Here’s a letter to USA Today:
Budget director Jacob Lew assures us that Social Security is solvent because the Social Security “trust fund” contains lots of U.S. Treasury bonds “backed with the full faith and credit of the U.S. government – and are held in reserve for when revenue collected is not enough to pay the benefits due” (“Social Security isn’t the problem,” Feb. 22).
Yes, the Social Security “trust fund” is indeed filled with ample quantities of interest-bearing U.S. treasuries. But the same organization (Uncle Sam) that is the creditor on these treasuries is also the debtor on them. Ask: when Uncle Sam cashes in these treasuries to get funds to pay promised Social Security benefits, who pays Uncle Sam the principal and interest on these treasuries? Answer: Uncle Sam – who must, of course, raise taxes on flesh-and-blood people to get the dollars that he pays to himself so that he can then pay out promised Social Security benefits.
I.O.U.s written to one’s self are not assets. They are, instead, pathetic reminders of one’s gross financial irresponsibility.
Bernie Madoff is in jail – rightly so – for duping people with the same sort of financial flim-flammery that the White House budget director today peddles in your pages.
Donald J. Boudreaux
UPDATE: Jim Agresti, President of Just Facts, sent to me the following e-mail: “In the words of the Clinton Administration’s 2000 budget proposal, the Social Security trust fund does ‘not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the Treasury that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures.’”