Hall of Shame: Liars In Government

A good example why the US nation is in trouble is when so many politicians are liars and/or economic illiterates.  That and the public is as illiterate or worse.  In my recent post correctly calling the Social Security Trust Fund a myth, it's amazing the confusion created by politicians about a relatively simple matter.

The trust fund "balance" of $2.6 Trillion that's supposed to "last" until 2032 is an unfunded liability to the US Government.

As I said in my blog, the Social Security Trust Fund holds special issued Treasury Bonds.  But these bonds are just obligations to pay from one branch of the government to another. The money has been spent long ago!  When cash goes out to beneficiaries, since there are no cash assets in the "trust fund", the US Treasury must sell bonds to generate the cash (when the gov't is in a budget deficit condition).   This is technical discussion since the government will continue to pay these benefits.  No one would be silly enough to argue that.  But for the bottom line: social security is adding to the deficit now and as far as one can see into the future.  So all of the Politicians that put Social Security reform "off limits" during budget negotiations are liars and/or incompetent.

Here's the increases in future budget deficits from Social Security:

The confusion comes because, if you or I hold Treasury bonds or notes in our portfolio at Fidelity or Etrade, it is an asset.   That's because we exchanged cash to buy bonds as an investment.  We receive cash when we receive interest payments.

But when the government holds a Treasury bond, it remains a liability; an obligation to pay.  When it comes time to pay or redeem those bonds, the government has to come up with cash money to pay out and must do so by raising revenues by current budget taxation or by issuing debt (unless the government is running a surplus).   As I've said before, how rich are you if you owe yourself $1 million??   Not very.

You Should Know Who's Lying

Feb. 20, 2011: Sen. Richard Durbin of Illinois, on NBC’s “Meet the Press”: Durbin: "Social Security does not add one penny to the deficit . Social Security untouched will make every promised payment for more than 25 years."

Feb. 20, 2011: Sen. Chuck Schumer of New York, on CNN’s “State of the Union” with Candy Crowley: Schumer: "Social Security, however, does not contribute one penny to the deficit and won’t until 2037."

Feb. 16, Senate Majority Leader Harry Reid of Nevada: Reid: "Social Security has contributed not a single penny to the deficit. So we can talk about entitlements as long as you eliminate Social Security. . . . Social Security is not part of the problem we have in America with the deficit."

[From Forbes] President Obama’s budget director, Jacob Lew, explained all this last February 2011 in USA Today:    “Social Security benefits are entirely self-financing. They are paid for with payroll taxes collected from workers and their employers throughout their careers. These taxes are placed in a trust fund dedicated to paying benefits owed to current and future beneficiaries. … Even though Social Security began collecting less in taxes than it paid in benefits in 2010, the trust fund will continue to accrue interest and grow until 2025, and will have adequate resources to pay full benefits for the next 26 years.”

All misleading statements!!!  You cannot trust these people in any way!

Hall of Shame

Senator Charles Schumer,
Senator Richard Durbin
Senate Majority Leader Harry Reid-nincompoop-in-chief
W.H. Management and Budget director (and nincompoop), Jacob Lew- serving as Budget director with no serious budget in 4 years.  Now, he's rumored to be Obama's Chief of Staff.  Wonderful!