PRESTOPUNDIT -- feeding memeorandum & econRT daily

The beginning of the problem is the fact that the taxes currently being levied aren�t going be enough to fulfil the promises that have been made to beneficiaries. There are various ways of measuring the shortfall, but the most relevant is that, if the problem were to be fixed with an immediate injection of cash, the amount required is around $5 trillion or about 50 per cent of current GDP.

[it is reasonable to assume that] policies involving accounting transfers of trillions of dollars between government accounts and from governments to private individuals [will] provide an ideal opportunity for all manner of pork-barrelling, from handouts to existing retirees to cosy deals for Wall Street investment banks ... [and that] the difficulty of matching reductions in contributions with reductions in benefits [will] be addressed by ensuring that nearly everyone was promised that they would be better off .. [and finally that] a combination of creative accounting and rosy scenarios [will] be used to justify an announcement that the problems of Social Security had been solved when in reality the accumulated shortfall was worse than ever .. [Consequently] current holders of US Treasury bonds will rightly be alarmed if attempts to address the funding deficit are bundled into a complex refinancing package involving a substantial increase in official government debt.