Re: “Debt-limit friction bad for future” (TNT, 7-29).
James Rosen’s article on “two kinds of debt” reveals the scam around the debt ceiling and “entitlement” crisis.
The hedge fund manager’s U.S. treasury bonds are backed by the “full faith and credit” of the U.S. Treasury because he is an “outsider.” A minimum wage worker ‘s Social Security payment borrowed by the government creates no obligation to pay it back since it is not a “real debt”; she is one of us. The full faith and credit of the U.S. government does not back money borrowed from American workers.
Suppose Social Security collections are taxes, not insurance. The hedge fund manager is taxed at 15 percent. The worker pays a minimum marginal tax rate of at least 30 percent. If she (it is more often a she) earns anything approaching poverty level, her minimum tax rate is 15 percent plus another 15 percent taken from her salary and employer.
Rosen says the American people “expect federal benefits they are not willing to pay for.” Exactly what did the Wall Street crowd get from the bailout? Yes, on paper they paid it back. In reality, the government printed money to buy their toxic assets so they could pay the government back.
Investment bank “toxic assets” were nothing but funny money. The Fed printed real money to buy those toxic assets so those bailed out banks could pay us back with our own money.
Given the bailouts, we should be outright owners of AIG, Citibank, etc., just like Fiat got Chrysler. Arguing about entitlements is a scam.