That Trust Fund


The myth of the myth of the Social Security trust fund lives on. So you have The Hill on March 15 of this year claiming "The trust fund itself has a theoretical $2.6 trillion surplus, but that money has been spent by the federal government like general revenues." And you have Speaker of the House John Boehner on May 15 pretending

Today there are ten thousand new people signing up for Social Security and Medicare every single day, ten thousand more every single day. And as a result, the money in the so-called trust fund doesn’t exist. And it has to come out of current revenues. And that’s why everything needs to be on the table. We’ve put for-- forward our plan.

Spreading the disinformation about the trust fund is central to the efforts of the GOP, neo-liberals, and traditional media to gin up support for cutting the program. Boehner asserts, dishonestly, "the so-called trust fund doesn't exist" and therefore reducing benefits "needs to be on the table."

When The Hill misinformed its influential readers two months ago, Dean Baker responded

It is not clear what information the paper thinks is added by the word "theoretical." It is possible to add the word to almost any sentence (e.g. "Washington has a theoretical basketball team"). When something actually exists in the world, calling it "theoretical" is presumably intended to impugn it in some way.

Of course the trust fund does exist in the world, it is held in the form of U.S. government bonds. These bonds are referred to as "IOUs" in the Hill piece. It is highly unusual to refer to bonds of private corporations or government bonds as IOUs.

The Social Security website explains

Far from being "worthless IOUs," the investments held by the trust funds are backed by the full faith and credit of the U. S. Government. The government has always repaid Social Security, with interest. The special-issue securities are, therefore, just as safe as U.S. Savings Bonds or other financial instruments of the Federal government.

Bonus lie from Speaker Boehner: "the money in the so-called trust fund doesn’t exist. And it has to come out of current revenues." Well, no, the money includes interest on the U.S. government securities bought with the trust funds. The SSA website explains "the principal amount of special issues redeemed, plus the corresponding interest, is just enough to cover an expenditure."

Social Security is not included in the current budget negotiations because it doesn't contribute to the deficit and it appears too hot to handle before the 2012 elections. But if the GOP prevails in 2012, it will be a prime target. And even if it does not.

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