A Stitch in Haste

The New York Times:

In suggesting that 2018 is doomsyear, the president is reinforcing a false impression that the trust fund is a worthless pile of I.O.U.'s - as detractors of Social Security so often claim. The facts are different: since 1983, payroll taxes have exceeded benefits, with the excess tax revenue invested in interest-bearing Treasury securities. (An alternative would be to, say, put the money in a mattress.) That accumulating interest and the securities themselves make up the Social Security trust fund. If the trust fund's Treasury securities are worthless, someone better tell investors throughout the world, who currently hold $4.3 trillion in Treasury debt that carries the exact same government obligation to pay as the trust fund securities. The president is irresponsible to even imply that the United States might not honor its debt obligations.

Um, lie.

No one, including the President, is suggesting that United States might not honor its debt obligations. That's a big part of the problem.

Of course it's great if I hold a Treasury security -- it means that an entity that is not myself owes me money that I am certain to be repaid. Awesome.

But if I own a "KipEsquire" security -- it only means that I have deluded myself into thinking that I have more assets than I really do. An IOU to myself is -- let's be perfectly, utterly and unambiguously clear about this -- 100% worthless.

The Treasury Department is the United States government. The Social Security Administration is the United States government. The "Social Security Trust Fund" is a mountain of IOUs from the federal government to the federal government -- and is therefore 100% worthless.

Stated differently, a Treasury security is nothing more than a promise by the federal government to raise revenue in the future. It is not a gold coin, or an acre of federal land, or a vault full of Snickers bars. Just a promise to tax you later. Not so awesome.

Consider another analogy: If your parents own a mountain of Treasury securities then you stand to receive a very nice inheritance. But if your parents instead own a mountain of IOUs to and from each other, what is the value of your inheritance then? That's right: 100% worthless.

The more straightforward the truth is, the more complex the con artist's lies must become.

Related Posts:
Daily NYT Social Security Lie
New York Times Continues "Ostrich-cizing" Social Security Reform
Social Security Reform 101
Social Security: Return of the Flying Pigs
Waiting for Reform