense.

            but they are that way ON PURPOSE as LAW.

            you disagree with the LAW? so why lie about it?

            “But there are surpluses that go into the funds. The government takes them but does not issue treasuries that can be sold by the trustees. Instead it gives them IOUs.”

            it gives internal IOUs that if/when repaid result in them having to sell IOUs to the public. Using the trust funds money just saves on interest paid on public notes – for a while.

            “But the contributors don’t care…..they don’t know how the mechanics work but as long as FICA collects taxes, they’ll get their benefits.

            The only thing the trust fund is doing is buying time for SS reforms so that benefits do not have to decline – which they have to do by law – unless reforms are agreed to.

            “That is called stealing in the non-government sector.”

            No it’s not. In ANY pay-as-you-go insurance, your premiums that you pay go to pay for claims for others.
            if there is internal costs for new equipment – money from premiums might be used instead of borrowing more money and paying interest.

            you’re just flat wrong on this.

            “And let me point out that this has been going on for a while. I would not use the word ‘temporary’ if I were you because it does not fit the scenario.”

            it’s “temporary” in the sense that when revenues accrue from FICA taxes – they can “temporarily” be used instead of selling more treasury notes but then they have to be used to pay benefits – then the treasury sells notes to the public to repay the temporary loan from FICA.

            “But it isn’t. It is like giving your savings to your irresponsible brother-in-law who gives you an IOU.”

            no.. you presume the brother is “irresponsible” rather than having to borrow money for a good reason. you are the one that has put a bad light on the mechanics of the process because you disagree with the debt overall.

            “While I agree that is not the point of this discussion. This is strictly about the mechanics of government pensions.”

            No it’s not and you know it. If you were REALLY concerned about govt pensions, you’d ALSO be including DOD civilian and military trust funds which are doing the same exact thing.

            you’re just lying boy.

            “This is not my argument here. I am accepting that SS, which I would eliminate,…”

            right there is your argument. would you “eliminate” military or civilian pensions that operate that same way?

            ” This debate is about how the surplus revenues are handled. If the government gave the funds treasuries and let the trustees be independent I would not have much of a case because they are marketable. But that is not what happens. The funds get IOUs that give no options to the trustees, which means that they cannot fully protect contributors.”

            that’s the way there were designed to work – on purpose – and implemented by law – for not only SS but other govt pensions.

            you are attacking the CONCEPT of pensions using the trust funds as a PROXY.

            your whole approach is disingenuous and dishonest.

            “Note that I am simply sticking to the simple facts and do not bring in other issues as you do. I am simply pointing out that the excess contributions are spent and that instead of cash, treasuries, or other marketable assets the funds are holding IOUs.”

            no you’re are doing MORE than that. You are saying that this proves that SS is a bad concept.

            “Yes they are. The law says that the accountants have to assume that the IOUs have a value even though they have no market.”

            They KNOW THAT guy. That’s why they are called “special issue”. Do you read the stuff I give you?

            the process is to redeem the special issues notes with money obtained by selling marketable notes to the public.

            ” It is a lot about the mark to model accounting that the law permitted the holders of mortgage backed securities to use. When the crash came we all found out just how valid those assumptions were.”

            there were no assumptions guy. It works exactly the way it was intended to work.

            “They are marketable securities. If I buy one and want to dump it if things start looking bad for rates I can sell a treasury to buyers in the bond market. There is no IOU market.”

            Van – do you think Treasury notes are IOUs also?

            “But it is not the same type of security. If you had read the material that you are telling others to read you would know that.”

            the special issue notes ARE SECURED with marketable Treasury notes Van.

            you read WAY TOO MUCH propaganda and not near enough of the facts.

          • That is my point. The government ‘trust funds’ are not actual trust funds in the formal sense.

            Correct. They do not have to keep marketable assets in trust for the beneficiaries and are free to accept IOUs instead.

          • re: marketable securities

            ” The MRF (military retirement fund) invests in non-marketable, market-based U.S. Treasury securities which are issued to federal agencies by the U.S. Treasury, Bureau of the Public Debt. These securities mirror marketable securities, but are not publically traded. ”

            http://comptroller.defense.gov/cfs/fy2010/13_Military_Retirement_Fund/Fiscal_Year_2010_Military_Retirement_Fund_Financial_Statements_and_Notes.pdf page 28

            Now my question to you is do you also object to the military retirement trust fund working this way?

            Do you think this is “stealing” also?

            Would you also advocate getting rid of the military retirement system for the same reasons as you advocate getting rid of social security?

          • Now my question to you is do you also object to the military retirement trust fund working this way?

            Because the fund does not have any marketable securities. If the government runs into trouble all of the contributions would vapourize.

            Do you think this is “stealing” also?

            Yes.

            Would you also advocate getting rid of the military retirement system for the same reasons as you advocate getting rid of social security?

            I have no problem with pension plans. I simply want them to keep and invest the contributions in marketable securities that have a liquid market. IOUs are not marketable because they have no market.

          • did you catch this part:

            ” States Treasury’s Bureau of Public Debt. These securities are redeemable at market value exclusively through the Federal Investment
            Branch. These nonmarketable market-based Treasury securities are not traded on any securities exchange, but mirror the prices of
            marketable securities with similar terms.”

            so essentially when they are redeemed – they are traded for money obtaining by selling the same value in marketable securities.

            is this something you do not (or did not) understand or you do understand it but reject it or do you just not believe it?

            It strikes me as a perfectly rational process where the govt uses any/all revenues the govt receives until they have to sell more treasury notes to cover the costs.

            It’s the sausage making in financing our debt.

            It’s done that way by law.

          • did you catch this part:

            ” States Treasury’s Bureau of Public Debt. These securities are redeemable at market value exclusively through the Federal Investment Branch. These NONMARKETABLE market-based Treasury securities are NOT TRADED on any securities exchange, but mirror the prices of marketable securities with similar terms.”

            Yes I did. They cannot be sold on any market. That means that when the government gets in trouble the benefits will have to be substantially reduced because the value of the ‘securities’ will collapse. The trustees can’t hedge against the popping of the treasury market or ensure that the purchasing power of benefits is maintained.

          • ” That means that when the government gets in trouble the benefits will have to be substantially reduced because the value of the ‘securities’ will collapse. The trustees can’t hedge against the popping of the treasury market or ensure that the purchasing power of benefits is maintained.”

            WTF? as long as the govt can sell treasury securities to the public to generate the money to redeem the non-marketable trust fund notes – this works.

            if you are saying when/if the govt can no longer sell treasury notes to the public – the trust funds will be the least of the problems.

            so you opposed to a policy that is the result of a law.

            that’s fine but that’s wholly different than your attack on SS because the trust funds are “bankrupt”.

            when you’re talking about more than 100 other similar trust funds that work exactly the same way – and all according to a law that specifically required them to do this – you’re no longer talking about just Social Security.

            You’re talking about more than a 100 other such funds for DOD civilian and military retirement, health care, Fuel taxes for highways… airport fees for FAA controllers… etc, etc…

            you’re far, far removed from isolating Social Security as someone fatally flawed and unsustainable when, in fact, that’s simply not the truth.

            It’s either a failure to understand and acknowledge that trust funds do work the way they were intended to work or you’re sucking up AEI sound-bite talking points without ever really taking the time to verify for yourself what the actual facts are.

            these are the facts:

            http://www.cbpp.org/cms/index.cfm?fa=view&id=3299

          • WTF? as long as the govt can sell treasury securities to the public to generate the money to redeem the non-marketable trust fund notes – this works.

            if you are saying when/if the govt can no longer sell treasury notes to the public – the trust funds will be the least of the problems.

            As usual you care far more about what is favourable to the politicians and ignore the contributors. There is a way that the people who have pension plans can be protected when the government has problems selling treasuries but not if they are forced to hold IOUs that depend on the ability of the government to buy treasuries. Expect to see the government float a trial balloon that would have private pension plans hold most of their assets in treasuries as well. That way all of the people that are not self reliant can go down with the ship together.

          • re: ” As usual you care far more about what is favourable to the politicians and ignore the contributors. There is a way that the people who have pension plans can be protected when the government has problems selling treasuries but not if they are forced to hold IOUs that depend on the ability of the government to buy treasuries. Expect to see the government float a trial balloon that would have private pension plans hold most of their assets in treasuries as well. That way all of the people that are not self reliant can go down with the ship together.”

            Now you back off into LA LA Land. People pay into FICA and FICA pays out beneficiaries. The ONLY difference the trust fund makes is whether or not it will be used to “top off” social security in the event that it is not reformed/changed.

            You simply do not accept the idea of pay-as-you-go insurance annuity which exists in the private sector as well as every other country in the world.

            but when/if the day comes that the US cannot sell treasury notes , the shortfall in the trust funds will be a gnat in comparison to the other problems .

            but you make social security the issue – because of your ideology … your hatred of the concept of social security when if you were REALLY concerned about what might lead to the inability to sell treasury notes – it would be the other expenditures – like those for DOD and Medicare that would precipitate disaster – not social security.

            You have no proportionality here – because your focus is not on the most serious issues – but the things your ideology is opposed to.

          • Now you back off into LA LA Land. People pay into FICA and FICA pays out beneficiaries. The ONLY difference the trust fund makes is whether or not it will be used to “top off” social security in the event that it is not reformed/changed.

            That is not a small difference. A trust fund that has marketable assets can pay out the promised benefits for decades. A trust fund that has no marketable assets will not be able to do anything. Why exactly should people who have paid in contributions have them stolen by a government that fights wars abroad, and engages in stupid wars against drugs, education, poverty, etc., at home? Theft is theft no matter who commits it.

          • ” A trust fund that has marketable assets can pay out the promised benefits for decades. A trust fund that has no marketable assets will not be able to do anything. Why exactly should people who have paid in contributions have them stolen by a government that fights wars abroad, and engages in stupid wars against drugs, education, poverty, etc., at home? Theft is theft no matter who commits it.”

            what did the GAO FAQ on Govt trust funds tell you Van:

            ” In the federal budget the meaning of the term “trust” differs
            significantly from its private sector usage. In the private sector, a person
            creates a private trust fund using his or her own assets to benefit a stated
            individual(s). The creator of the trust names a trustee who has a fiduciary
            responsibility to manage the designated assets in accordance with the
            stipulations of the trust. In the federal sector, the Congress creates a
            federal trust fund in law and designates a funding source to benefit stated
            groups or individuals.2 However, in contrast to a private trust fund, the
            federal government does not have a fiduciary responsibility to the trust
            beneficiaries, and it can raise or lower future trust fund collections and
            payments or change the purposes for which the collections are used by
            changing existing laws. Moreover, the federal government has custody and
            control of the funds as well as the earnings of most federal trust funds.”

            re: contributions stolen by the govt

            Van – do you think the Federal govt “steals” your gasoline taxes?

            do you think the Feds “steal” money from the pension funds of the military?

            you have been given the facts – over and over – and what do you do?

            you just keep right on as if you never saw them.

            that’s DUMB Van.

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