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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: CalculatedRisk who wrote (27360)	2/28/2005 4:06:23 PM
From: Larry S.	Read Replies (2) \| Respond to of 110194

Thank you very much for your work. I have done my own analysis of the game played in WDC under the Unified Budget. I love your charts. I have always viewed the Trust Funds associated with programs financed with general tax revenues to accounting gimmicks; that is, they provide for keeping track of money spent as well as allocated funding. Yes, we pay interest of the balance at the rate of the average of the 4- and greater-year treaury notes but this is essentially a reward to those manging the programs for not spending faster. However, those Trust Funds associated with programs financed though a dedicated tax, primarily the payroll tax are a different animal. Epstein of Barron's covered the issue in an Economic Beat column a couple of years ago and I believe agrees that those associated with the payroll tax are not accounting gimmicks. They hold real debt. The Unified Budget concept is the problem. Without it, it would be obvious that the deficit in 2004 was more than 650 billion. It seems clear that the reason Greenscam and the Administration are now upset with SS, is the fact the Greenscam was right when his Commission motivated the SS tax rate increases that are responsible for the surplus in the SS Trust Fund. The surplus will carry SS through the Baby Boomers retirement. They will be effectively gone when the surplus is used up. But, the their benefits will eliminate the surplus, which will expose the real deficit and, worse, they will have start moving the debt in the Trust Fund to the public soon thereafter. You can be sure the Unified Budget will be eliminated because, if not, the deficit in SS tax revenues will start adding to the reported deficit. For reasons, I don't understand, the Administration seems to believe that we can divert about a third of the SS tax revenues to private accounts, pay the promised benefits to the Baby Boomers and borrow the money to make up the short fall in revenues without creating a more serious increase in debt. It makes me wonder if they all failed grade school math or that they believe the public stupid. Larry