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Social Security "Never Added a Dime to the Deficit" Really?

Senate Majority Leader Harry Reid said, "Social Security has contributed not a single penny to the deficit. So we can talk about entitlements as long as you eliminate Social Security."

http://www.realclearmarkets.com/articles/2012/10/03/social_s...

I wonder what is behind the Democratic commitment to avoiding reality at all costs. Is it raw stupidity or is it something more sinister? In Reid's case, it comes across as raw stupidity.
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Senate Majority Leader Harry Reid said, "Social Security has contributed not a single penny to the deficit. So we can talk about entitlements as long as you eliminate Social Security."

http://www.realclearmarkets.com/articles/2012/10/03/social_s......

I wonder what is behind the Democratic commitment to avoiding reality at all costs. Is it raw stupidity or is it something more sinister? In Reid's case, it comes across as raw stupidity.

MadCap


This shows that we should never allow politicians to be in charge of finance. Their brains are just not wired correctly.

Mike
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He's playing semantics of course. The fact that the finances of SS are set to implode like the ponzi scheme it is in the next decade or two and it will either have to be bailed out by the Treasury or a lot of lemmings who depend upon it will be up a creek without a paddle doesn't mean it has affected the deficit thus far, so technically he's correct so long as you ignore the inevitable unless drastic changes are made. Reid is like the anti-market... never look forward, always look back and make claims only on what has happened, not what is sure to happen.

Unfortunately people tend to buy into this kind of "magical thinking" rather than face a scary reality. It's human nature. "Nothing bad has happened yet, maybe if we ignore it then it'll go away!" Uh... good luck with that. Math doesn't lie, and the numbers going forward are disasterous, especially if you're like me and in your mid-30's (or younger). I frankly don't expect to collect a dime from Social Security regardless of how long I live. What are they going to pay me with?!? Given the situation even if they DID give me money it would be worthless as they'd have to print it like mad leading to hyper-inflation. I just watch that money burn away from each paycheck, kissing it good-bye forever and rueing the day Social Security was created.
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Is it raw stupidity or is it something more sinister?

In his younger years it started out as stupidity. Now in his younger years, its pure dementia.

JLC
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Given the situation even if they DID give me money it would be worthless as they'd have to print it like mad leading to hyper-inflation. I just watch that money burn away from each paycheck, kissing it good-bye forever and rueing the day Social Security was created.

Colovion


You young folks should make sure you own at least one functional wheel barrow (see Weimar Republic).

http://49chevy.blogs.com/home/2008/11/invest-in-wheelbarrows...

Mike
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I wonder what is behind the Democratic commitment to avoiding reality at all costs. Is it raw stupidity or is it something more sinister? In Reid's case, it comes across as raw stupidity.

It's a question of how you define the deficit.

In essence, if you want to "cut SS to decrease the deficit", you're defaulting on the Social Security Trust fund which was created by Reagan to ensure the long-term viability of SS.

Until very recently, Social Security was in surplus, with that surplus being "invested" into government bonds. Unfortunately, the way the accounting was done was to count SS payroll taxes towards general government revenues so that the SS surplus seemed to reduce the actual deficit the government was running. Which it really didn't.
This optical illusion/sleight of hand/accounting fraud allowed Reagan and Bush II to cut taxes and run deficits that were much larger than they appeared. Bush II, at the peak of the economic cycle, was running a deficit that was really around 700 billion dollars.

In retrospect, the SS looks less like a mechanism to guarantee the viability of SS and more like a strategy in which the GOP raised taxes (payroll taxes) on the middle class, using the proceeds to finance tax cuts for the rich.
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Until very recently, Social Security was in surplus, with that surplus being "invested" into government bonds. Unfortunately, the way the accounting was done was to count SS payroll taxes towards general government revenues so that the SS surplus seemed to reduce the actual deficit the government was running. Which it really didn't.
This optical illusion/sleight of hand/accounting fraud allowed Reagan and Bush II to cut taxes and run deficits that were much larger than they appeared. Bush II, at the peak of the economic cycle, was running a deficit that was really around 700 billion dollars.


This is hilarious. You have it exactly backwards. It *should* have been included in the budget. It *should* have been consolidated. It's just like when a parent company owns a subsidiary. You consolidate the results. You don't carve out the subsidiary's results.

If you are *really* concerned about proper financial reporting, then push towards accrual accounting for government, not a basis of accounting that *increases* the accounting fiction even more.

By the way, those "investments" in bonds are bogus assets that are *exactly* offset by government liabilities, so it provides no economic benefit whatsoever.

I'm an experienced accountant, but if you want to argue accounting with me, go for it.
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I'm an experienced accountant, but if you want to argue accounting with me, go for it.
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Oh, in that case you're a doo-doo head.
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I'm an experienced accountant, but if you want to argue accounting with me, go for it.
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Oh, in that case you're a doo-doo head.
_______________________________________________________

Oh, so you've worked with accountants too eh?

(sorry Madcap couldn't resist, and yes I did lots of work with accountants as an internal SAP AP/AR/CO consultant for a while)
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This is hilarious. You have it exactly backwards. It *should* have been included in the budget. It *should* have been consolidated. It's just like when a parent company owns a subsidiary. You consolidate the results. You don't carve out the subsidiary's results.
...
By the way, those "investments" in bonds are bogus assets that are *exactly* offset by government liabilities, so it provides no economic benefit whatsoever.



No really?
What *should* have been done is separate out Social Security and the trust fund as a separate legal entity - an insurance scheme.

Increasing payroll taxes with the express aim of creating a trust fund to finance the eventual deficit of the scheme then treating the additional revenue as general tax revenue completely defeats the purpose of the tax hike.
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