BREAKING:AP: S&P Downgrades U.S. Debt From AAA part 2

Wow, you don't even believe the Social Security Trustees Report?

You seemed to determined to remain on talking point.

 

If you can't find these regularly published data even after being told where to look for them, what sort of skills do you expect to have that will enable you to break them down?

Except for the fact that the SS and Medicare surpluses account for approaching 20% of the public debt.

Nothing was raided. SSTF does not need the funds represented by the surpluses for decades. Simple fiduciary responsibility requires that the trustees invest these funds so as to earn a competitive, market-based rate of return in the meantime. They are required by law to use conservation of principal as their primary investment criterion. How many qualifying markets do you think exist in the world that could efficiently absord several trillion dollars to be invested and then withdrawn accoridng to easily estimated schedules?

This is because FRBNY is the banking agent for the US government.

Well, I already told you. About $5.5 trillion came from redemptions of marketable/commercial treasury securities, and the bulk of the rest from short- and very short-term government account series paper. There are also SLGS and some other stuff involved, but the two main categories cover by far the bulk of it.

The actual point was that concern over how Treasury will be able to pay off SSTF pales somewhat in consideration of the volume of debt that is redeemed by Treasury every year, and without straining itself at all.

Virtually all marketable debt that matures is paid off by rolling the security over, either to the same borrower (most -- like SSTF -- are perfectly content to keep holding the asset) or to a new one. With 10-year rates having closed today at 2.15%, there is no shortage of new ones.

It isn't clear what it is you have. Treasury will have no problem repaying SSTF as scheduled. SSTF's impressions of its future obligations are based on the quality of its very questionable projections. There is no certitude at all concerning a matter of long-term insolvency, insolvency in this case simply meaning that the trust fund would be exhausted, exactly as it was designed to be. Keep in mind in all this that in 1997, the Trustees projected that the trust fund would be exhausted in 2029. Fast-forward to 2007 and they projected that to occur in 2042. Not only did the date not get ten years closer, it got three years further away. That's because the Trustees are notoriously pessimistic in their projections, and if they are only a little bit too pessimistic in any number of areas, the trust fund will in fact never be exhausted, even if we do nothing to shore the program up at all. Something to keep in mind.

There is no absolute ceiling. In theory, there is some ceiling relative to various real economic measures, but whatever that is, we are nowhere near it.

I can't discern your meaning here. Try again, maybe.

 

LOL. No, I certainly don't believe them, and the reason for that is that I've worked with them for better than 20 years. They are not some sort of gods. They are technicians constrained in their actions because their work will be taken as official. I am not so constrained. I can take their (nearly) exact model, adjust the variables and assumptions at the margins, and see how the projection itself reacts. Cool, huh?

 

17thAndK wrote: "If you can't find these regularly published data even after being told where to look for them, what sort of skills do you expect to have that will enable you to break them down?"

You know what? Nobody says less with more words than you, congratulations! There's some overriding correlation between attaining material and understanding what it does or doesn't say? That's pretty fuq'n stupid... besides, why don't you let me worry about that. I wasted enough time at Treasury-Direct looking at July's monthly report. For the most part it is a series of tables, 36 pages long. The reason you're not sourcing is because at the very most, all you have are some figures. You have absolutely nothing of relevance to substantiate what you contend those figures mean!

"Except for the fact that the SS and Medicare surpluses account for approaching 20% of the public debt."

This is poorly worded but what you mean is that these trust funds hold a considerable amount of that debt. So does China, Japan and OPEC, what's your point? Oh yeah that's right, surpluses create deficits. No, taking surplus revenue and wasting it on overconsumption, on a phony war on drugs, on a phony war on terror, on extortion payments to the Taliban, ignoring an antiquated and inefficient energy grid, employing a perverse tax code and on and on and on! THOSE are the sort of policies that are creating debt! Get a clue will ya.

"About $5.5 trillion came from redemptions of marketable/commercial treasury securities, and the bulk of the rest from short and very short-term government account series paper."

e: ... This is so weak! Face it, you not explaining anything because you lack the capacity to do so and there's no material to cite. Nobody knows what any of that actually entails AND NEITHER DO YOU! You repeat that the $52 trillion represents certain types of transactions. The next diversion you'll resort to is that it represents the principle and yield of past obligations. lol WHICH EXPLAINS, LET ALONE JUSTIFIES, ABSOLUTELY NOTHING!

You say the Federal Reserve issued $52 trillion worth of securities in just nine months time. What did they get in return? Certainly not $52 trillion, there isn't anywhere near that in circulation. Who is obligated for the $52 trillion worth of securities? Here's what you essentially said. The Federal Reserve's primary cohorts present it with these notes, that with maturity yields, amounted to $52 trillion and the Fed simply issued new paper that will yield an even a greater amount at a later date. That's the answer to all our problems? I would contend that that is the root of all our problems! My understanding is that our largest creditor isn't China, it's in fact, the Federal Reserve!

"The actual point was that concern over how Treasury will be able to pay off SSTF pales somewhat in consideration of the volume of debt that is redeemed by Treasury every year, and without straining itself at all."

I would say your hokey premise is full of holes if it weren't for the giant crater on top of them! I would be the first to say that we shouldn't be enduring such fiscal chaos. What you don't seem to understand is that it doesn't matter that the Fed could issue more debt to honor the claims of senior citizens & patients. Again, economists, the corporate media and the ACTUAL ACTIONS OF THE POLICYMAKERS is the reality, not this notion you're suggesting. You're saying, hey over here behind the curtain the Federal Reserve is redeeming obligations to the likes of JPMorgan, Citigroup (Rockefeller) and central bankers that dwarf that of the SS trust fund. So, don't you worry Mr. Joe Blow out in East Jesus, Iowa, they'll take care of you too. LMAO!!! Take a good look around will ya! My god, we can't save a penny, our homes can no longer serve as a key source of equity, wages are stagnant, while unemployment, incarceration and medical bankruptcies are rampant.

The circumstance & political rhetoric that the average American is subject to is such that all road signs suggest very rugged terrain and the bridge is out! Further currency debasement, a massive shift of public assets to the private sector and austerity is our future, just like everywhere else. Your premise is in complete conflict of this. You've provided absolutely nothing to support this contention that what can be accomplished, will in fact, be what transpires.

 

You're looking at the MPDS. Not a bad idea, but it takes some groundwork first before you can understand it. What you are looking for is a position and activity report. It's two pages.

No, I want people to learn to find things on their own. You have at least made the attempt which I do commend. What I contend once again is that concern over how Treasury will ever be able to repay $2.5 trillion to SSTF over the next 40 years or so needs to be tempered with an understanding that they have managed to pay back 20 times that much just so far this fiscal year. The universe of public debt transactions is larger by orders of magnitude than what most people imagine.

That there is indeed a connection between SSTF (and various of the other roughly 150 federal trust funds) and the amount of public debt outstanding.

Talk to Congress. It was they who authorized such expenditures and appropriated funds for them. How those are financed is an entirely separate and unrelated matter that would have been not one iota different if Congress had been written out of the picture and all spending had been carried out to your exact specification.

Clearly, you are not familiar with these data. This is a poor basis for concluding that no else is either.

No. $52 trillion worth of public debt securities was redeemed in ten months time -- FY2011 through July 31.

The Fed and FRBNY are two different actors in this drama. But new issues of public debt securites over the same time period totalled $53 trillion if that helps any.

QE2. Of course it doesn't mean anything special except to those who fancy the way the moon and stars are aligned.

If it doesn't matter, why were you so concerned about it?

Everything they say and do is based on the reality I've been describing. Public finance exists, whether people are aware of its intracacies and magnitudes or not.

 

Well, if you just "adjust the variables and assumptions" you can get whatever answer you want. And if the projections swung wildly every year, you might have a point. But they seem to be fairly consistently going on one direction.

 

Yes, they are consistently over-pessimistic. This is how ten years can go by, and instead of the projected date for exhaustion of the trust fund getting ten years closer, it gets three years further away.

And where do you think the values for variables and the equations for assumptions come from anyway? People make them up, that's where. In this case it's people from the SS actuarial staff. CBO runs periodic assessments of SS as well. In that case, it's people from their actuarial staff. CBO is pessimistic also, but not as pessimistic as SS, which is why their projections show trust fund balances lasting for years longer than SS does. SS assumes that net immigration will be essentially flat over the major portion of the next 75 years. Is that a realistic assumption in light of all the baby boomer retirements over the next 30 years or so? What if it isn't? What is it's off by a little bit? What if it's off by quite a bit? What if it's off by quite a lot? Curious people ask these quesions. Some even estimate answers for them...

 

So... your argument is if the CBO projection say that SS won't be able to meet it's obligations by 2040 and the SS Trustees say 2036, your conclusion is that there is no problem at all?

 

17thAndK wrote: "What you are looking for is a position and activity report. It's two pages."

I do appreciate you sharing the information. Hopefully you'll see that something constructive came of it. That said, and after some research, the information only leads to deeper questions. Page two of the position & activity report (P&A), pertains to securities issues & redemptions from which you cite. As you have said, they correlate and are in excess of $52 trillion, just for FY2011 alone. What I took note of was that the vast majority of issues & redemptions were what's referred to as Government Account Series (GAS) securities. I had to research what they were.

Besides treasuries, there is also what is known as GAS securities. The distinction, if any, isn't established here. Nor did I find any distinction in the P&A report. Here's similar content from the Treasury:

Dated Oct '10, from the Senate:

This is interesting:

Okay, so the vast majority of the issues & redemptions totaling approximately $46 trillion of the $52 trillion total this year are these Government Account Series securities & treasuries, which actually comprise intragovernmental holdings. They are nonmarketable federal public-debt obligations and most of the securities are credited to less than a dozen trust funds. I had speculated that nominal activity of such unimaginable proportion would have to involve the Federal Reserve, its primary dealers and central banks from hundreds of countries. I still don't discount ulterior forces but according to this evidence here, it's all done within an extremely narrow niche. Non-marketable intragovernmental holdings passing in & out of just a dozen or so trust funds! Obviously, this all done off budget.

This is just incredible and to my mind, inexplicable behavior. Or is it? 17thAndK, you can explain, let alone, justify this? I don't think you can! You tell me, what could possibly account for intragovernmental obligations totaling over $46 trillion in this fiscal year alone? No obfuscating, show me what necessitates these outrageous obligations within the various federal trust funds? I say with utmost confidence, you can't specifically establish what any of it was for! Well, any of us could make a rational argument for some of it, but $46 trillion through July 2011? This is all off-budget, subject to no public scrutiny whatsoever and completely void of any sense of actual revenue and expenditure "realities". That said, I applaud you for bringing this issue to light!

 

markrc99 wrote: "...tell me, what could possibly account for intragovernmental obligations totaling over $46 trillion in this fiscal year alone? No obfuscating, show me what necessitates these outrageous obligations within the various federal trust funds?"

I went back to treasury to check their "Monthly Statement of the Public Debt (MSPD)". The monthly statements in fact break down where all the Government Account Series-intragovernmental holdings go to. I had to add in Oct, Nov & Dec of 2010, as they are part of fiscal year 2011. The total, which was adjusted for inflation, amounted to over $49 trillion. So, I know what the vast majority of the $52 trillion is for, it's a considerable A-to-Z list. But how they're able to paper over all these obligations and not create chronic inflation is beyond the limits of my knowledge. However, this still doesn't mean austerity and upheaval isn't what is in most Americans future. Though I do hope 17thAndk is correct and I'm mistaken!

http://www.treasurydirect.gov/govt/reports/pd/mspd/mspd.htm

 

First of all, those dates are 25-30 years into the future. Second of all, they are projections based on pessimistic assumptions equivalent to assuming that the Great Bush Recession is permanent. Third of all, Social Security would be fully able to meet its obligations if the trust fund were to be exhausted, just as it was before the trust fund ever existed. This, of course, is because SS is obligated by law to pay out 100% of scheduled benefits or 100% of cash available, whichever is less.

Even with no changes at all in the meantime, the trust fund will actually last well into the second half of the century, and if the trust fund were actually to be exhausted, SS could still afford to pay out about 75% of scheduled benefits indefinitely. As in forever. And because of the way benefits are calculated, 75% of benefits then would be worth more than what 100% of benefits is worth today.

When the baby boomers looked 25-30 years into their future back in the late 1970's and early 80's, they saw a much bigger problem than that. Then they fixed it. By taxing themselves over the course of their working lives so that the burden of their retirement benefits would not fall on the workers of that day. If the workers of this time want to do something to assure that they too will receive 100% of scheduled benefits, they have the means to do that. There are many ways to assure that slightly more cash will be paid into the system, and that is all that is needed to bend the curve when you have 30-40 years of leverage to work with.

What is being discussed by some instead is the idiotic notion that benefits be cut right now to levels lower than those that would obtain if the trust fund were simply allowed to run out, but without waiting around to see if it really does run out or not. This is called "locking in paper losses". Pretty stupid.

 

Obama submits budgets that not even a house and senate with democrats in the majority can pass. Not really a solution. Almost as if it is by design to avoid addressing the issues in need of a solution.

 

17thAndK wrote: "What I contend once again is that concern over how Treasury will ever be able to repay $2.5 trillion to SSTF over the next 40 years or so needs to be tempered with an understanding that they have managed to pay back 20 times that much just so far this fiscal year."

Your rationale is faulty, because it's an assumption. Again, it's not a matter of whether Treasury could meet said obligations, but whether they will.

"Everything they [economists, corporate media & policymakers] say and do is based on the reality I've been describing."

This is simply not true. Small government, austerity, personal responsibility, sacrifices have to be made. We're told that over & over. Social programs like Medicare & SS are not exceptions, they're in fact the biggest targets! What is often left out of the discussion is that there has been considerable downward pressure on the middle & lower classes for more than four decades. The other problem with your premise is that fiscal responsibility can be expected from a branch of the same entity that has played a significant role in creating all this fiscal chaos, that being the federal government. No way. Look, here's from today regarding emergency funds from hurricane Irene:

Cantor is saying what you're saying? Hardly... You've got this notion that all boats are adding sails and outboards. No they're not, they're all leaking & sinking.

 

The information is shared every month, but I do again commend your willingness and even tenacity in going out and finding it. That sort of self-actualized grit and thirst for understanding is not at all common enough these days. And ssk yourself if you don't feel differently about what you have recently learned for having done it on your own, rather than having had me just stick a link in your face.

The only distinction is that what most people think of as Treasury securities are the notes and bonds that are sold to the public at large. These are marketable (in most cases) so that they may be traded on secondary markets, the secondary markets for Treasuries being by far the largest and most liquid secondary debt market in the world with foreign governments, major banks, and other large-scale players involved on a virtually continuous basis. These issues of course trade at values that fluctuate with regard to interest rates and the nearness of any scheduled interest payment.

US Government agencies and trust funds on the other hand are not at all interested in secondary market participation, nor do they want the value of their securities moving around on them in response to various market pressures. Accordingly, theirs are non-marketable securities that cannot be traded on secondary market but can always be redeemed at face value plus accrued interest. The public at large cannot purchase these securities. Otherwise, there is no difference between them. They are all and equally Treasury securities that define a liability to Treasury and an asset to the holder. It is the holder and his interests that define the only difference -- the public holds marketable Treasury securities, while government entities hold non-marketable Treasury securities. They are all Treasury securities.

With the exception of Social Security and USPS, all of the agencies operating the trust funds so invested are in fact on-budget, but their investment activities specifically are not budgeted. Military pay for instance is on-budget and provided for under an annual appropriation, but soldiers' payroll deductions for the Military Service Retirement Trust Fund are not budgeted per se, The payroll amounts not paid to soldiers are simply paid into the trust fund instead, and after paying current pensions, the trust fund then invests its balances in Treasury securities.

There are not $46.6 trillion worth of obligations. There were $46.6 trillion worth of transactions called redemptions. Keep in mind that if I move my $1 million investment from a 1-year note to a series of 1-month notes, my investment will trigger $12 million worth of redemptions per year instead of $1 million. In 2004, as an end to the Fed's lock on interest rates at near-zero levels approached, many agencies moved their investments from long-term into short-term and very short-term maturities. This has naturally magnified the redemption volume since, but its 8-to-1 ratio to those on marketable securities nevertheless highlights the ease with which Treasury can obtain funds, thus pretty much pulling the rug out from under notions that debts to SSTF cannot be repaid as scheduled.

All of this is actually carried out completely in the open and it can all be scrutinized by the public at will, as you yourself have just been proving. The budget meanwhile is a current account concept. It deals with cash in and cash out. The difference between those two is a financing or capital account matter, and what you see in debt operations is simply the management of those capital account balances, whether plus or minus.

 

Though with different numbers, the very same sorts of concepts and operations as you see currently were in effect and ongoing also during the most stable and prosperous years of our recent history. There is nothing actually threatening here...just some pretty big numbers. The need for austerity at any level is what we would like to avoid. The notion of current austerity being just the thing to ward off potential future austerity is silly. It is a little like pointing out that the bright side of being eaten by a shark today is that the risk of being eaten by a shark tomorrow has been eliminated.

 

Get your head out of the sand of right-wing disinformarion. The FY2012 budget documents and analyses do not materially differ from those submitted by other President's over many, many years. Congress does not pass a budget in any case. It writes about a dozen authorization and appropriation bills to implement the budget. The Republican-inspired Senate vote on the FY2012 budget was over whether to take up the budget under the normal budget process of debate and committee hearings after Obama had responded to Republican challenges over long-term issues by agreeing to suspend the normal budget process and deal directly with those long-term issues. Let's do big! But Republicans could not do big. They could not put their money where their mouth was. Hapless leadership lost all control over the party, and they had to settle in the end for a pitiful package of spending cuts that had been on the table for months. S&P slapped a ratings downgrade on them for it. So now we have the annual August recess at hand with no work done on the FY 2012 budget and no resolution of any meaningful long-term issue either. It's all been just another colossal Republican-inspired waste of time. All we got out of it was the downgrade. Nice work!

 

Everything about the future is an assumption. All that is certain is the present and the past, and some of that can be difficult to get a handle on. But the $52 trillion in public debt redemptions thus far in FY2011 does not fall into that category. It is as clear as a bell. Social Security currently holds about $2.5 trillion worth of Treasury securities that it will want to redeem in increasing tranches over perhaps 30 years. There is not a case to be made for Treasury's inability to meet those demands.

Because, in some echo of the days of fire-and-brimstone preaching, we as a society must atone for some past imagined sins? What a load of hooey. This is economics, not some Billy Sunday sermon.

A reminder that just ten years ago the federal government was very much as it is today, and yet the economic situation of the nation was very, very different. What happened in 2001 and thereafter to change things?

Cantor and I are rarely in agreement on anything as he lies through his teeth with such regularity. The FY2011 budget -- unlike those submitted by Bush -- contained placeholders for domestic disaster relief. If the budget deal of last April stripped those out, it was Cantor who removed them. But it is very like him in any case to cut his personal and partisan interests in line ahead of those of actual Americans who may be physically, economically, and emotionally damaged by Hurricane Irene this weekend. Who actually cares about THEM...

 

Let me know if you ever get around to what it is you disagree with. Obama hasnt got a budget through congress since he has been in office and youve presented nothing above to indicate that the Democrats could have passed this last one.

 

I'm not sure what other than total lack of familiarity with the process would lead you to believe that Congress votes on the budgets that Presidents submit. The job of Congress is to develop the legislation that will implement the budget. The first budget that Obama submitted was that for FY2010. The last of the dozen appropriations bills (DOD) for FY2010 was passed on December 19, 2009.

Due to Republican obstructionism and hostage-holding tactics while they threatened a government shutdown, the last bundle of appropriations for FY2011 (per the budget that had been submitted to Congress in February 2010) was not passed until April of this year. Six Continuing Resolutions had been made necessary by that point. The budget for FY2012 is of course still awaiting action after Republican complaints that long-term matters should be taken care of first turned out to be nothing but so much meaningless hot air.

 

No one claimed they did. Ill wait here while you battle that strawman.

Actually, almost every year except these under Obama, Congress actually develope the budget that is passed by the congress, and then signed or vetoed by the president. And then they develope the legislation that implements that budget

 

The more you say the less and less likely I believe you.

The 2000 SS Trustees report put the Apocalypse in 2037. That seems to track pretty closely the most current estimates, and that was well before any "Bush Recession." That was back in the budget surplus days of lollipops and sunshine.

But the real kicker is this:

So it doesn't matter if there is any money available, SS will be cutting checks regardless? In that case, why not stop the payroll tax? Just have the Treasury write a check to itself. You seem to be an advocate of that.

 

Obama hasnt got a budget through congress since he has been in office...
Translation?

Oh dear, that's completely whacked. The Presdient submits the budget every year. The two chambers produce individual and then a joint budget resolution to act as a non-binding guide to the committees of jurisdiction. The committees and their subcommittees hold hearings and debates and draft a dozen authorization and appropriation bills, Those move to the floor for further debate and votes. The final versions are reconciled, repassed in each chamber, then sent to the President for his signature or veto.

 

Same problem, different time interval. In 1997, it was 2029. In 2000, it's 2037? Instead of three years closer, the date got five years further away? Can you explain how a thing like that would happen?

The Great Bush Recession has so far shaved five years off the Trustees' projections. Everything he ever added is gone.

No money? LOL! Since you plainly don't have one, here's a clue: Every covered and working American will still be paying payroll taxes if the trust fund is ever exhausted. Those funds alone would be sufficient to pay roughly 75% of scheduled benefits in perpetuity.

 

No one claimed otherwise. Your not disputing anything Ive said here. Yes the president submits a budget, but it is never what he gets back to approve after the congress is done developing it. You like to disagree, but then cant put into words what you disagree with.

 

Yes, YOU did...

Congress actually develope the budget that is passed by the congress, and then signed or vetoed by the president. And then they develope the legislation that implements that budget.

This is pure malarkey-babble. There is not now and never has been a budget that has been passed by Congress. The President submits the budget to Congress. Congress then develops the various bits of legislation that implement the budget by authorizing spending and by appropriating funds to those purposes. The President signs a series of bills. End of story.

I'm forced to dispute virtually everything you've said here because you don't know what you are talking about. You haven't the foggiest grounding in the matter at all.

I've already summarized the basic steps that comprise the federal budget process. To the extent that you disagree with any of that, you are wrong.