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April 07, 2005

That Trust Fund.

The New York Times is, shall we say, a little upset with George Bush.

Mr. Bush rehearsed just that act on Tuesday, when he visited the office of the federal Bureau of Public Debt in Parkersburg, W.Va. He posed next to a file cabinet that holds the $1.7 trillion in Treasury securities that make up the Social Security trust fund. He tossed off a comment to the effect that the bonds were not "real assets." Later, in a speech at a nearby university, he said: "There is no trust fund. Just i.o.u.'s that I saw firsthand."

Social Security takes in more money than it needs to pay current beneficiaries, and the excess is invested in the Treasury securities that Mr. Bush was discussing. They carry the same legal and political obligations as all other forms of Treasury debt, every penny of which has always been paid in full and on time.

In his speech, Mr. Bush went on to acknowledge that future generations would have to make good on the debt. But the intended meaning of the photo-op was clear. In the hope of persuading people to privatize Social Security - a move that would only add to the growing debt burden for future generations - Mr. Bush wants Americans to believe that the trust fund is a joke. But if the trust fund is a joke, so is the full faith and credit of the United States.

Fortunately, the governments, institutions and individuals who hold United States debt can tell a publicity stunt from a policy statement. Still, casting aspersions on a basic obligation of the United States government is insulting and irresponsible.

What Shrub said is true, they are just i.o.u.’s. What the Times says is also true,  that they carry just as much weight as the other debt obligations of the US. Which is why we all should be worried of course, for the taxes necessary to redeem those bonds, plus pay the costs of Medicare et al in the future, will bring the US economy to a shuddering halt and thus, at the very minimum, severely call into question the ability of the US to meet its debts.

April 7, 2005 in Economics | Permalink


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If the bonds didnt exist ,taxes would have to be raised to cover the deficit in SS..

Since the bonds exist,when they are cashed in ,taxes would have to raised to cover the deficit in SS..

Quite a difference,no??

Posted by: e m butler | Apr 7, 2005 3:42:41 PM