Monday, December 20, 2004

The Government is not a Debtor

The Government is not a Debtor

PGL at Angry Bear notes this quote from Stephen Moore of the Club for Growth on Hardball last Wednesday:
MOORE: Well, any company--first of all, if any company were running a pension fund that were anything like Social Security, we'd throw these guys in jail, the CEOs in jail, because we've stolen about $600 billion--that's billion with a B--from this supposed trust fund. Young people...

I, and many others who are much more Interested Parties, look forward to seeing the CEOs of Enron, Lucent, and United Airlines, to name three (the rest found here, in jail, as Stephen Moore insists they should be.

Also any other CEO whose company pensions are not funded to at least 70% using the GAO estimates, not the ones in their Annual Report.

Moore continues by strongly implying that the AAA credit rating of the United States government should immediately be lowered to D:
MATTHEWS: How did we do that? How did the government do that?
MOORE: What happened was, as the payroll dollars were coming in, Chris, both Republicans and Democrats--they both share the blame?took that payroll tax money that was supposed to be for Social Security and guess what? They spent it on other programs. They spent it on missile systems. They spent it on Lawrence Welk museums. They spent it on road projects.
MATTHEWS: But didn't they pay--didn't they borrow the money from the system and that went back into the system?
MOORE: Yes, but you go to the bank vault, Chris, and all you see when you open up the bank vault is a bunch of IOUs.

Well, actually, what you see are Treasury Bills such as these (and maybe a few Bonds), many of which are available from Treasury Direct. Investors buy them for various reasons, not the least of which being that the government guarantees them, and they are therefore not going to default. We pay for that risk by accepting a lower rate of interest than, say, a corporate bond or a mortgage security.

If we are to believe Mr. Moore, buyers of government securities are not going to be repaid, because the money generated from their purchase by investors such as you and I was spent on the Lawrence Welk museum and a missile-defense system that doesn't work.


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