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> Social Security Counting Social Security as a holder of the national debt is nonsense. Usually the cited debt excludes intragovernmental debt, since these in

> Social Security Counting Social Security as a holder of the national debt is nonsense. Usually the cited debt excludes intragovernmental debt, since these internal government-internal IOUs are utterly meaningless with respect to the debt the country has outstanding. Most honest brokers will never cite the meaningless number, but rather the "debt held by the public". Intragovernmental debt isn't what gets you to "most" or anything, but it should not be counted in any situation where we're talking about the fiscal or macroeconomic situation, rather than a political point.

vkou 5y ago
> Counting Social Security as a holder of the national debt is nonsense. Usually the cited debt excludes intragovernmental debt, since these internal government-internal IOUs are utterly meaningless with respect to the debt the country has outstanding. Consider 2 situations. 1. Social Security lends the government a trillion dollars. 2. Bob lends the government a trillion dollars. Bob sells this loan on the public market. Social Security happens to be the organization that buys that loan from Bob. What makes the former "Utterly meaningless", but the latter not? It's not like Social Security is... Planning on forgiving that debt.
- jacquesm 5y ago
  It's the same party. Bob is an outside party. When my left hand owes my right hand it doesn't matter whether I have the intention of forgiving that debt or not, it is an internal matter, one that may show up on my balance sheet but it has no direct effect on my day to day affairs. Because just as it won't be forgiven it also won't be called in overnight or used to manipulate the market against me: I control both sides of that equation. But with Bob that isn't the case.
  - chii 5y ago
    the oft touted reason for high debt load being bad is that the gov't would be unable to pay it. So how can it be that on the one hand, it "doesn't matter", but on the other hand, the debt is touted as being unable to be serviced? The gov't owing it to a department is the same obligation as owing it to a foreign entity (or a domestic, private entity for that matter).
    - jacquesm 5y ago
      > The gov't owing it to a department is the same obligation as owing it to a foreign entity (or a domestic, private entity for that matter). No, it isn't. Sorry, but this just isn't up for debate.
      - quickthrowman 5y ago
        If the Treasury defaulted on its obligation to pay the interest and principle on the debt owned by SS, the ratings agencies would downgrade US Treasuries the same way they would if they failed to pay Japan, or any other bondholder.
    - caturopath 5y ago
      https://www.cbpp.org/research/recommendation-that-presidents-fiscal-commission-focus-on-gross-debt-is-misguided https://www.cbpp.org/research/recommendation-that-presidents... notes > Most economists agree that the debt held by the public is what really affects the economy. As the Congressional Budget Office stated in its June 2009 report on the long-term budget outlook, “Long-term projections of federal debt held by the public, measured relative to the size of the economy, provide useful yardsticks for assessing the sustainability of fiscal policies.” In contrast, “gross debt . . . is not useful for assessing how the Treasury’s operations affect the economy.”
- tomerv 5y ago
  Both cases are meaningless debt. The interesting information is total amount owed by the government minus total amount owed to the government. If I take a loan from the bank for $1000, but also have $1000 in a bank account in another bank, then my debt is 0. Social Security is a bit like the second bank account.
  - vkou 5y ago
    > The interesting information is total amount owed by the government minus total amount owed to the government. That is correct. In the case of social security, you also have to account the total amount that social security owes to its contributors. Because at the end of the day, Social Security has to pay out benefits, this debt isn't just pointless accounting fiction. "Social security owns government debt" very clearly communicates that the government indiscriminately defaulting on loans will mean that social security beneficiaries will have to take a haircut - just like if I replace the words "Social security" with "XYZ pension fund." Just because the government runs this particular pension fund doesn't mean that it's all that much different, accounting-wise from a private one.
- caturopath 5y ago
  > Social Security lends the government a trillion dollars. This is a nonsense step. There is no meaning to the social security lending the government any money, as social security is the government > Bob lends the government a trillion dollars. Bob sells this loan on the public market. Social Security happens to be the organization that buys that loan from Bob. This scenario is just "The government buys back some of its debt, reducing its outstanding debt." The "Social Security" part is just a random detail that doesn't add anything. (BTW, Social Security doesn't actually do this. They hold special bonds that are not the same ones available to the public.)
  - pessimizer 5y ago
    Social Security is not funded by the government, it's funded by payroll taxes. Saying that Social Security loaning money to the government is meaningless is like saying that you loaning money to your brother-in-law is meaningless because you both have accounts at the same bank. Debt is debt.
    - caturopath 5y ago
      > Social Security is not funded by the government, it's funded by payroll taxes This fictional accounting is a silly marketting gimmick, not a meaningful distinction. It's a government program just like all other forms of welfare. Do you think that there were decades when lots of folks were contributing and no one was collecting?
      - NoSorryCannot 5y ago
        Uh, if accounting is a fiction, well, I'm not going to say there isn't a kernel of truth to that, but it doesn't help us answer the question of who has debt responsibilities to whom; the entire enterprise is predicated axiomatically on "accounting fictions".
    - dragonwriter 5y ago
      > Social Security is not funded by the government, it's funded by payroll taxes. If it is funded by taxes, it is funded by government. You could argue that the social security trust funds are loaning money to the general fund, but that’s like saying your savings account and money market account are loaning money to your checking account.
- muzz 5y ago
  Yes and hit highlights that this is a choice, ie the choice of how to invest the surplus. Social Security happens to buy US debt with that surplus, but it could have invested it elsewhere ie stocks if it were allowed to. (Of course there are pros and cons to this https://www.wsj.com/articles/should-the-social-security-trust-fund-be-allowed-to-invest-in-stocks-1491790740 https://www.wsj.com/articles/should-the-social-security-trus...)

vkou 5y ago

> Counting Social Security as a holder of the national debt is nonsense. Usually the cited debt excludes intragovernmental debt, since these internal government-internal IOUs are utterly meaningless with respect to the debt the country has outstanding. Consider 2 situations. 1. Social Security lends the government a trillion dollars. 2. Bob lends the government a trillion dollars. Bob sells this loan on the public market. Social Security happens to be the organization that buys that loan from Bob. What makes the former "Utterly meaningless", but the latter not? It's not like Social Security is... Planning on forgiving that debt.

jacquesm 5y ago
It's the same party. Bob is an outside party. When my left hand owes my right hand it doesn't matter whether I have the intention of forgiving that debt or not, it is an internal matter, one that may show up on my balance sheet but it has no direct effect on my day to day affairs. Because just as it won't be forgiven it also won't be called in overnight or used to manipulate the market against me: I control both sides of that equation. But with Bob that isn't the case.
- chii 5y ago
  the oft touted reason for high debt load being bad is that the gov't would be unable to pay it. So how can it be that on the one hand, it "doesn't matter", but on the other hand, the debt is touted as being unable to be serviced? The gov't owing it to a department is the same obligation as owing it to a foreign entity (or a domestic, private entity for that matter).
  - jacquesm 5y ago
    > The gov't owing it to a department is the same obligation as owing it to a foreign entity (or a domestic, private entity for that matter). No, it isn't. Sorry, but this just isn't up for debate.
    - quickthrowman 5y ago
      If the Treasury defaulted on its obligation to pay the interest and principle on the debt owned by SS, the ratings agencies would downgrade US Treasuries the same way they would if they failed to pay Japan, or any other bondholder.
  - caturopath 5y ago
    https://www.cbpp.org/research/recommendation-that-presidents-fiscal-commission-focus-on-gross-debt-is-misguided https://www.cbpp.org/research/recommendation-that-presidents... notes > Most economists agree that the debt held by the public is what really affects the economy. As the Congressional Budget Office stated in its June 2009 report on the long-term budget outlook, “Long-term projections of federal debt held by the public, measured relative to the size of the economy, provide useful yardsticks for assessing the sustainability of fiscal policies.” In contrast, “gross debt . . . is not useful for assessing how the Treasury’s operations affect the economy.”
tomerv 5y ago
Both cases are meaningless debt. The interesting information is total amount owed by the government minus total amount owed to the government. If I take a loan from the bank for $1000, but also have $1000 in a bank account in another bank, then my debt is 0. Social Security is a bit like the second bank account.
- vkou 5y ago
  > The interesting information is total amount owed by the government minus total amount owed to the government. That is correct. In the case of social security, you also have to account the total amount that social security owes to its contributors. Because at the end of the day, Social Security has to pay out benefits, this debt isn't just pointless accounting fiction. "Social security owns government debt" very clearly communicates that the government indiscriminately defaulting on loans will mean that social security beneficiaries will have to take a haircut - just like if I replace the words "Social security" with "XYZ pension fund." Just because the government runs this particular pension fund doesn't mean that it's all that much different, accounting-wise from a private one.
caturopath 5y ago
> Social Security lends the government a trillion dollars. This is a nonsense step. There is no meaning to the social security lending the government any money, as social security is the government > Bob lends the government a trillion dollars. Bob sells this loan on the public market. Social Security happens to be the organization that buys that loan from Bob. This scenario is just "The government buys back some of its debt, reducing its outstanding debt." The "Social Security" part is just a random detail that doesn't add anything. (BTW, Social Security doesn't actually do this. They hold special bonds that are not the same ones available to the public.)
- pessimizer 5y ago
  Social Security is not funded by the government, it's funded by payroll taxes. Saying that Social Security loaning money to the government is meaningless is like saying that you loaning money to your brother-in-law is meaningless because you both have accounts at the same bank. Debt is debt.
  - caturopath 5y ago
    > Social Security is not funded by the government, it's funded by payroll taxes This fictional accounting is a silly marketting gimmick, not a meaningful distinction. It's a government program just like all other forms of welfare. Do you think that there were decades when lots of folks were contributing and no one was collecting?
    - NoSorryCannot 5y ago
      Uh, if accounting is a fiction, well, I'm not going to say there isn't a kernel of truth to that, but it doesn't help us answer the question of who has debt responsibilities to whom; the entire enterprise is predicated axiomatically on "accounting fictions".
  - dragonwriter 5y ago
    > Social Security is not funded by the government, it's funded by payroll taxes. If it is funded by taxes, it is funded by government. You could argue that the social security trust funds are loaning money to the general fund, but that’s like saying your savings account and money market account are loaning money to your checking account.
muzz 5y ago
Yes and hit highlights that this is a choice, ie the choice of how to invest the surplus. Social Security happens to buy US debt with that surplus, but it could have invested it elsewhere ie stocks if it were allowed to. (Of course there are pros and cons to this https://www.wsj.com/articles/should-the-social-security-trust-fund-be-allowed-to-invest-in-stocks-1491790740 https://www.wsj.com/articles/should-the-social-security-trus...)