What is greatest contributor to our deficit?

[giblets]

Perhaps, but as I mentioned there are fundamental limits on society's ability to defer consumption in the aggregate. To do so, society has to divert current production into investments that actually create future wealth. If the SSTF were invested in, for instance, credit card debt then it would be just as false a claim as its US bonds.

I was thinking that investing money in corporations would lead to more investment in capital goods.

[Kuciwalker]

Has anyone made the point yet that you didn't have to distribute with Chinese factory workers to begin with?

Can you rephrase this? I'm not sure what you are trying to say.

[Kuciwalker]

I was thinking that investing money in corporations would lead to more investment in capital goods.

Sometimes.

[Fake Boris]

Can you rephrase this? I'm not sure what you are trying to say.

I'm not sure if I understand your points anyway.

But you seem to imply that 'redistributing' present income with poor Chinese workers will not allow you to compensate current SS costs with future gains.

It appears to me that you are supposing neoliberal free trade is a necessity.

[Kuciwalker]

How are we defining poor? I'm guessing most of the elderly are not going to have that much income. Unless you want the money given to old people to be based on the total assets they own, and give less to people who have accumulated more....?

I am not (yet) advocating any specific policies here. I'm denying that the Boomers have any legitimate claim on the SS and Medicare benefits they promised we would give them. The benefits they receive will be our generation's largesse, and should be designed in terms of maximizing social welfare, not fulfilling moral obligations.

Allowing people to collect the returns of their investments is socially useful, because it creates the incentive to invest. But by and large, the Boomers did not invest the money they "saved" through their payroll taxes. There is little value in guaranteeing the returns they promised themselves.

[Tupac Shakur]

the total assets they own

Otherwise known as wealth.

[giblets]

the total assets they own

Otherwise known as wealth.

You really aren't a very insightful thinker.

.

[Kuciwalker]

I'm not sure if I understand your points anyway.

But you seem to imply that 'redistributing' present income with poor Chinese workers will not allow you to compensate current SS costs with future gains.

It appears to me that you are supposing neoliberal free trade is a necessity.

Imagine for a moment that the US were an isolated nation with no trading partners. Our society's ability to shift consumption in time (that is, choose to consumer X less stuff now in order to be able to consume Y more stuff later) is limited by our ability to find actual investments - things we can make using our current resources, that will produce more resources in the future. For example, a house; it consumes some wood, labor, etc. today, but over many future decades it produces shelter. A car consumes labor and metal now and produces transportation in the future. A factory consumes concrete and steel and produces widgets in the future. etc. These opportunities are limited; society can only invest a certain fraction of its current production before it runs out of stuff to invest in. Beyond that point, society can't shift consumption in time.

Even though society as a whole can't shift consumption in time, though, individuals can "invest" by lending money to other people, to be spent on current consumption, in return for the promise that those other people will give them even more money back in the future. This does not change the total production or consumption of society at either point in time. (It may still be socially useful, e.g. if a farmer who had a good year lends food to a farmer who had a bad year, so that neither starves.)

This brings us back to the US government. Government debt, when used to finance productive investments like roads, represents "real" savings. But the majority of government spending is not on investment, but on transfer payments - either explicit cash transfers, or 'in kind' transfers such as medical treatment. These also may be socially useful, but they aren't investment and don't increase future production or consumption. The bonds used to finance those transfer payments represent claims on nonexistent resources - the goods purchased with them have already been consumed. The Social Security Trust Fund is nominally separate from the general fund, and represents Americans' savings to pay for their social security benefits (savings through the payroll tax). But the fund is invested entirely in this US debt, which is a claim on the resources that we already consumed. The claims on the Trust Fund (that is, retirees' claims to their social security benefits) are entirely just claims that future taxpayers will give them money for nothing in return.

By itself, this arrangement isn't necessarily incorrect - this sort of intergenerational transfer could be socially optimal. But it does subvert the idea that the previous generation is morally entitled to their benefits because they paid into the fund their entire lives - the fund was just a vehicle for redistributing goods between themselves.

Where do the Chinese come into this? Well, in the real world, the US is not an isolated nation, and our government debt is partially financed by foreigners. If the Chinese government buys a bunch of 30-year US Treasury bonds, the net redistribution now involves four different parties. First, current Chinese (who are overwhelmingly poor) are giving goods to current Americans (who are overwhelmingly rich). In return, future Americans (who will, hopefully, be rich) will give goods to future Chinese (who will probably be less poor). It is not clear at all that this redistribution is socially optimal.

I'm not "supposing neoliberal free trade is a necessity"; I'm making the observation that the Chinese actually have bought over a trillion dollars of US government debt. IOW, not only have the Boomers "saved" for their retirement by giving themselves their own stuff and claiming it as a debt (to be paid by future taxpayers), they've taken stuff from other countries in return for the promise that future taxpayers will pay for it.

[Kuciwalker]

The worst part is that much of the US debt doesn't even fund transfer payments; it has paid for the active destruction of trillions of dollars of wealth

[giblets]

Yeah, baby boomer bloodlust