Quote:
Originally Posted by Cletus Miller
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.
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What do you mean it's not the same thing? Either way, the Government has an obligation to pay $100B + interest. The only thing that is different is the payee. What am I missing?
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