"The debt I'm talking about is the additional debt to cover the transition costs to privatization."
You misunderstood me. What I'm saying is that the supposed "transition costs to privatization" ARE the supposed additional debt incurred. As people opt to divert their contributions to private accounts, the government has less revenue with which to pay current benefits, which are not reduced.
The "transition costs" critics (and, not very brightly, proponents) refer to are simply that reduction in current government revenues. That is not a cost at all - it is government spending on SS benefits and other programs (where the "surplus" is spent after it is borrowed from the "trust fund") that is a cost.
What they worry about is how to keep funding all these programs on lower revenue. Well, there are only three ways any government can do that (without cutting spending, that is) - raise other taxes, borrow, or monetize it (i.e. print money). Since we don't do the third in any direct, short-term way (it would be a bad idea, as you know) and since most voters tend to vote against those who hike taxes (never mind the economic consequences of doing so), that leaves borrowing.
So, as I said, the "transition costs" critics talk about ARE the additional debt the government would have to issue in the markets. But again, all they are really doing is shifting their borrowing from the trust fund to the securities markets, there IS NO net increase in government debt from privatization, partial or otherwise.
Bob
PS: Yes, they DO issue IOUs to the trust fund when they borrow the surplus and yes, they do bear interest. They are also included in the accounting for the gross debt of the US, but are often ignored - as "intragovernmental holdings" - for various reasons (legitimate or otherwise). They make up a substantial portion (I'm not sure exactly what portion, but it's large) of the intragovernmental number below from the Bureau of the Public Debt website.
Current Debt Held by the Public / Intragovernmental Holdings / Total
01/13/2005 $4,417,573,913,146.62 $3,183,599,571,877.11 $7,601,173,485,023.73 |
