Bill, let's say that this morning you bought a 90-day T-bill for $997.20. When it matures next February 5, you decide to take the $1,000.00 and run. Where does the Treasury get that thousand dollars to pay you? The expected answer would be: about $997 from selling another T-bill to a different buyer, and about $3 from tax revenue. Of course, since the budget is running a deficit this year, the Treasury might have to sell $998 in 1.001 T-bills, and only get $2 from taxes. If, by some miracle, the current Federal budget deficit turns into a surprise surplus, the Treasury might only have to sell .999 T-bills to pay you, and get $4 from taxes. When the Trust Fund starts drawing down, the same choices will be available.
Looking at it another way, the Treasury can sell a variety of instruments to a variety of buyers. One buyer is another government account with a current surplus. When that surplus is drawn down, by cashing in Treasury securities, the Treasury will need to shift the mix of buyers of its debt, or pay down the debt, or both. Absent changes to Social Security, this is what will happen over roughly thirty years starting six years from now. Clear enough?
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branchandroot
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Date: 2008-11-08 04:14 am (UTC)Looking at it another way, the Treasury can sell a variety of instruments to a variety of buyers. One buyer is another government account with a current surplus. When that surplus is drawn down, by cashing in Treasury securities, the Treasury will need to shift the mix of buyers of its debt, or pay down the debt, or both. Absent changes to Social Security, this is what will happen over roughly thirty years starting six years from now. Clear enough?