The most interesting thing you don’t know about the deficit

Washington scaremongers talking about the deficit have put the fear of China into the American psyche, but does China really “own” the U.S. deficit?

In a revealing article, former Senator Don Riegle and Social Security expert Lori Hansen Riegle let us in on a secret — the largest debt owed by the federal government to any one entity is to Social Security.

We owe it to ourselves. Literally.

Here’s how that works: when the federal government needs to borrow money, it issues Treasury bonds — a special form of IOU. Treasury bonds are considered a very safe investment; many Americans hold them in their retirement accounts. As Riegle and Riegle show with numbers from the U.S. Treasury Department, the largest single holder of Treasury bonds is Social Security. And Social Security is earning interest on those bonds, just like any other investor would. That’s the Social Security “trust fund” you’ve heard so much about.

So, what’s with all the talk about the “bankrupt” trust fund? And what does Social Security have to do with the deficit?

Imagine if you suddenly didn’t have to pay your house mortgage anymore. Wow, that would erase a large chunk of debt from your personal finances. It’s a lovely dream, but that’s all it is — wishful thinking. The bank is relying on you to make good on your loan, and as the foreclosure debacle has shown, you’ll face dire consequences if you don’t.

I can only assume that there are some politicians who are engaging in wishful thinking about the Treasury bonds held by Social Security. Gee, wouldn’t it be great if we didn’t have to make good on those loans… After all, no one less than Timothy Geithner pointed out that “that’s where the money is.”

Well, yes, that’s where it is and a good thing, too. The American workers have been paying into Social Security, their money was invested in Treasury bonds, and when it comes time to retire and rely on their Social Security benefits, that money will be there.

And the interesting thing is, while Social Security doesn’t contribute to the deficit — by law it can’t pay out more money that it has — it holds a large chunk of the debt owed by the federal government.

So, perhaps the deficit hawks are confused. Or maybe they want us to be confused.

Here’s what Riegle and Riegle have to say:

Another argument made by Social Security opponents to raise fear about the national debt is how much our government has borrowed from China. They never mention how much our government has borrowed from Social Security. In fact, the government has borrowed more from the Social Security surplus than it has from any other source in the world, including China. As a result, Social Security now “owns” nearly 18 percent of the federal debt, making it the largest single holder of US debt. The government owes almost twice as much to Social Security as it does to China and Hong Kong.

Why aren’t the opponents worried about paying back Social Security — why aren’t they talking about repaying this debt to the American people?

According to the U.S. Treasury Department’s “Monthly Statement of the Public Debt of the United States” (9.30.10), the total debt was $13.562 trillion and was held as follows:

US Holders of Debt

42.1 % — US Individuals and Institutions

17.9 % — Social Security Trust Fund

6.0 % — US Civil Service Retirement Fund

2.1 % — US Military Retirement Fund

Foreign Holders of Debt

11.7 % — Oil Exporting Countries

9.5 % — China and Hong Kong

6.3 % — Japan

1.4 % — United Kingdom

1.3 % — Brazil

1.6 % — All other foreign countries

The deficit is a concern. All U.S. debt must be covered. There’s no question about that. But let’s be clear. We can’t make China the bogeyman here.  The federal government has overspent in the last decade, thanks to two wars, a huge tax cut for the wealthy, and an unregulated banking industry that led to a global recession. The deficit came about because of a schism between two views of what the government’s (i.e. the people’s) responsibility is. As President Obama said in his speech yesterday:

Part of this American belief that we are all connected also expresses itself in a conviction that each one of us deserves some basic measure of security. We recognize that no matter how responsibly we live our lives, hard times or bad luck, a crippling illness or a layoff, may strike any one of us. “There but for the grace of God go I,” we say to ourselves, and so we contribute to programs like Medicare and Social Security, which guarantee us health care and a measure of basic income after a lifetime of hard work; unemployment insurance, which protects us against unexpected job loss; and Medicaid, which provides care for millions of seniors in nursing homes, poor children, and those with disabilities. We are a better country because of these commitments. I’ll go further – we would not be a great country without those commitments.

Riegle and Riegle close their article with a view from the other side:

 House Republican Majority Leader Eric Cantor (R-VA) provided some insight to their Social Security views in a recent NPR interview when he was talking about Social Security and said, “We are going to have to come to grips with the fact that these programs cannot exist if we want America to be what we want it to be.”

Luckily, poll after poll shows that Americans of all political persuasions do not want Social Security to fail. Let’s be vigilant and make sure that tax investments that each and every one of us pays at work into the Social Security system are well managed and cashed in for full value as mature U.S. Treasury bonds.

Time to think big like a Roosevelt

Photo of an illustrated pillow from Michigan.

Robert Reich, who is a member of the Frances Perkins Center’s advisory committee, suggested on Sunday on his blog that something good could potentially come out of the awful catastrophe of the oil spill in the Gulf — jobs. Here’s a quote:

Friday’s job report was awful. For most new high school and college grads finding a job is harder than ever. Meanwhile, states are cutting summer jobs for disadvantaged young people. What to do with this army of young unemployed? Send them to the Gulf to clean up beaches and wetlands, and send the bill to BP.

…we’ve got hundreds of thousands of young people sitting on their hands right now because they can’t find jobs. Many are from affected coastal areas, where the tourist and fishing industries have been decimated by the spill.

The President should order BP to establish a $5 billion clean-up fund, and immediately put America’s army of unemployed young people to work saving the Gulf coast. Call it the new Civilian Conservation Corps.

Today, Laura Flanders, in her blog The Notion on The Nation’s website, takes it one step further. In her diary, Learning from Roosevelt(s), she says:

Obama could don the mantle of two Roosevelts at once. … Channel Teddy Roosevelt and stick it to the polluters and channel FDR and put people back to work — and create programs that create goodwill for generations.

President Franklin Roosevelt created the Civilian Conservation Corps and  asked Frances Perkins to administer it, eventually putting three million young men and women to work from 1933 to 1942 building enduring landmarks that are cherished today. I hope President Obama will be inspired to think BIG like a Roosevelt. It’s the only way to tackle these two HUGE problems–the oil spill and pernicious unemployment.

Administrations are more than one “great man”

The American Prospect has an interesting article by Lizabeth Cohen, “Team of Rivals Redux.” Cohen, chair of the History department at Harvard, compares the jockeying of advisors within the FDR administration to the supposed jockeying going on within the Obama administration.

As David Axelrod, Rahm Emanuel, Timothy Geithner, Christina Romer, Eric Holder, and the rest of the gang are becoming household names — Hillary Clinton and Larry Summers already were before they signed up — interest is growing in how they are jockeying for turf and adapting to the pressures the administration now faces. Roosevelt watchers no doubt wondered the same about the people he brought together at the top of his administration.

In this context, Cohen reviews the two recent books about the Roosevelt days, Nothing to Fear by Adam Cohen and The Woman Behind the New Deal by Kirstin Downey.

As we watch Roosevelt’s team maneuver for power, criticize one another to their boss, and fight it out in Cabinet meetings as well as behind the scenes, we come to realize something to be alert to in the Obama administration. An effective captain of a team of rivals, like FDR, prods his fiercely competitive players to argue with one another to strengthen his own ability to make well-informed decisions. Current Cabinet members beware!

Perkins’ experience demonstrates how complex the relationship between a loyal adviser and the president can be. She had a close connection with Roosevelt, often irking her Cabinet colleagues by managing to get a private word with FDR right after Cabinet meetings recessed. But that access did not always enable her to prevail. She sometimes lost control over programs she felt rightfully belonged to the Labor Department, most notably over immigration, naturalization, and deportation as Nazism spread in Europe and later as fears of communist infiltration raged at home. She was personally hurt that the president failed to come to her defense in 1939 when a committee in the House of Representatives red-baited her for refusing to deport the radical longshoreman Harry Bridges.

Reviewer Cohen points out that writing about history often focuses on a singular figure such as George Washington,

Yet Downey’s and Cohen’s impressive ability to bring these five New Deal figures to life reminds us that administrations are made by more than the great man — someday it will be a great woman — elected by the voters.

President Obama quotes Frances Perkins during signing ceremony

Today, while signing an executive order creating the Council on Women and Girls, President Obama specifically cited Frances Perkins:

In the end, while many of the challenges women and girls face are new, the work of this Council is not — it’s been with us for generations. Frances Perkins, who was President Franklin Roosevelt’s Secretary of Labor, and the first woman to serve in the Cabinet — a great hero of the New Deal — described it well when she said, “I had a kind of duty to other women to walk in and sit down on the chair that was offered, and so establish the rights of others long hence and far distant in geography to sit in the high seats.” To sit in the high seats.

The rest of his remarks are equally interesting. Go to Lynn Sweet’s The Scoop from Washington to read them and see some photos. Here’s another quote that I liked especially:

That, above all, is the true purpose of our government. Not to guarantee our success, but to ensure that in America, all things are still possible for all people. Not to solve all our problems, but to ensure that we all have the chance to pursue our own version of happiness. To give our daughters the chance to achieve as greatly as the women who join us today. That’s the impact our government can have.

Frances would have liked to hear those words. I sure did.

[Click on the video to watch it.]

Daytime TV

It was fun to watch President Obama sign the Lilly Ledbetter Fair Pay Restoration Act, with Lilly Ledbetter herself at his side. Michelle Obama attended the signing, along with the bill’s co-sponsors, labor leaders, and others. I noticed Senator Olympia Snowe smiling broadly in the group of co-sponsors behind the president. You can watch it yourself and smile, too:

Is there a “hold” on Hilda Solis?

The Health, Education, Labor, and Pensions (HELP) Committee has not yet voted to send Congresswoman Hilda Solis’s nomination as Obama’s labor secretary to the floor. The nomination was announced on December 19th, and since then, a number of other cabinet positions have been voted on. So what’s the hold up with Secretary-designate Solis?

A “hold” is when a senator on the committee anonymously “blackballs” a nominee, which effectively stops the nomination process in its tracks. Technically, a hold can’t be placed until after a nominee is voted out of committee, and Solis hasn’t even gotten that far.

But some are speculating that a hold has been threatened by Republicans who don’t like Solis’s strong endorsement of the Employee Free Choice Act (EFCA).

But here’s the problem for the Republicans on the HELP committee: President Obama is also a strong supporter of  EFCA. And he’s not going to nominate a secretary of labor who isn’t.

Teddy Partridge, in “Who Owns the Holdup on Hilda?” which appeared yesterday in firedoglake, has this to say:

The GOP needs to understand that Barack Obama voted for the Employee Free Choice Act (which the Chamber of Commerce calls “card check” instead of “Majority Sign-Up”) and his Labor Secretary-designate, Hilda Solis, co-sponsored EFCA in the House. The GOP needs to face facts: this new Administration favors EFCA. A delay in confirming the Labor Secretary doesn’t, and won’t, change that.

Here’s a video put out by SEIU that demonstrates the Administration’s support for EFCA:

And finally, Alternet has this post today: “A Historic Opportunity: Hilda Solis and the Financial Crisis” by Andrew Thomaides. Here’s an excerpt:

Like Frances Perkins, Hilda Solis is also a very passionate, serious, and courageous leader and also happens to be the most progressive appointee in the cabinet of the new administration. She has deep ties to organized labor, the immigrant community, and movements for environmental justice. With the right amount of grassroots support and pressure, Solis could make a serious contribution to the formulation of progressive legislation that would greatly impact and improve the daily lives of the majority of Americans long into the future. The financial crisis the Obama administration has inherited is the greatest of our time. It presents the same opportunities that were there in 1933 when Frances Perkins and FDR took over the White House and created the modern welfare state, bringing the US out of the Great Depression and into the 20th century socially and economically.

Let’s hope the HELP Committee and the full Senate move quickly to approve Solis’s nomination.