Social Security is not “going broke” because Social Security cannot go broke

Dan Crawford commends John T. Harvey’s blunt reminder, “Why Social Security Can’t Go Bankrupt.”

It is a logical impossibility for Social Security to go bankrupt. We can voluntarily choose to suspend or eliminate the program, but it could never fail because it “ran out of money.”

… It’s not a pension fund into which you put your money when you are young and from which you draw when you are old. It’s an immediate transfer from workers today to retirees today. That’s what it has always been and that’s what it has to be – there is no other possible way for it to work.

… This is how Social Security actually operates. As you can see, this needs no prior financing or savings, nor would that appear to be particularly helpful. At the national level, maintaining a class of retirees (whether via Social Security or private pensions) means redistributing existing output, not putting money under your mattress. Although you can run out of money for retirement, we, as a nation, cannot.

What, then, you may ask, is the Social Security Trust Fund, the pool of money that people say will dry up and make it impossible for anyone to receive their Social Security payments? It is the surplus that resulted from having collected more in taxes than was necessary to pay out to retirees. Let me say that again: it is how much existing workers were overtaxed relative to the need to pay retirees in the past. It was never the source of the money we’ve been paying to Social Security recipients all these years. Strictly speaking, it’s completely unnecessary if we are able to precisely and continuously match tax revenues and pay outs.

Yes. Please remember this: Anyone who tells you that Social Security is “going broke” is either lying to you or, at best, does not have the first clue how Social Security works.

Social Security is not going broke. Social Security cannot go broke.

It is not an account that can be depleted, it is an arrangement between generations. As long as there are generations, then Social Security will continue to exist.

There is no debt or deficit that can interfere with that arrangement. The arrangement, like any promise, can be deliberately broken, but it cannot go broke.

Only two scenarios can be imagined to make Social Security stop working:

1. Our grandchildren all turn out to be selfish assholes and oath-breakers, deciding en masse to screw over their retired parents and grandparents while also being so short-sighted as to invite their own children and grandchildren to screw them over in turn upon their retirement. If all of our children turn out to be evil and stupid, then Social Security will not be sustainable. But then if all of our children turn out to be evil and stupid, nothing else will be sustainable either.

2. Some kind of science-fiction, P.D. James, Children-of-Men scenario in which the human race mysteriously becomes incapable of reproducing. That would mean no future generation of workers to pay for Social Security benefits, and thus would entail the end of Social Security. But since it would also entail the end of everything else, including the human race itself, it’s hard to view such a potential problem as a flaw in the design of Social Security.

 

  • Turcano

    In the parlance of the authors, this period is considered to be an Unraveling, where the major social institutions have been discredited by the previous generation and the social demand for order is at its nadir.  The Culture Wars were the reaction to this turn of events by (largely right-wing) Boomers.  I think it serves simply as a label for this time period, since the authors don’t appear to have a political agenda.

  • depizan

     The draft protests were also part of the _war_ protests.  It’s not surprising that people didn’t want to be drafted to fight a war they didn’t think we should’ve been fighting at all. I’m not sure how that fits into the privilege issue.  (Which isn’t to say that there weren’t people involved just because _they_ didn’t want to go to war.)

    And there were a lot of college students at the time who were first generation college students – that is to say, decidedly not from privileged backgrounds.

    I also had the impression that the sexual revolution and the rise of feminism were much more linked than you suggest.  Right to abortion, availability of birth control, freedom to divorce, freedom to admit liking sex, those all seem to be part of both.

    Then again, these are things before (or effectively before) my time.

  • Lori

     

    PJ – don’t rack up the bills then.

    The bills have already been racked up. The debt ceiling is about money Congress has already spent, not money they may or may not spend in the future. No one who gets their news from Right wing sources seems to be able to grasp this. I wonder why?

    Why are we facilitating this with gameage?    

    What we’re trying to facilitate is having a functioning country. The only “gameage” is on the part of wingers and glibertarians.

  • http://twitter.com/lesterhalfjr Chris Hadrick

    The solution to excessive debt is not to have excessive spending. raising the debt ceiling and minting  trillion dollar coins do not address the source of the problem at all. 

    To say “we already spent the money, it’s too late” is not dealing with the core issue either.  stopping the cycle AT ANY POINT is the only proper course of action.

  • EllieMurasaki

    Suppose we stop all government spending tomorrow. Cold turkey. (And suppose the economy doesn’t crash from the sudden lack of spending by people employed by the government or by people getting money from same.)

    The money we’re worried about now is already spent. The debt ceiling fight is about being able to pay for what we bought. To use the (admittedly flawed) household budget analogy: you are suggesting that Uncle Sam cut up his credit card and never send in another payment, even though he’s carrying a substantial balance on that card.

  • AnonaMiss

    Yeah, this is all before my time, so for the most part I defer to the opinions of those who lived it.

    I will say though that I am a big fan of the draft. Though of course the rich have ways of getting out of even the draft, it’s much more color/class blind than our current ‘volunteer’ military. Hell, the military contracting system is basically a way of paying privileged individuals more than twice as much to do the same jobs they pay unpriveleged individuals poverty-level wages for. While the Vietnam protesters didn’t have the benefit of hindsight, I think it’s pretty clear that reinstating the draft would at this point be an equalizing, rather than a privileging, force in the modern military.

    Of course even more than that I’d prefer a mandatory term of service model a la Norway, Switzerland, Israel. But this is all pipe dreams in the current political environment ofc.

  • http://blog.trenchcoatsoft.com Ross

     The source of the problem is to little money. It’s not too much spending. We have a BIG COMPLEX country that has BIG PROBLEMS that can only be addressed by LARGE EFFORTS.

    And the whole idea of a debt ceiling is ludicrous. If someone’s willing to loan us money, they should be allowed to. I mean, fuck, you’re a libertarian, why can’t you understand that? WOuld you advoctae a personal debt ceiling for individuals and make it illegal for private citizens to borrow more than some particular amount of money? No, I’m pretty sure you’d say “THose people who took out giant mortgages they can’t afford had every right to borrow as much as they could find someone to loan them.”

  • EllieMurasaki

    a personal debt ceiling for individuals

    Those are called ‘credit limits’.

  • http://baloneyslicer.tripod.com/ Robert Cogan

    Social Security benefits lift about 21.4 million Americans out of poverty. It can be made solvent for nearly 75 years by taking the cap off salary contributions. So when I hear Obama mentioning reducing benefits, he angers me. We need a broad coalition to make sure this doesn’t happen. Surely conservatives can attack that “spending” at some time when millions are not still in debt and unemployment is high. Simply eliminating the cap on contributions would only affect about 6% of covered earners (see, online “The Evolution of the Social Security Tax Max” and “Distributional Effects of Raising the Social Security Tax Max.”) This would be a tax transfer from very high income recipients in a given year to poor recipients. 
       
    Mainstream American policy has treated the Constitution as not restricted to its words but granting implied powers. Government must tax to function and those able must, morally, render unto Caesar, not evade taxes. Our paper money is actually property of the Federal Reserve. Our government morally earn its keep (taxes) by providing for common defense and the general welfare, including minimal relief of the poor. It’s ridiculous to think there is a natural “shortage” of paper U.S. dollars and (electronically created / transferred / eliminated) credit so that “We’re broke.” Our national debt, unlike personal debt, is no “Weapon of Mass Destruction.” The Constitution gives Congress the authority to create [any amount of] money and “regulate the value thereof,” even “United States Notes” (greenbacks, created without borrowing from the Federal Reserve, without taking any debt.) Instead, our money – corrupted Congress gave the money power (1913) over to a Federal Reserve which is controlled by bankers of the private profit making banking industry.

    Greenbacks became worthless to Colonial individuals, but by funding our Revolutionary army, they “bought” independence for the whole country from Britain. Civil War greenbacks bought freedom from slavery, preserved the Union, and returned to purchasing power parity with gold backed dollars by 1879. They could be created in controlled amounts, targeted to re-flate employment, infrastructure, and public funding of healthcare and highert education debt reduction. Out of control “hyperinflation” is a private banker propaganda – created taboo.

    A few billionaires (Pete Peterson, the Koch brothers) pay Big Liars (e.g., Beck, Limbaugh) and public serpents (CongressCreeps) to act as if there was a “Virtue of Selfishness” (Ayn Rand book title.) Their bottom feeding, prehensile avarice, disguised under “freedom” rhetoric, seeks endlessly to vacuum and siphon up income from poorer citizens and reduce the amount of governmental transfer back to the smallest trickle. Forty other billionaires, including Warren Buffet and Bill Gates, have some noblesse oblige, and have promised to give half their fortunes to charities (of their choice.) But systematic, noncapricious governmental relief transfers from high income recipients to the aged and poor are life saving, morally justified, ancient, widespread, and time – honored by unselfish people.

  • Lori

      Those are called ‘credit limits’.   

    No. A credit limit is set by the lender. What Ross is talking about would be more like a lender deciding that she’s willing to loan you $1000 dollars because she’s confident that you’re good for it* and the government saying, “No. You may not loan Ellie $1000 even though you believe she’s good for it. You may only loan her $100 because we don’t think anyone should ever spend more than $100 over their current liquid assets.”

    *That’s your credit limit (more or less).

  • http://apocalypsereview.wordpress.com/ Invisible Neutrino

    In the parlance of the authors, this period is considered to be an
    Unraveling, where the major social institutions have been discredited by
    the previous generation and the social demand for order is at its
    nadir.

    Do you have a reference to a book or anything I could read? This intrigues me. :)

  • http://apocalypsereview.wordpress.com/ Invisible Neutrino

    The thing that makes me shy of the mandatory term of service thing is that I’ve seen some rich folks propound it as a social remedy when in this day and age the chances are good they’d find all kinds of get-out clauses for their own kids to avoid it.

  • EllieMurasaki

    Oh, right. Sorry.

  • AnonymousSam

    One can also argue that the draft makes unpopular wars more appealing because there’s a near-guarantee of soldiers to fight in them.

  • EllieMurasaki

    More appealing to the people who wouldn’t be getting shot at.

  • AnonymousSam

    I.E., the people who have the power to declare war.

  • Tricksterson

    I started to like this then realized that you think thats a bad thing.

  • Sgt. Pepper’s Bleeding Heart

    Yeah, I think equity is a very important thing to strive for, but not to the extent of forcing people to go kill people in whatever country is your enemy this year.

  • http://twitter.com/lesterhalfjr Chris Hadrick

    Ellie- then it’s just a shell game. You spend tons of money then you go “well we have to raise the debt ceiling or it will be ever so horrible” and nothing ever changes. 

    Knowing the debt ceiling can be raised at will takes away any of a debt ceilings purpose. it’s a ceiling. you aren’t supposed to be able to raise it all the time.  

    Also, would you have a problem with Caligula being on a hypothetical trillion dollar coin?

    Ross- “WOuld you advoctae a personal debt ceiling for individuals and make it illegal for private citizens to borrow more than some particular amount of money”

    not the same thing. the person is only harming themselves if they borrow more than they can pay back. The government is harming us. We have to pay this back, it’s our money. 

    NO our government (not “us”) shouldn’t  just borrow money and spend it on random stuff because it can. for the same obvious reasons a person shouldn’t. 

    Robert Cogan- “Out of control “hyperinflation” is a private banker propaganda – created taboo.”

    Yeah Weimar Germany and current day Zimbabwe were / are just holograms created by “private bankers” 

    I agree that 1913 was a fateful year and the Federal Reserve is an immoral institution but it’s  because it’s  a central bank by other name, not because it’s “private” which is certainly isn’t.  http://en.wikipedia.org/wiki/Working_Group_on_Financial_Markets

  • http://blog.trenchcoatsoft.com Ross

     

    not the same thing. the person is only harming themselves if they
    borrow more than they can pay back. The government is harming us. We
    have to pay this back, it’s our money. 

    NO our government (not “us”) shouldn’t  just borrow money and spend
    it on random stuff because it can. for the same obvious reasons a person
    shouldn’t.

    I consent to my country taking on this debt. I think that this debt is worth it. So do a majority of americans.

    You don’t get to destroy civilization because Chris Fucking Hadrick is a selfish, greedy bastard who would rather watch the world burn than to pay a dime of the money that only exists at all because of the government he wants to cripple.

  • http://twitter.com/lesterhalfjr Chris Hadrick

    We have 16 trillion dollars  in debt now and I’M the one who wants to destroy the country because I don’t want MORE? study Rome for 3 seconds sometime.

     money that only exists at all ” ??   I don’t think you quite understand the concept of money.

  • Turcano

     The book is called Generations by Strauss and Howe; an introduction to the theory can be found here.

  • EllieMurasaki

    So you really are suggesting that the US cut up its credit card and stop paying the lender. Cutting up the credit card might be a reasonable approach if it were possible to, y’know, keep paying federal employees something they can use to pay their rent and food bill, but we’d have to raise taxes staggeringly to manage that. Not paying the people who lent us the money we already spent? Saying we refuse to pay our debts? There’s reasons moral obligations are often stated in terms of debts and vice versa. I don’t agree with a lot of those reasons, but I do agree with some and most people agree with most all of them and I’m shocked that you seem to agree with none.

    Caligula has no significant role in US history. Were the coin to be minted, I’d put Harriet Tubman on it. Or Sally Ride. Or Janet McCloud. Or, hell, Michelle Obama.

  • http://www.facebook.com/paulwilczynski Paul Wilczynski

    Raising the income cap on contributions would only if you also did not pay out more to those who earned more, as Social Security does now.

  • http://www.facebook.com/people/Patrick-McGraw/100001988854074 Patrick McGraw

    I’m sometimes confused and frustrated by the generation classifications. My high school sociology textbook listed birth dates for the Baby Boom as 1945-1968, a range which would have included Kurt Cobain, one of pop culture’s poster children for Generation X.

    And due to being born in 1979, I am supposedly Gen X. Even though none of the generational markers for Gen X apply to my experience, and most of those for Gen Y do.

  • Lori

     

    One can also argue that the draft makes unpopular wars more appealing
    because there’s a near-guarantee of soldiers to fight in them. 

    I think a better argument can be made for the opposite position. More people would push back against politicians lying us into wars if they knew there was a possibility that they and theirs could be forced to fight them. I think people would have been a lot less likely to swallow the obvious
    lies used to justify the invasion of Iraq if they thought
    they might be the ones rolling into Baghdad or taking
    a trip to sunny Fallujah.

    We’ve come to a weird place in this country WRT civil-military relations. On one hand it’s more or less mandatory to venerate The Troops. On the other hand it’s perfectly fine to treat soldiers as disposable, in no small part because they volunteered and they knew the job was dangerous when they took it. Even further, it’s fine to treat the people who fight our wars as completely invisible, beyond the reach of either scrutiny or support, if they work for a private contractor rather than being directly employed by the Pentagon.

  • marvin nubwaxer

     mostly people see through ignorant bigot, selfish, short sighted eyes that rely on information they get from right wing radio, fox news and republican politicians.  the right has their own massive industry of  propaganda which is mostly for consumption by other right wingers.

  • http://twitter.com/lesterhalfjr Chris Hadrick

    Ellie- It’s a totally symbolic meaningless coin. why not Caligula? It’s a general nod to similar moments in Western Civilization. 

    re: the draft: the argument for it is that it will reduce the number of wars. I have an idea: how about we don’t declare more wars??  How about no draft AND no wars? Whose country is this? 

  • P J Evans

     It isn’t paying enough to live on. Right now, I’d get just over $1000 a month. That’s with something like 30 years work.Unemployment would get me more money.
    NO ONE gets rich on SS, no matter what you’ve been told.

  • Lori

    God, you’re an idiot.

  • AnonymousSam

    Now, see, that makes me angry. It’s a pittance, but $1000 a month would still be more than I was making at my more-than-twice-full-time-hours job in the past. That’s not an argument against social security or unemployment; it’s an argument against eliminating minimum wage, because I can’t see it not leading into ridiculously low wage jobs like the one I had.

  • http://apocalypsereview.wordpress.com/ Invisible Neutrino

    Why is there a need to make a magic link between earnings you are taxed on and pension payouts? In a typical defined benefit plan it doesn’t matter how much you pay in.

    Government plans are a hybrid of defined contribution and defined benefit, but the point is that the defined benefit part means there is really no link to earnings in one’s prime years.

    So raise the cap on contributions, set a pension floor income that enables any senior citizen to live well, and be done with it.

  • Gotchaye

    This is absurd.  It is obviously much more similar to each of the hundred or so times the debt ceiling has previously needed to be raised than to the financial crisis under Caligula.  The whole point of minting the coin would have been to /avoid/ the sort of financial crisis that can be triggered by a government running out of money.  Typically we don’t put people on coins in order to make clear that we’re trying to avoid doing what they did.

    Also, a note on hyperinflation in Weimar Germany and Zimbabwe: in neither case was hyperinflation meaningfully caused by governments printing money to cover debts denominated in their own currency.  This is hardly obscure information; even Wikipedia is pretty clear on this.  After WW1 Germany was forced to take on debt in gold or in foreign currency to make reparations to the victors.  This debt was not sustainable, and Germany /could not/ pay it, nor could Germany devalue it.  But the alternative was to be invaded.  So Germany’s choices were cripplingly high taxes, printing at an ever-faster rate, or war.  Printing lots and lots of money was a perfectly rational decision, given their situation, and was not the cause of their problems.

    “Hyperinflation in Zimbabwe began shortly after destruction of productive capacity in Zimbabwe’s civil war and confiscation of private farms” – the first sentence of the Wikipedia page.

    One almost suspects that this absolutely massive drop in productivity might have had something to do with Zimbabwe’s problems.  There was also an enormous corruption problem.  Long story short, the government simply had no credibility.  There’s actually a very similar case in US history – the Confederate dollar saw hyperinflation at the close of the Civil War, precisely because it was clear to everyone that the government backing the currency wasn’t credible.  But given this lack of credibility, printing lots and lots of money was really the government’s only choice if it wanted to stave off collapse for just a bit longer. The lesson from Zimbabwe for the US today is that it is extremely dangerous to give people reason to doubt the government’s money/debt.  Some experts believe that an important factor in a country’s credibility on monetary matters is whether or not it intentionally defaults on its debt for no apparent reason.

  • Buck Eschaton

    It’s interesting that the military never runs out of money, but social security does.  It’s really interesting that no matter how much we’re in “debt” we can find money for wars, but not for social security. When it comes to military spending and wars it’s almost like the U.S. Federal Govt. can create money out of nothing.  It’s really funny that we always have enough money for wars and for bailing out of the banks. More than $14 trillion to the banks, but we just don’t have enough for social security or for actual American citizens.
    It’s almost like we’re on some kind of fiat currency for wars and bank bailouts and then when it comes to actual people the Fed Gov transitions over to the old gold standard and starts operating liking some bleeping household. It’s really interesting.

  • AnonaMiss

     

    Yeah, I think equity is a very important thing to strive for, but not to
    the extent of forcing people to go kill people in whatever country is
    your enemy this year.

    I agree; but I also think that frivolous wars would be significantly less politically viable if those being sent to fight came from all sorts of backgrounds, not only those accustomed enough to being fucked to just bend over a little further.

    The fact that there hasn’t been a strong anti-war movement since the Vietnam war is IMHO due to the absence of a draft. It’s the military equivalent of Missing White Girl Syndrome.

    Invisible Neutrino’s point on the rich just getting their kids out of it is well-taken, but I don’t think it would survive more than a generation or two. When the grand majority of voters have done their service, accusations of draft dodging would be much more severe than GWB experienced.

    The main flaw I see with mandatory terms of service is the problem of what to do with strong pacifists. Which I don’t have an answer for.

  • P J Evans

     They could do work that benefits the country, even if they aren’t in the military. (There aren’t that many strong pacifists. There are a lot of people who will do whatever they can to avoid being drafted, including faking disability.)

  • Sgt. Pepper’s Bleeding Heart

    re: the draft: the argument for it is that it will reduce the number of wars. I have an idea: how about we don’t declare more wars?? How about no draft AND no wars? Whose country is this?

    Stop the clocks people, I agree with Chris. I don’t buy that he’s a screw-you-I-got-mine libertarian out of pacifist motives, but I agree on this. Forcing people to train to become killing machines will not reduce war. Putting our dicks back in and resolving not to pull out the war card every 5 minutes might.

  • Lori

    accusations of draft dodging would be much more severe than GWB experienced. 

    That wouldn’t take much. GWB was IMO (one shared by many others) far worse than a draft dodger* and was a deserter and it didn’t keep him from becoming president and Commander in Chief of the armed forces. That would be the same armed forces he bailed on when even serving in his safe, cushy, draft avoiding berth became inconvenient to him.

    *Draft dodgers at least had the courage of their convictions and sacrificed for them. GWB was just a spoiled coward with connections.
    IOW, don’t underestimate the willingness of the privileged class to protect and support its own.

  • Sgt. Pepper’s Bleeding Heart

    The fact that there hasn’t been a strong anti-war movement since the Vietnam war is IMHO due to the absence of a draft. It’s the military equivalent of Missing White Girl Syndrome.

    Maybe not in the US. You may have missed the movement against the invasion of Iraq that culminated in millions of people across the globe marching in protest on a single day, and a number of US allies refusing to send troops to Bush’s slaughterathon.

    The main flaw I see with mandatory terms of service is the problem of what to do with strong pacifists. Which I don’t have an answer for.

    Strong pacifists are easy to deal with. Just chuck us in jail as always. Your bigger problem is what to do with ordinary people in the middle who have no beef with whoever it is your government is going to hate next week, don’t have a strong enough conviction to sit in jail over it, but could do without the future PTSD thanks very much.

  • http://twitter.com/lesterhalfjr Chris Hadrick

    gotchaye- the point is hyperinflation is a real thing. 

    “But given this lack of credibility, printing lots and lots of money was really the government’s only choice if it wanted to stave off collapse for just a bit longer.”

    ” The lesson from Zimbabwe for the US today is that it is extremely dangerous to give people reason to doubt the government’s money/debt.”

    Well I certainly agree with this but people aren’t doubting us because some of us are making attempts to prevent more debt, it’s the debt that’s causing the doubt.  They even look similar as words. 

    countries don’t judge us by our stagecraft and politics they judge us by our actions and our actions have been inability to maintain a budget year after year since the 70′s ( with a couple of projected surpluses in the late 90′s) and Alan Greenspan’s loose money policies at the Fed  since the 80′s.

    Buck- I agree.  

    sgt peppers- reinstituting the draft is another gimmicky idea based on the notion that we  can’t possibly have some obvious basic thing we obviously want and need so we need to create a  political obstacle.  not a good look

  • EllieMurasaki

    You’re seriously basing an argument on ‘debt’ and ‘doubt’ looking similar? In that case, I demand the recognition my right to beer arms. Not sure what beer arms are, but I certainly have a right to them.

  • Lori

    I have an idea how you can make some real money. Contact the schools you’ve attended and promise never, ever to identify yourself as an alumnus if they refund your tuition. You’ll have to have someone help you figure out how to phrase it so it doesn’t sound like outright blackmail, but there is no self-respecting institution of higher learning that wouldn’t take the deal if you just show them the stuff you routinely post in the internet.

  • http://apocalypsereview.wordpress.com/ Invisible Neutrino

    countries don’t judge us by our stagecraft and politics they judge us by our actions

    Why yes. Yes, they do.

    In the 1980s, Ronald Reagan and George Bush Sr. had no problem bullying small nations into doing what they wanted – for example, invading Grenada on a relatively thin pretext, etc. All this, of course, in the name of fighting Communism or drugs.

    Even in the 1990s, the USA was well-known in certain circles for coercing Latin American and African  nations to adopt anti-drugs laws or risk being forbidden to hook into the international electronic fund transfer mechanisms like CHIPS or FEDWIRE.

    Since poorer nations can in some cases live or die on remittances, being blocked from easily transferring funds is a real hardship.

    And let’s not even get into all of Dubya’s adventurism.

    Your country’s actions in the last generation have been that of a self-satisfied smug bully. And that’s what the world judges your nation on.

  • AnonymousSam

    The problem is that it’s a tautological solution: “To stop going to war so often, don’t go to war so often.” Technically the answer is 100% applicable, but the bigger question is why the United States feels the need to go to war every decade or so, and I think it has a big part to do with having a huge military with billions of dollars’ worth of toys. You can’t flex military might if you don’t have enough to swing.

    “I suppose it is tempting, if the only tool you have is a hammer, to treat everything as if it were a nail.” – Abraham Maslow

  • Sgt. Pepper’s Bleeding Heart

    Sure, which is why that kind of response is a throwaway line in an internet forum but not what I’d say in a more expansive treatise on the topic.

    Less flippantly, the attitude that war is the best way to solve every problem is unlikely to be helped by forcing vast numbers of your citizens to prepare themselves to wage war. 

  • Gotchaye

    Well, no, it’s not the debt itself that’s causing the doubt.  First, it’s not very clear who’s doing this doubting.  Certainly not people looking for a safe place to invest.  Short-term interest rates could not be lower.  Basically everyone agrees that more inflation would be a good thing right now until nominal interest rates have room to lift from zero.  Long-term interest rates are even very low.  Recently, the only times we’ve seen actual, real-world evidence that the markets were unhappy with the country’s fiscal situation have had to do with one of three things – either the markets started getting panicky because of a threatened default (debt ceiling), because of the prospect of short-term debt reduction (fiscal cliff), or because of loud fights in Congress (the stated reason for the ratings downgrade).  If there had been no debt ceiling, no fiscal cliff, and no Republicans in Congress screaming about the debt, who would be concerned right now? 

    To the extent that there is doubt (and as I said, it’s not actually clear that there is doubt outside of politicians who want to cut entitlements and people who listen to politicians who want to cut entitlements), that doubt is driven almost entirely by stagecraft and politics.  Real doubt – doubt backed by money – causes higher interest rates and higher inflation.  Where are these things?

  • http://twitter.com/lesterhalfjr Chris Hadrick

    Ellie- I just randomly noticed the similarity. 

    I have to go to work but will address these fine points later. bottom line though: cut your losses, walk away from the casino, start rebuilding the honest way having learned the lesson that short cuts aren’t worth it. 

  • EllieMurasaki

    I have no idea what you’re responding to.

  • EllieMurasaki

    But I can address this:

    cut your losses, walk away from the casino

    Get rid of the stock market and any markets for derivatives such as mortgage bundles? That might work! Dunno how we’d pull it off given national political and world economic climates, but that might work!

  • Carstonio

     

    the bigger question is why the United States feels the need to go to war every decade or so, and I think it has a big part to do with having a huge military with billions of dollars’ worth of toys.

    Both probably have the same root cause. Bullies are driven by fears and insecurities. They believe, perhaps on an subconscious level, that if they’re powerful enough or intimidating enough, the people they fear will leave them alone. The insecurities of the US involve racism specifically and xenophobia generally, and I think Susan Faludi has a point with her theory that the early wars with the Indians shaped much of the national psyche. (Gee, hard to imagine why the people already living here would object to being pushed off their land by force.)

    Since at least World War I, xenophobia has been a dominant theme in rightist politics here, but certainly not exclusive to the right. Most often this veers between military adventurism and the type of isolationism expressed by folks like Pat Buchanan. Democrats often acted like hawks on communism, but this usually seemed like an overreaction to red-baiting from the right. I still shake my head over how too many people of my generation wrongly remember the Iran hostage crisis. In their minds, Carter was a wimp and the Iranians thought they could push him around and get away with it.


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