Public debt is not the issue — that's just a neo-con scare campaign

OddTrader · Feb 29, 2016

https://en.wikipedia.org/wiki/Social_Security_Trust_Fund

An economic perspective
Overview

The Trust Fund represents a legal obligation of the federal government to program beneficiaries. The government has borrowed nearly $2.8 trillion as of 2014 from the Trust Fund and used the money for other purposes. Under current law, when the program goes into an annual cash deficit, the government has to seek alternate funding beyond the payroll taxes dedicated to the program to cover the shortfall. This reduces the trust fund balance to the extent this occurs. The program deficits are expected to exhaust the fund by 2034. Thereafter, since Social Security is only authorized to pay beneficiaries what it collects in payroll taxes dedicated to the program, program payouts will fall by an estimated 21%.

The trust fund is expected to peak in 2021 at approximately $3.0 trillion.[17] If the parts of the budget outside of Social Security are in deficit, which the Congressional Budget Office and multiple budget expert panels assume for the foreseeable future, there are several implications:

Additional debt must be issued to investors to obtain the funding necessary to pay this obligation. This will increase "debt held by the public" while simultaneously reducing the "intragovernmental debt" represented by the trust fund.
CBO reported in 2015 that: "Continued growth in the debt might lead investors to doubt the government’s willingness or ability to pay its obligations, which would require the government to pay much higher interest rates on its borrowing."[29]
Other parts of the budget may be modified, with higher taxes and lower expenditures in other areas to fund Social Security.[30]
Debate regarding whether the proper debt to GDP ratio for evaluating U.S. credit risk is the "debt held by the public" or "total debt" (i.e., debt held by the public plus intragovernmental debt) will be rendered moot, as the amounts will converge substantially.

On the other hand, if other parts of the budget are in surplus and program recipients can be paid from the general fund, then no additional debt need be issued. However, this scenario is highly unlikely.

"Gross federal debt consists of debt held by the public and debt issued to government accounts (for example, the Social Security trust funds). The latter type of debt does not directly affect the economy and has no net effect on the budget."
Congressional Budget Office[29]

CBO. "The Budget and Economic Outlook 2015-2025" (PDF). Congressional Budget Office. Retrieved July 21, 2015. https://www.cbo.gov/sites/default/f...016/reports/49892/49892-breakout-Chapter1.pdf

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OddTrader · Feb 29, 2016

http://inflationdata.com/Inflation/Inflation_Calculators/Inflation_Rate_Calculator.asp

CPI Inflation Calculator

$100

in 1950

Has the same buying power as:

$982.31

in 2014

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jem · Feb 29, 2016

I thought your article said it very clearly... right here...

"This is a massive change. In 1950, a family sending their child to the University of Pennsylvania would only spend 18 percent of their annual income (if they paid in cash) to send their kid to study. Today it would consume 79 percent of gross annual income. Even if we look at net take home pay a regular family in no way could send their child to school without going into massive student debt.

A good portion of inflation over this time has been masked by massive amounts of debt and financing. Car purchases, mortgages, and college are now financed long-term. Low rates have masked this erosion but with rates reaching the lower bound of the range, the pain of inflation is now being felt by many households."

OddTrader said:
1950:

The average family income: $3,300

The average car cost: $1,510

The median home price: $7,354

2014: (Better quality car and much improved building in 2014)

The average family income: $51,017

The average car cost: $31,252

The median home price: $188,900
More...

Ricter · Feb 29, 2016

jem said:
"This is a massive change. In 1950, a family sending their child to the University of Pennsylvania would only spend 18 percent of their annual income (if they paid in cash) to send their kid to study. Today it would consume 79 percent of gross annual income.
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But we've had HUGE INFLATION in the number of colleges in that time, too.

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Public debt is not the issue — that's just a neo-con scare campaign

OddTrader

OddTrader

jem

Ricter