At long last, a stupid, as well as illegal idea dies on the vine. Bloomberg reports
Treasury, Fed Oppose Using Platinum Coin to Avoid Debt Limit
The U.S. Treasury Department and Federal Reserve oppose the idea of minting platinum coins as a way to avoid the U.S. debt ceiling, according to a statement from Treasury spokesman Anthony Coley.
“Neither the Treasury Department nor the Federal Reserve believes that the law can or should be used to facilitate the production of platinum coins for the purpose of avoiding an increase in the debt limit,” Coley said in an e-mailed statement.
“There are only two options to deal with the debt limit: Congress can pay its bills or it can fail to act and put the nation into default,” according to a statement today from the White House.
“When Congressional Republicans played politics with this issue last time, putting us at the edge of default, it was a blow to our economic recovery, causing our nation’s credit rating to be downgraded,” the e-mailed White House statement says. “The President and the American people won’t tolerate Congressional Republicans holding the American economy hostage again simply so they can force disastrous cuts to Medicare and other programs the middle class depend on while protecting the wealthy. Congress needs to do its job.”
To understand why a default is completely out of the question, please see Silly Worry of the Day: US Will Default; Politics of the Debate
As far as Republican strategy goes, I am in favor of shutting down the government unless there are significant budget cuts. Unfortunately, that will not happen. Republicans will cave in once heat from Wall Street begins.
In Social Security Payouts Per Worker; Accrued Interest on Accrued Promises; Imagination I posted numerous charts showing the unsustainable nature of the system.
First let's review the background, then I will address what can be done to make the system Actuarially Sound.
Here is one key chart from reader Tim Wallace followed by commentary.
Social Security Burden on Non-Farm Workers
Accrued Interest on Accrued Promises
Social Security assets are nothing but IOUs, and interest income is actually interest on money long since spent.
The entire "Trust Fund" is nothing but a promise to pay. There are no real assets (other than the ability to raise taxes to meet current expenses). Everything else is just a promise, and even more absurdly, accrued interest on accrued promises.
The chart provided by Wallace should give everyone second thoughts about the ability to raise taxes to meet expenses.
The key point is Social Security is now cash flow negative although imaginary assets have increased in value, based on imaginary interest, and imaginary ability of taxpayers to forever keep meeting escalating payouts.
Here is another chart from my earlier post Social Security Trends: Beneficiaries, Total Costs, Number of Workers, Ratio of Workers to Beneficiaries
Total Annual Cost of Social Security 1967-Present
Social Security Beneficiaries vs. Total Non-Farm Employment
Here is the chart from the Social Security Administration that shows the system is cash-flow negative even though alleged assets have increased in value.
Trust Fund Data
Payroll Tax Cut
The system turned cash flow negative in Fiscal Year 2012, far earlier than anyone expected, primarily because of the payroll tax cut. However, that cut was rescinded in the Fiscal Cliff agreement so the system will temporarily be back in the green this year.
Looking ahead, and ignoring accrued interest on imaginary assets what can be done to make the system solvent?
Actually, Social Security is not that difficult a problem (at least in comparison to Medicare), except for the politics of it all. Numerous things could be done to put the system in the green.
Possible Ways to Make Social Security Actuarially Sound
Mike "Mish" Shedlock