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Shameless Photo Op

On the 7th of April The New York Times criticized President Bush for a symbolic “visit to the Social Security Trust Fund” — a filing cabinet somewhere in the Social Security Administration which holds paper copies of the government bonds in which the trust fund is invested. Deeming it a “shameless photo op”, the Times editorial took the President to task for denigrating U.S. government bonds as mere IOUs, and repeated the standard claims of the stalwart defenders of the current Social Security system that those bonds represent real wealth backed by the “full faith and credit” of the U.S. government. Almost as an aside, and with no further elucidation, they acknowledged that there might be some concern about paying for those future obligations — but that acknowledgement was so surrounded by glowing testaments to the integrity of government bonds and the solvency of the trust fund that it left the impression that such concerns were beneath contempt.

I find this indifference to the very real cash-flow obligations with which we are saddling our children and grandchildren dismaying. I wrote this as yet another attempt to convince them — and their equally insouciant readers — to take those obligations seriously. It was not published.

7 April 2005

Your editorial on the President’s visit to the Social Security trust fund (“Shameless Photo Op”, 7 Apr 2005) attacks his claim that its portfolio of Treasury bonds are “not real assets”, and repeats the mantra of the Social Security faithful: that the “full faith and credit of the United States” ensures those assets are both real and, by implication, sufficient to the task of meeting our future obligations.

Fair enough. The President is inarticulate in describing the real problem with the trust fund and resorts to cheap emotional rhetoric. But notwithstanding your defense of the “reality” of those assets, they are not sufficient to our needs. The trust fund is a joke even if the bonds that comprise it are not.

The problem is not that the trust fund holds no assets. The problem is that the trust fund assets are nothing more than claims on future government revenues. If we wanted simply to raise tax rates and borrow money to pay for Social Security in the future we could do so directly, without the sham of funneling the money through the “assets” of the trust fund. The “joke” of the trust fund assets is not that they are worthless but that they are pointless: they do nothing to change the amount of contemporaneous tax revenue and/or deficit that will be required to support Social Security obligations in the future; they merely transfer that requirement from the Social Security Administration to the rest of the government.

© Copyright 2005, Augustus P. Lowell

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