Abnormal Interests

What are these IOU's? They are special Treasuring Notes backed by the good faith and trust of the United States Government. As such, they are not worthless scraps of paper stuffed haphazardly in some filing cabinet. Like many of you, I have owned a few Treasuring Notes and like many of you, I have kept them in a filing cabinet and in a bank safety deposit box. When it came time to sell them, I had no doubt that my government would honor them. It is very reckless to suggest that these bonds are of no value. It is true that unless something is done before they need to be redeemed, the government will likely have to barrow, by issuing other bonds, to pay for them. But this will happen gradually between 2018 and 2052 at which time the fund will only be able to rely on income form taxes. Which will then be able to provide 81% of the promised benefits (These numbers come for the non-partisan Congressional Budget Office rather than the highly politicize Trust Fund it self.). The government will do what it does every day, barrow money. Very slight changes in the income now, such removing the maximum income against which Social Security taxes are collected, will fix the problem or come very close to it.

Our government, for better or for worse, must be able to barrow. Remarks like those of the president risk frighten investors, foreign and domestic, into looking else where for a safe place to put their money. The growing debt is bad enough, having to pay higher interest rates will only make it worse. It there an implication in the President remarks that one of his like minded successors might default on the debt owed the Social Security Trust fund? If so, this must be grounds for impeachment. Of course, that will never happen.

Here's another beauty from the speech,

Americans must reject temporary measures. In other words, you'll hear people in Washington say, well, we got a 75-year fix, for example. You know, in 1983, the issue came to focus, and President Reagan and Speaker Foley, as well as other Republicans and Democrats, set aside their partisan differences and said, look, we have an obligation to act on behalf of the country. And they came together and put what they thought was a 75-year fix to the problem. The problem is that the 75-year fix wasn't a 75-year fix, because here we are, 22 years later, talking about it again. See, that's a misnomer.

Well, let's do the math. From 1983 to 2052 (the year the Trust Fund sells it's last bond under the current system) is 70 years. Not quit 75 years, but extremely close. Some think the CBO understates the time. So the 75-year estimate was extremely good. Where does Bush get the 22 years? By subtracting apples from chicken soup cans. The Social Security fix done in 1983 will last until 2052 at least. Not just until today. This kind of a statement would be a lie if it were not so misleading.

The article does quote some sensible legislators.

Responding to Bush's visit, Senate Minority Leader Harry Reid (D-Nev.) and House Minority Leader Nancy Pelosi (D-San Francisco) sent Bush a letter saying it was "simply wrong to suggest that the Social Security trust fund does not exist, or that the securities held by the trust fund are merely pieces of paper."

"For a president to even suggest that the federal government might, for the first time, default on a security backed by the full faith and credit of the United States unnecessarily misleads American workers about the health of the Social Security program," they wrote.

Call the Social Security Trust Fund bonds IOUs may not be a lie but it is very close to one. Those who seek to destroy Social Security often say this kind of non-since, but coming for the President it is truly despicable.