RAND PAUL: No phony debt ceiling deal

As the Congressional Research Service noted in a report on May 5, 1998:

“When the government issues a bond to one of its own accounts, it hasn’t purchased anything or established a claim against another entity or person. It is simply creating a form of IOU from one of its accounts to another.
According to the Office of Management and Budget under the Clinton Administration in 1999:

These [trust fund] balances are available to finance future benefit payments and other trust fund expenditures–but only in a bookkeeping sense. These funds are not set up to be pension funds, like the funds of private pension plans. They do not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the Treasury, that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures

4.5 trillion of the 14 plus trillion that is subject to the debt limit as above described consists of “intergovernmental obligations” namely bookkeeping entries from Treasury to the Social Security and Medicare “trust funds”.

If part or all of the so called intergovernmental debt is forgiven and written off the books of Treasury the national debt would be lowered by that amount TOMORROW MORNING and the entire CRISIS would be resolved subject to supplying approximately 200 billion to these entities in 2011-2012 to make up for the shortfall of premiums and taxes paid relative to required benefits to recipients. This amount will be paid by treasury from the general fund and from borrowings regardless, as was necessary in 2010.

The special obligation Treasury bonds are bought and sold by only Treasury and no one gets hurt by writing them off no banker, no citizen, no market fund…period, for the simple fact that no one owns any of them except the Trust Funds.

Millions of dollars in staff studies, comment, publicity and speeches on this debt limit issue needlessly. No one will fail to pay these benefits because they would risk their entire political position.The tax and premium receipts and any required Treasury funding will insure these payments. By budgeting the required shortfall every year the trust fund scam is not even needed.

In return for lowering the public debt subject to the limit and freeing at least 3 trillion for borrowings, the congress and White House should approve spending cuts and close tax subsidies totaling an additional net 3 trillion toward balancing the budget and reducing the debt in three consecutive annual budgets, the first being 1.5 trillion, the next 1 trillion and then another 1 trillion. Simultaneously in a non-crisis mode SS and MC can be reformed to insure their longevity. These actions will assist in accomplishing the balanced budget issue as well.

This entire shameful episode is a disgrace and has exposed the disingenuous statements of all parties in leadership. It could have been resolved in one day by forgiving this phony, paper debt.

–
Keith A. Eaton