Subject: RE: Responses/Questions to Mr. Reischauer et. al.
>From: Michael Jones
>>>>I agree with nearly every point you made in your post. However, it is misleading to state the the politicians 'dip' into SS funds. By law, any excess funds are "invested" in special treasury bonds (the special part about them is that the government can set any rate it wants, since it is essentially lending to itself).
Wrong again Michael. By statute, the interest rates on the SSTF bonds consist of the 'weighted average' of the most recent Treasury public auction of bonds with the same maturity. The same 'weighted average' that is used for bonds purchased by individuals with 'non-competative' bids at the public auctions.
>>>>One could make a case that the loan from SS to the Treasury should be used to pay down debt instead of more spending on government programs. In practice, the politicians just spend it.
Nope. They cannot spend it for anything else, just like you pointed out above. It does not affect the appropriations process at all, so what you propose would make no difference whatsoever. Treasury bonds are Treasury bonds, whether directly borrowed for current expenditures or retiring maturing public bonds.
>>>>The Trust Fund has actually made the long term SS funding problem worse.
No. Wrong again. The Trust Fund has preserved prior excess tax receipts for the 'lean years' ahead.
>>>>All I ask of the persons who reject real reform is to take a position on this aspect of how the contributions are invested. If you want to continue to invest in government bonds, the only future recourse is to raise taxes in the future to pay the loans back with interest. How else can the liabilities created by the system be paid back?
Well, you are wrong again. Where the excess SS contributions are invested has no affect on future debt, interest or tax liabaility. Excess SS tax receipts do not create liabilty. No more so than Vanguard does when they invest in US Treasuries. Excess spending of the general fund does that. I'm not sure why you have so much problem with that simple concept.
