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April 18, 2005

Considering the Trust Fund

One of the ways that conservatives have attempted to sell their undermining of Social Security is telling us that the Trust Fund is full of Treasury Bonds that aren't real money.

Jane Galt goes down this primrose path, although not to the point of undermining the system:

In case anyone thought it was in any doubt, I do, in fact, believe that there are bonds, and that the government will note the interest rates on those bonds in its account books. But the failure to understand that there is a difference between IOUs written to yourself, and IOUs written to someone else, strikes me as willfully obtuse.

Willfully obtuse? Hmmm...

Upon even a moment's reflection, it's obvious that the trust fund does not exist in the way that its proponents are claiming -- as a guarantee of benefits -- because the bonds are not obligations to Social Security beneficiaries. They are obligations to the Social Security Administration. And the Social Security administration has no legal obligation to turn the accounting entry representing interest payments from the federal government into cash. According to the supreme court, Americans have no property right in their social security benefits, as they would as creditors of an underfunded private sector pension plan.

I agree that the Treasury Bonds aren't direct IOUs to SS recipients. They're IOU's to the Social Security Administration. But the entire existence of the SSA is to write checks to retirees and others who qualify. If they don't do that...the reason for their existence evaporates. I don't know all of the legalities involved here..but it seems to me that if the Trust Fund isn't used for sending checks when outgoing expenditures exceed revenues, the SSA ceases to exist.

So by that very nature, the Trust Fund is a guarantee of benefits.

Keep in mind as well that those dollars in your pocket aren't real money. They're IOUs as well. They're honored because they're backed up by "real money"...or gold. Just like US Treasury Bonds are backed up as well.

I find it difficult to believe that any conservative truely wants to carry the "Treasury Bonds aren't real money" meme to it's logical conclusion. That conclusion would be that the US will default on the bonds, causing a global financial meltdown.

What was that about willfully obtuse?

Posted by Carla at April 18, 2005 11:37 AM