The Myth-ing Logic of Phony IOUs in the Soc Sec Trust Funds

by Bruce Webb

There has been a recent mini-surge of op-eds claiming that the ‘assets’ of the Trust Funds, all $2.6 trillion, are simply mythical. The most recent Scrooge to argue this line may have been Thomas McClanahan of the KC Star in this piece from Christmas: More mythbusting on Social Security ‘money’” in which he informs us how mistaken we are:

Many people believe the trust fund contains securities that have real economic value. So, a few days ago, I wrote an editorial titled “The myth of the trust fund.”


To turn trust fund bonds into real money, the government must do what it would have to do if the trust fund did not exist: borrow, cut spending somewhere else, or raise taxes. The trust fund bonds may be assets from the point of view of Social Security, but they’re a liability for the government as a whole, and for us as taxpayers

Well the argument is at base nonsense on historical, political, legal and economic grounds, but it also suffers a logical hole big enough to run a Prison Bus through. Because if it is true in 2010 it was equally true in 1993 when the Trust Funds first got back to actuarial balance (per McClanahan another myth presumedly) and more to the point in 1983 when Reagan agreed to the tax increase via the Greenspan Commission. Which would logically make Dutch and the Maestro Greenspan pre-meditated thieves and liars.

And more to the point you would have to add almost everyone in the political, media and academic establishment who didn’t raise this seeming clear objection back in 1993, there being no logical point of separation whereby real assets suddenly turned into mythical ones. True some people have been arguing one version or another of phony IOU for years, but somehow that never got translated into proposals to cut FICA on wage earners, instead they happily collected the money while apparently per Mr. McClanahan never intending to pay it back, the Treasuries never being real to start with.

Sorry this argument cannot be made in good faith, not unless this guy had a Road to Damascus/Could Have Had a V-8 moment in the very recent past. A polite term for this is special pleading, though Conspiracy to Commit a few million Counts of Larceny fits pretty well.

Do the assets in the Trust Fund have economic value? Well since 2006 the DI Trust Fund has been taking first interest and starting last year principle in cash. And the ‘checks’ are clearing, what more proof do you need that Special Treasuries have exchange value beyond the fact they are exchanged for value every workday of the year? Now there are arguments that would plausibly suggest that the strain of this redemption will create a problem at some future date, but those arguments should come with numbers and dates and percentages of GDP attached and not just be advanced via ‘Shazam! Its a Myth! Oh Foolish One!’ No it is a proposal by liars to promote theft. (Which probably blows my opportunity for a party invitation Chez McClanahan).