Club for Growth’s Social Security blog is a useful tool for keeping up on the latest from the rightwing hacks. Case in point is the post “The Trust Fund Hoax”, which links to a couple of attempts to defend 2018 “just IOUs” yahoo-ism (and Max Sawicky is welcomed to jump in at any point as I’m liberally using his wonderful ways of setting the issues straight). Before we turn to Mr. Frum and Mr. Nugent, let’s put this in terms of Mr. And Mrs. America (to quote Dick Armey) who are 45-ish middle-class employees. They have been paying a 12.4% payroll tax on the premise that they were prefunding part of their retirement. Under Bush’s plan as explained by the 2018 “just IOUs” yahoo – that was all one great hoax as what they were really doing is subsidizing the General Fund deficit so Ronald Reagan can cut income taxes – mostly for high income folks living off of capital income. And when Mitch Daniels said “there is plenty of money for an income tax”, what Bush43 had in mind as we know see is that Mr. and Mrs. America will continue to pay high employment taxes so Bill Gates can play less in taxes. After all, the President’s budget still leaves a gaping General Fund with the only significant spending reductions being his hope fo slash Social Security benefits for Mr. and Mrs. America.
So how does Nugent dismiss the now $1.6 trillion in Social Security Trust Fund reserves, which are likely to grow to $8 trillion by 2020?:
The truth is that there is no money in the Social Security trust fund. Most Democrats can’t handle this fact and instead fanaticize about a Social Security trust fund that supposedly represents a giant savings plan. The charade is exacerbated by the holding of only low-yield government bonds in the trust fund.
Bonds are not money – they are just IOUs? I have some money in my wallet (cash) and it is an IOU on the American Central Bank (Federal Reserve). I have lots of money in my Bank of America checking and savings accounts, but these financial assets are just IOUs on B of A. I’m not sure how Mr. Nugent would define “money” but most definitions have it being a financial asset, which is an IOU.
But to be fair, Nugent was saying things similar to what Frum had to offer:
NRO readers, being a sophisticated bunch, have probably already spotted the fallacy here. If Fred writes an IOU for $10 to Jim, Jim has an asset. But if Fred writes an IOU to Fred for $10, he has not created an asset for himself – he’s created a reminder notice. And that’s the situation of the Trust Fund. One branch of the US government (the Treasury) owes another branch (the Trust Fund) a bunch of money.
I’ll skip the obvious debating point here (those who trust Kudlow-Luskin-Moore cannot be a sophisticated bunch) and note with approval that Frum caught another Meet the Press piece of idiocy:
MR. RUSSERT: In 2018, the Social Security Trust Fund will begin to draw down, and in 2042 run a deficit, according to the trustees of the fund. What is your plan? What will you do? If the president’s wrong, what would you do specifically to fix Social Security?
But Frum forget to point how how utterly Tim Russert confused (1) is – again. A fund with $8 trillion by 2020 and that will supposedly not even have a cash flow deficit for another generation is in trouble? Someone explain to Tim that having lots of money in the bank allows one to “draw down” (run cash flows deficits) for a long time. Instead, Frum was more interested in attacking Senator Kennedy for proposing a reversal of Bush’s income taxes to offset the massive General Fund deficit.
What is Frum really saying here? He is saying that what Mr. and Mrs. America thought was going to prefund their Social Security retirement – both principle and interest – has been given to folks like Bill Gates in the form of income tax cuts – especially tax cuts on capital income, And Mr. and Mrs. America will have to continue to pay high employment taxes as we should perish the thought that Mr. Gates would ever face a tax increase.
Our friend David Altig is a lot more honest about his referring to Social Security as a pay-as-you-go system and not a prefunded defined benefits system as at least he is honest enough to concede that the Bush agenda is a massive redistribution of wealth. And if you have joined Kevin Drum in re-reading the pre-SOTU remarks by the Senior Administration official, you might notice that the White House was referring to some ‘tone” where everyone seemed to agree with Mr. Frum’s view that these reserves are not a prefunding of our Social Security retirement accounts. I’m certainly not agreeing with this tone and neither did President Clinton. But I’m glad the White House and its allies are finally admitting what the real agenda is. Mr. and Mrs. America – take note.
1: thanks to the AB reader who noted I omitted “confused” on 1st draft.