Worthless IOUs?
"There is no trust fund, just IOUs that I saw firsthand, that future generations will pay," Bush said after inspecting the storage site. "Imagine - the retirement security for future generations is sitting in a filing cabinet."
George W. Bush
"No, but you...you...you're thinking of this place all wrong. As if I had the money back in a safe. The money's not here. Your money's in Joe's house...right next to yours. And in the Kennedy house, and Mrs. Macklin's house, and a hundred others. Why, you're lending them the money to build, and then, they're going to pay it back to you as best they can. Now what are you going to do? Foreclose on them?"
George Bailey, in It's a Wonderful Life
Did anyone really believe there was a big pile of gold bullion in a vault that was the Social Security Trust Fund? I doubt it; we have been on the gold standard in this country for a long time. In other words, there's not even a big pile of gold bullion at Fort Knox that corresponds to each and every dollar bill in circulation. Does that mean that a dollar bill is nothing but a worthless IOU?
An IOU is just a promise. The only thing that would make it worthless is for the entity which made the promise to decide to ignore the promise, to default on the obligation. So why is President Bush telling us that there is no trust fund?
For the last twenty years, if you've paid Social Security taxes, you've paid extra, more than was necessary to meet the obligations of Social Security to current retirees. The reason you've paid extra is to build up a surplus, because there was a point in the future where the ratio of retirees to workers would be large enough that payroll taxes wouldn't be enough to meet the obligations. So, for the past twenty years, Social Security has accumulated a surplus; this is the "trust fund." The trust fund was invested in US government debt; in other words, the money was loaned to the federal government, with a promise to pay it back later.
I have money invested in US government debt; probably you do, too. So do a number of foreign governments, especially the Chinese. Are all our IOUs worthless, too?
Why is President Bush going around saying that there is no trust fund? Because otherwise, he'd have to deal with the massive deficits his administration has accrued. He wants to default on this part of the debt, because he can hide it under a smokescreen of "Social Security is broken." If he can't default on this part of the debt, if he can't just say, sorry, I don't want to pay that back, then he'll have a hard time making his pet tax cuts permanent.
Let's be clear here. If there is no trust fund, then what has happened is, a regressive payroll tax has been used to fund tax cuts which disproportinately benefit the wealthiest segment of our population. The past twenty years of over-collecting of Social Security taxes then represent a massive redistribution of wealth from the poor and middle-class to the rich.
Cutting the capital gains tax, phasing out Social Security, eliminating the inheritance tax; this administration seems intent on undoing the American dream, that anyone can rise from poverty to riches. This administration seems intent on establishing a permanent moneyed aristocracy, on making it impossible for any kind of social mobility.
Are your investments in US Treasuries worthless IOUs? It depends; can the Republicans find a way to hide their theft of your money?
George W. Bush
"No, but you...you...you're thinking of this place all wrong. As if I had the money back in a safe. The money's not here. Your money's in Joe's house...right next to yours. And in the Kennedy house, and Mrs. Macklin's house, and a hundred others. Why, you're lending them the money to build, and then, they're going to pay it back to you as best they can. Now what are you going to do? Foreclose on them?"
George Bailey, in It's a Wonderful Life
Did anyone really believe there was a big pile of gold bullion in a vault that was the Social Security Trust Fund? I doubt it; we have been on the gold standard in this country for a long time. In other words, there's not even a big pile of gold bullion at Fort Knox that corresponds to each and every dollar bill in circulation. Does that mean that a dollar bill is nothing but a worthless IOU?
An IOU is just a promise. The only thing that would make it worthless is for the entity which made the promise to decide to ignore the promise, to default on the obligation. So why is President Bush telling us that there is no trust fund?
For the last twenty years, if you've paid Social Security taxes, you've paid extra, more than was necessary to meet the obligations of Social Security to current retirees. The reason you've paid extra is to build up a surplus, because there was a point in the future where the ratio of retirees to workers would be large enough that payroll taxes wouldn't be enough to meet the obligations. So, for the past twenty years, Social Security has accumulated a surplus; this is the "trust fund." The trust fund was invested in US government debt; in other words, the money was loaned to the federal government, with a promise to pay it back later.
I have money invested in US government debt; probably you do, too. So do a number of foreign governments, especially the Chinese. Are all our IOUs worthless, too?
Why is President Bush going around saying that there is no trust fund? Because otherwise, he'd have to deal with the massive deficits his administration has accrued. He wants to default on this part of the debt, because he can hide it under a smokescreen of "Social Security is broken." If he can't default on this part of the debt, if he can't just say, sorry, I don't want to pay that back, then he'll have a hard time making his pet tax cuts permanent.
Let's be clear here. If there is no trust fund, then what has happened is, a regressive payroll tax has been used to fund tax cuts which disproportinately benefit the wealthiest segment of our population. The past twenty years of over-collecting of Social Security taxes then represent a massive redistribution of wealth from the poor and middle-class to the rich.
Cutting the capital gains tax, phasing out Social Security, eliminating the inheritance tax; this administration seems intent on undoing the American dream, that anyone can rise from poverty to riches. This administration seems intent on establishing a permanent moneyed aristocracy, on making it impossible for any kind of social mobility.
Are your investments in US Treasuries worthless IOUs? It depends; can the Republicans find a way to hide their theft of your money?
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