Excellent editorial in this week's The New Yorker on Chimpy's take on Social Security. Wish I could post the entire discussion here, wonderful talking points.
Untrustworthy - Hendrik Hertzberg
As an institution, the trust fund has been good to the Bush clan. Thanks to this ingenious financial tool, through which part of a family fortune can be protected for its intended beneficiaries, George W., among other Bushes, has been spared some of the material difficulties that afflict so many of their fellow-citizens. It is the trust fund that, in part, has allowed members of the family to follow their dreams.
Another sort of trust fund, the one associated with Social Security, has likewise been good to America’s ruling dynasty. True, the direct disbursements are relatively trifling: although the checks go out to Poppy and Bar, as they do to thirty million other retirees, the amounts are probably insufficient to pay lawnmowing and pool expenses at Kennebunkport. But the political benefits, especially to their firstborn son, have been formidable. The Social Security system consists of, on the one hand, a disbursement mechanism that provides modest but dependable incomes to the elderly and the disabled and their survivors and dependents, and, on the other hand, a funding mechanism, a 12.4-per-cent flat tax on wages up to ninety thousand dollars a year. The difference between the two goes into (or comes out of) the Social Security trust fund, which has grown dramatically over the past twenty years. In tandem with the Clinton Administration’s fiscally responsible budgeting, the trust fund’s growth pulled the entire federal budget out of deficit from 1998 to 2001. Those trust-fund-driven budget surpluses, in turn, enabled George W. Bush, first as a candidate and then as President, to sell (falsely, it turned out) his program of tax cuts for the comfortable as a freebie. And the trust-fund surplus kept this year’s budget deficit down to a scary $412.1 billion, rather than the scarier $563.2 billion it would be without it. You would think, therefore, that the President would speak respectfully of the Social Security trust fund. But no.
(snip)
The trust-fund-as-myth contention is a staple of Bush’s echo chamber of conservative op-edders and think-tankers. Whether there is any truth to it is an interesting, as he might say, question. (It’s worth noting, by the way, that, if the trust fund is a myth, then its prospective shortfall is a myth, too.) The trust fund, which has close to two trillion dollars in it at the moment, is frequently derided as an accounting fiction. In fact, it consists of a growing pile of U.S. Treasury bonds of a special type, embossed and beribboned and neatly stacked in a vault in West Virginia. Unlike standard Treasury bonds, these do not fluctuate in value. By the same token, they cannot be traded on the open market, which is why many of Bush’s ideological allies dismiss them as mere pieces of paper, without inherent worth.
It is theoretically true that the Treasury, with Congress’s permission, could refuse to redeem these bonds when the time came. The consequences would be severe, especially at the next election: seniors, already a fifth of the voting public, will be something like a quarter of it in 2018, when, according to the Social Security Administration’s (highly conservative) estimates, the trust fund has to start cashing in. But it could happen, theoretically. Of course, the Treasury could also refuse to honor the bonds held by foreigners. These, too, are pieces of paper. The main difference is that the consequences of default would be harsher. For that matter, federal reserve notes—the ones, fives, and twenties in our wallets—are pieces of paper, too. Their only value is as symbols of a promise from the United States government. If the promise is no good, neither is the money. The entire economy runs on promises—that is, trust—which is why paranoid survivalists convert their assets to guns and cans of tuna fish.
(snip)
http://www.newyorker.com/talk/content/articles/050328ta_talk_hertzbergEnough of Shiavo, we have played their game long enough - time to get back to the problems at hand.
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