Quote:
Originally Posted by Adder
I don't see how this relates to Burger's question. Today, before my fantasy world, the trust fund redeems the bonds (i.e. has them repaid by treasury). There is currently a deficit, so treasury issues new bonds to pay for it (oddly enough, likely at lower rates, but let's leave that aside). But net change in the $14T in debt is zero, no? Instead of owning the trust fund, new bond holders are now owed.
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Okay an example, using made up numbers.
SS has a FY revenue deficit of $100B:
Option 1: SS redeems $100B of bonds. The $100B is paid to SS out of the general fund. The Gov't sells $100B in new bonds to the public. This adds $100B to the FY deficit.
Option 2: SS sells $100B (+/-, depending on the applicable coupon) of bonds on the open market. The $100B is paid to SS by China. The Gov't issues no new bonds, but loses the power to cancel them. The deficit is the same as it would have been without the redemption.
True, it's a wash on total debt. But that doesn't mean it's the same thing.
