Saturday, July 16, 2011

Trust fund, where art thou?

kw: finance, politics, criminal activity

The President warns (threatens) that on August third, Social Security checks might not be sent out. Just a few days ago I attended a seminar at which the speaker used materials prepared by the Social Security Administration. One point he made was that the Social Security "trust fund" is solvent until at least 2037, after which benefits must be reduced an estimated 22%, and some more figures followed, but I suffered a cognitive dissonance at that point. If the trust fund is solvent, that means there is money in it, and isn't that what the SSA will used to pay recipients?

Not so fast. While Social Security taxes are used to buy treasury bonds, and those bonds are counted as assets to the "trust fund", they are counted as a debt owed by the federal government, on the federal budget side. (See this Washington Examiner editorial for a more complete analysis.)

For the first three decades that Social Security existed, this accounting fiction was actually adhered to. Under President Lyndon Johnson, however, a number of laws were changed to make it easier to simply spend the assets of the fictional fund; they were effectively rolled into the general budget. After all, he had a war to fight.

Well, we are still at war (we haven't had a genuinely war-free year since 1811). And perish the thought that the military might miss a payday! What will happen to their paychecks on August third? Hmmmm? Our esteemed President hasn't whispered a word about that, now has he?

The entire budget debate is being conducted dishonestly by every single practitioner. The specter of missed payments by Social Security is balanced by bombast and gloom from the "Republican" opposition. Positions continue to get more rigid, and more fragile. Remember this, folks, a year from now, when national elections and primaries are gearing up. It doesn't matter what party or position an officeholder supports. If the Federal government were a business, all its leadership would have been jailed long ago. So whatever you do, don't vote for incumbents. Whether the incumbent is Democrat, Republican, Independent, Tea Party, Socialist, Libertarian, vote for someone else.

There is little likelihood that a new President and new bunch of Congresspersons will be any better, but it is hard to imagine a fresh bunch doing any worse. There is the hope that, just by accident, they'll do a few things better. We can only hope.

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