Fighting back against the move to slash Social Security

Social Security is not being attacked on its merits.

Therefore the bleeding heart arguments will not prevail.

The protagonists believe the problem is that the federal government is on the road to financial ruin, and not merits of Social Security per se .

My conclusion is the only message that will work is that operationally social security is not broken as the protagonists believe.

Their central premise is simply wrong and they can be proven wrong on that central contention.

Government checks don’t bounce- all Federal spending is done by using their computer to mark up numbers in bank accounts (Bernanke quote)

The Federal government will always be able to make all its payments including Social Security payments (Greenspan quote)

Federal spending is in no case operationally dependent on revenues from taxing or borrowing and everyone in Fed operations knows it.

Spending begins to cause inflation only after all the unemployed have been hired and all the excess capacity is used up.

Government deficit spending = world dollar savings, to the penny and everyone in the CBO and OMB knows it.

If government spending isn’t enough to allow the economy to pay its taxes and meet its savings desires
the result is unemployment, excess capacity, and deflationary forces in general.
All as a point of logic.

The wholesale interest rates for the banking system, which also determines interest rates the Treasury pays, are set by the Federal Reserve Bank, not market forces.

The move to cut Social Security is an innocent fraud coming from a position of ignorance of monetary operations.

It is coming from those who mistakenly believe that the federal government has run out of money,
that federal spending is dependent on borrowing that our children will be left to repay,
and that any deficit spending always risks hyper inflation.

It is driven predominately by people who would support Social Security if they didn’t believe the federal government was on the road to financial ruin.

Italian budget deficit down towards 2%

Falling deficits in general in the Eurozone due to the growth rate of GDP combined and the countercyclical tax structure.

Aggregate demand from non government credit expansion (and some from exports) is supporting GDP as support from government deficit spending wanes. This can go on for quite a while as consumer leverage still has a lot of upside potential. However, it will self-destruct if allowed to continue long enough. And, as in the US, net exports have the potential to sustain growth in the medium term as well, though this is hard to fathom without a fall in the Euro.

I need to do more work on this as there are a lot of moving parts over there, including prospective members targeting their currencies, building Euro reserves (public and private), and tightening their fiscal balances. Additionally, portfolios have been rebalancing toward the Euro.

Overall, however, we enter 2008 with tightening fiscal balances in most countries. This will serve to keep a lid on demand and output, while rising food/energy will keep upward pressure on prices.

Italy’s 2007 public deficit about 2 pct of GDP

Prodi 27 Dec 2007 06:39 AM ET
Thomson Financial

Italy’s public deficit will be about 2 pct of GDP, compared with a government forecast of 2.5 pct, said prime minister Romano Prodi in his year-end address.

“We will close the year with a lower deficit, it will be around 2 pct, a figure below any forecast,” Prodi said.

philip.webster@thomson.com pw/ejb COPYRIGHT Copyright Thomson
Financial News Limited 2007. All rights reserved.