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Social Security: NYT Repeats "Full Faith & Credit" Lie (Why aren't you reading this at the new website?)
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The New York Times is rehashing the same old red herring that it did previously regarding “full faith and credit” as it applies to the phantom Social Security “trust fund” -- Mr. Bush ... 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. ... 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.
This is, of course, utter nonsense.
The Times is correct when it says that Social Security takes in more in taxes than it pays in benefits. But that money is not invested – it is spent. A dollar in taxes cannot be simultaneously invested and spent. No amount of sophistry can evade that simple fact.
And what of those pieces of paper in a Virginia filing cabinet? Call them “Treasury Securities” or call them “IOUs” or call them “Zoop.” Whatever you call them, they are utterly worthless, as is any IOU from an entity to itself.
A Treasury security held by me, or, you, or the Bank of Japan, or a pension fund, is indeed a real asset to us, but only because it’s a transaction between two distinct entities: the federal government and someone or something that is not the federal government. But the “trust fund” is a transaction between the government and itself, which is meaningless.
If I have a piggy bank filled with Treasury securities, then yes I am very well off and I am protected by “full faith & credit.” But if I have a piggy bank filled with IOUs from myself to myself, then I have absolutely nothing, and my promise, from myself to myself, that my IOUs from myself to myself are backed by my own “full faith and credit” is at best accounting trickery and at worst schizophrenia.
If a married couple (same-sex or otherwise) has a piggy bank full of Treasury securities stashed away for their retirement, then yes they are very well off and they are protected by “full faith and credit.” But if they have a piggy bank full of IOUs from one spouse to the other spouse, then they have absolutely nothing, and their mutual promise to each other that their IOUs to and from each other are backed by their mutual “full faith and credit” is meaningless.
If the federal government has a piggy bank full of, say, IOUs from the Bank of Japan, then yes it has real assets that (I presume) are backed by the “full faith and credit’ of the Bank of Japan. But if the piggy bank is full of IOUs from itself to itself, then it has absolutely nothing. “Full faith and credit” — which only has meaning in the context of “full faith and credit to whom?” — has no meaning whatsoever when a person, or government, extends it to itself.
Now replace “piggy bank” with “trust fund” and IOU with “securities” and you have the President’s message, which, unlike the “trust fund,” is very real.
Meanwhile, Social Security Choice notes something interesting:
The New York Times editorial page weighs in on President Bush's photo-op in West Virginia inspecting the non-existent assets of the Social Security trust fund. And what do you know — it's practically verbatim from Democratic Party talking points.
-------------------- Wise men learn more from fools than fools from the wise.
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