We saw an article (first published 18th November 2009) featured on MSN which got us thinking; the title is "How long can Social Security last?" Reading the article, the answer seems to be "not long at all." It's very interesting that this article was apparently dredged up from the archives and floated once again on MSN, unless it's just that popular.
The article perpetuates the myth of an SS trust fund, stating that the fund will go in the red "in a few years," and be empty by 2037. Oh darn, that sounds unfortunate. But what actually caught our attention was when the article talked about how to fill the 'short-coming' in the 'fund.' The list was as follows:
-Benefit cuts
-Tax increases
-Riskier investments
The first two options are obvious: more money coming in, less money going out, just like our wallet and bank account. The irony of cutting benefits is that inflation is constantly decreasing the value of the SS payouts, but that is beside the matter. We want to dissect the third option: investing the 'trust fund' in riskier ventures.
Given the present, heady atmosphere in the United States Government, we can think of a few exciting places wherein the SS Administration can dump the excess cash it has just sitting around at the office. Now, we have to point out here, that the SS 'trust fund' is actually just money which flows in and out of the U.S. Government's General Fund. In spite of all the accounting shenanigans, in reality the SS cheques are drawn from the general operating budget, as simply any other expenditure.
If the SS 'trust fund' is authorised to be 'invested' in riskier ventures, it will allow the U.S. Government to treat those monies as, effectively, another slush fund. Or, to put it another way, the SS 'trust fund' becomes the SS 'bank, automaker, and whatever-else-Congress-feels-necessary bailout fund.' This can, of course, be dressed up as a good thing: banks and automakers are 'turning the corner,' and will make massive profits to investors; mortgage-backed securities will recoup their value, and then some; credit cards will become profitable again; car loans will be great as the economy turns around; et cetera, et cetera. All these would seem, on paper, to help the SS 'trust fund' close its fiscal gap.
"Surely they won't do that!" you exclaim, dear Reader; "the Government wouldn't put the retirement of millions of Americans on the line to bail out banks and other corporate interests?"
Well, what can we say to that? Frankly, the U.S. Government seems to be constantly doing exactly the worst thing possible during this Depression. From bailing out banks and automakers, to planning on raising taxes via health care 'reform' and other such nefarious plots, we can't see any good moves having been made at all! So, if the SS 'trust fund' were to be allowed to invest in riskier sectors of the economy, where would that investment go but to the arenas which the Government has already been furiously bailing out for two years? We'd be overjoyed to hear other likelihoods, but such corruption as we lay out herein seems inevitable to us. That is, of course, contingent on the SS 'trust fund' being loosened in its restraints.
If the SS 'trust fund' is successfully retooled as a slush fund for banks and automakers, we fully expect to see all other Federal 'trust funds' to be similarly revised. Since all such 'funds' are facing budget shortfalls, brought on by whatever cause(s), such changes can be presented as both necessary, and intelligent. Perhaps even shrewd. Those manoeuvres will be, of course, none of the kind, but rather hopelessly wasteful and economically destructive.
Showing posts with label budget crisis. Show all posts
Showing posts with label budget crisis. Show all posts
Thursday, January 14, 2010
Sunday, July 12, 2009
A Modest Proposal to Save California
With the State of California presently pumping out $3 billion in unconstitutional IOUs, we suspect that a more impressive meltdown of the State's government is not too far off. It seems unlikely that any mixture of creative accounting and tax schenanigans will be able to stave off the collapse of the State's tax revenue, nor its downgrading debt rating. Unless Governor Arnold Schwarzenegger manages to both get the California legislature to accept his drastic cuts to the State's outlays - as well as pushing for even deeper and sweeping cuts - California will likely perform a sovereign default, and experience a collapse of the Government's services.
But, as with most things, it really doesn't have to go down like that, and to that end we have an idea: de-State-ify California, and convert it into the District of California. We think the move could go, as Bob Newhart says, something like this:
The Federal Government forces bond holders to swap California's debt for fresh Treasury debt at face-value, or perhaps a token premium. With that move complete, the Federal Government would then dissolve the State Government, and place the political administration of California directly under the authority of Congress. As we understand it, this would convert California into a Territory (which is how the District of Colombia is classified). In order to get the residents of California to feel happy about this move, the Congress could pass a Constitutional amendment allowing territories - like the District of Colombia, and possibly the District of California - to vote in elections of Representatives and the President.
This move would not be without benefits to both parties (i.e. California and the Federal Government): Californians could conceivably see lower taxation, as there would be no parallel State/Federal services, such as welfare... but we would count on that one too much. The Federal Government would be the bigger winner, because California would lose its Senators. That may not seem like such a big deal, but if turning a State into a District is successful, or at least not a total catastrophe, the Federal Government would likely perform the act on several other failing States. With fewer and fewer Senators, an argument could be made for the dissolution of the Senate, and the transfer of the Senate's powers to the Executive or the House of Representatives. Such a move could be dressed up as a 'drastic change to increase efficiency in Government, and reduce public expenditures.'
Be that as it may, if the Federal Government were to take over California directly, it would at least stave off the embarrassment, and potential fallout, from having a State default on its debt. It would also be a shrewd move for the Federal Government, for a somewhat complicated reason. As, in theory, the Federal Government is the representative of its constituent nations (as in a Republic), the credit rating of the Federal Government probably would be affected negatively by a Californian default. Such an effect would have a concurrent negative affect on the Federal Government's spendthrift ways. Ergo, prevent a Californian default at all costs, to protect the Federal budget.
Or... the Federal Government could just fork over a tonne of money to California, since Michigan has already gotten its own, private bailout. We can only remark on how well it seems to have worked.
But, as with most things, it really doesn't have to go down like that, and to that end we have an idea: de-State-ify California, and convert it into the District of California. We think the move could go, as Bob Newhart says, something like this:
The Federal Government forces bond holders to swap California's debt for fresh Treasury debt at face-value, or perhaps a token premium. With that move complete, the Federal Government would then dissolve the State Government, and place the political administration of California directly under the authority of Congress. As we understand it, this would convert California into a Territory (which is how the District of Colombia is classified). In order to get the residents of California to feel happy about this move, the Congress could pass a Constitutional amendment allowing territories - like the District of Colombia, and possibly the District of California - to vote in elections of Representatives and the President.
This move would not be without benefits to both parties (i.e. California and the Federal Government): Californians could conceivably see lower taxation, as there would be no parallel State/Federal services, such as welfare... but we would count on that one too much. The Federal Government would be the bigger winner, because California would lose its Senators. That may not seem like such a big deal, but if turning a State into a District is successful, or at least not a total catastrophe, the Federal Government would likely perform the act on several other failing States. With fewer and fewer Senators, an argument could be made for the dissolution of the Senate, and the transfer of the Senate's powers to the Executive or the House of Representatives. Such a move could be dressed up as a 'drastic change to increase efficiency in Government, and reduce public expenditures.'
Be that as it may, if the Federal Government were to take over California directly, it would at least stave off the embarrassment, and potential fallout, from having a State default on its debt. It would also be a shrewd move for the Federal Government, for a somewhat complicated reason. As, in theory, the Federal Government is the representative of its constituent nations (as in a Republic), the credit rating of the Federal Government probably would be affected negatively by a Californian default. Such an effect would have a concurrent negative affect on the Federal Government's spendthrift ways. Ergo, prevent a Californian default at all costs, to protect the Federal budget.
Or... the Federal Government could just fork over a tonne of money to California, since Michigan has already gotten its own, private bailout. We can only remark on how well it seems to have worked.
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