I haven’t ranted about the non-existent Social Security crisis for a while. Thankfully, Bob Somerby does some very good myth-busting of the ‘worthlessness’ of Social Security IOUs–that is, the Social Security Trust Fund:
It’s true, of course, that the SS surpluses of the past twenty years (the so-called trust fund) have been borrowed and spent. (That’s the system Congress put in place when it raised payroll taxes in the 1980s.) But then, the federal government borrows lots of money, from lots of sources, and all of that money has been spent! Duh. The government doesn’t borrow money so members of Congress can sit and stare at it. They don’t just let it sit in a vault until they have to pay it back. The government borrows money from the SS trustees and from Chinese banks–and all the money gets spent! That’s why the money is borrowed!
Could we conduct a thought experiment about this remarkable bit of misdirection?
The federal government has borrowed lots of money from Chinese banks down through the years. When those loans come due and must be repaid, do you think the feds will say this to the Chinese: The money isn’t there–we’ve already spent it? There’s just a pile of worthless IOUs in your account? Of course they won’t say any such thing–they’ll repay what’s due, then borrow some more. (Assuming we haven’t gone into balance.) But the same process obtains with the money that’s borrowed from the SS trust fund.
You may not like the fact that the government borrows–but that’s a separate question. There’s nothing magical about the money borrowed from the SS trust fund–nothing that sets it apart from all the other money the government borrows. And yet, a remarkable piece of propaganda was invented decades ago, and it has now wormed its way into the hearts of the populace. Baker’s post proves it again: You simply can’t discuss Social Security without someone reciting the points which have fueled this long campaign. Indeed, young people are sure they’ll never see a penny of Social Security because of this long, slick effort.
This must be the greatest piece of political propaganda of the last fifty years–the greatest bit of misdirection conceived in that period. Everyone has heard the talking-points. Volunteers rush forward to state them.
So how about it? Is it true? Is the trust fund “nothing but worthless IOUs?” Here’s the answer to that question: People! Go ask the Chinese!
Or, to paraphrase Dean Baker, if we’re going to default on government-backed securities, why not start with Peter Peterson’s?