By The Numbers - part the twenty ninth

Yet more nonsense about Medicare. Just as most, mostly from the Left side of politics, tell voters that 'you paid into Social Security and Medicare so you earned them', those mostly from the Right side of politics say that one or the other or both are on the brink of insolvency and have to be cut. They're both lying. Go figure.

The cold, hard, actuarial truth is that we don't need Scott's plan to force a debate over Medicare funding, because within five years, the trust fund that funds Medicare hospital coverage (Medicare Part A) will have a zero balance.

Guess what? It's all bullshit, and here's why: the so-called "trust funds" are fiction. They don't, in the very meaning of the term, exist. Note, in particular, this line

Interest earned on the trust fund investments

What, pray tell, are those 'investments'?

The trust is not an actual fund, but rather an accounting mechanism for the government securities that underlie the program.

Yet more nonsense about Medicare. Just as most, mostly from the Left side of politics, tell voters that 'you paid into Social Security and Medicare so you earned them', those mostly from the Right side of politics say that one or the other or both are on the brink of insolvency and have to be cut. They're both lying. Go figure.

The cold, hard, actuarial truth is that we don't need Scott's plan to force a debate over Medicare funding, because within five years, the trust fund that funds Medicare hospital coverage (Medicare Part A) will have a zero balance.

Guess what? It's all bullshit, and here's why: the so-called "trust funds" are fiction. They don't, in the very meaning of the term, exist. Note, in particular, this line

Interest earned on the trust fund investments

What, pray tell, are those 'investments'?

The trust is not an actual fund, but rather an accounting mechanism for the government securities that underlie the program.

In plain words: the Medicare 'trust fund' is said to 'earn' interest on the Damn Gummint's 'securities', aka Damn Gummint Bonds. What happens is that Uncle Sam moves moolah from one pocket to another, pretending that Social Security or Medicare or ... has 'earned' $X billion in some time period.

But, wait, you might cry!!! That's stupid!! It's just an accounting trick!!! Well, sort of or may be or may be not. Consider the alternative, where the Damn Gummint buys up stocks and bonds of public companies from Wall Street. For the moment, ignore the volatility of returns (and that a goodly number of Big Bidnezz don't pay dividends to shareholders in the first place). It would be a neat trick to plan Medicare or Social Security payments when you've, essentially, no idea what you're fund flow will be.

"Well Mom, you can't have that hip surgery Doc Smith says you need because Medicare says that the Portfolio went in the shitter last year."

And, of course, for the Big Bindnezz that doesn't pay dividends, and thus not pay income to Medicare, the 'trust fund' would have to sell off some part of its shares in some part of its Portfolio each year to maintain the cash flow.

It's one thing for the 1%-ers to do that, quite another for the Damn Gummint. The selloff in the XYZ Corporation that results would have a profound domino effect. And, of course, multiply that in spades during recession years when the 'trust funds' receive little or no dividend income from those Big Bidnezz that do pay dividends. You can see where this is going. It's called positive feedback, and in most cases, postive feedback isn't a positive experience.

In order to maximize it's returns, the Damn Gummint would have every incentive to look the other way when 'their' companies go batshit criminal in pursuit of the almighty Buck. Enforcement of securities laws would disappear. The laws themselves would likely be rescinded, especially if the RRW runs the Damn Gummint. I haven't done the arithmetic for this essay, but I'd wager that the Big Programs: SS, Medicare, Medicaid, VA, and such, would 'own' a non-trivial proportion of American Big Bidnezz; would make CalPERS look like a gnat (it's worth reading up, in that CalPERS is teeny compared to what the Federal 'trust funds' would be). Talk about a conflict of interest. Not to mention the whiplash in the C-suites of those Big Bidnezz: a Left administration for four years of Do Good investing followed by four years of Right administration giving orders to partner with the Right Wing Dictatorships du jour. Or thereabouts. Won't that be fun?

So, you can have free-market 'trust funds' (not that there's been any sort of free-market in these United States) that run the country (or vice versa?), or a Damn Gummint that keeps Big Bidnezz on some kind of leash; short or long depending on whether it's the Left or Right in charge. You can't have both.