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Politics : Al Gore vs George Bush: the moderate's perspective -- Ignore unavailable to you. Want to Upgrade?

To: TimF who wrote (2528)	10/15/2000 10:13:23 AM
From: Hawkmoon	Read Replies (1) \| Respond to of 10042

The only fault I find is that your logic can not over come the politics of the situation. Yes, the size of the Federal Govt is certainly the key to this problem. Imagine we have a govt that spends more than it takes in.. (which isn't too hard.. :0) It has to issue debt which is sold to the public or foreign governments. Foreign holders appreciate the ability to hold US debt instruments because it is relatively safer than their own debt, and due to its size, the US govt debt market is fairly liquid. But as foreign or non-govt holders of US debt decline as T-bills are repurchased by the US govt using SS surpluses. But once the revenue matches the amount of govt expenditures and we have a balanced budget, any additional surpluses have to be held at T-Bills, which means the govt now has more money to spend immediately in the general budget. Eg: Let's say the govt budget is a $1 Trillion dollars (for the sake of round numbers) and it has no outstanding national debt. However, it's revenues reach a peak annual $1.3 trillion dollars and levels off. That means the govt receives $300 billion more than it is spending. Since the $300 billion surplus cannot be invested in anything but T-Bills, the surplus will increase the national debt, and the govt will be forced to increased its spending by $300 billion a year in discretionary spending. And if the govt has to increase its spending, it will do this by increasing its size, the number of people drawing govt salaries, or through entitlement spending. So now we have a govt with a $1.3 Trillion budget that will be FORCED to grow if surpluses continue to rise. And this increase will represent govt programs that cannot be easily cut or eliminated, thus are effectively permanent. So now let's project forward to the point where the baby boomers start drawing their benefits. And let's say that they start drawing $500 billion per year in SS entitlements. Since the govt now a budget of $1.3 Trillion of locked in spending (since it has been expanded permanently), we now to add this $500 billion to the $1.3 Trillion budget increasing the size of govt to $1.8 Trillion and effectively putting the govt back into deficit by $500 Billion, since we're only receiving $1.3 Trillion in annual revenues. So this is, imo, describes the fallaciousness of "surpluses" as savings meant to cover future liabilities. Were that money placed in private debt obligations such as AAA corporate bonds, or an S&P index fund over time, it would become a source of money that gets invested and INCREASE THE SIZE OF THE ECONOMIC PIE, rather than sucking money away from the economy and forcing it to be applied to a bigger, more expansive government. Remember, any SURPLUS to the govt is money that HAS TO BE put into T-Bills, and the funds applied to the general Govt budget. It increases the size of govt, while decreasing the amount of capital available to the private sector. This, to me, is quite an ironic situation. Surpluses forcing the govt to grow even larger... Regards, Ron