Yup, that 'blatant distortion' is me, which makes that two CCL bashings in one post. Though the post is not about our articles specifically - it's really about Bush's plan for reform, or lack there of - I think it deserves a response.
Ever since the Columbia Spectator’s editorial page managed to print a character defamation, a blatant distortion, and truly unhinged rubbish, all in the same day (no small feat, I’m sure), I’ve been wary about taking them seriously. This struck me as a pretty rational reaction - after all, the defamee responded eloquently and the ridiculousness of the other two are fairly self-evident.
However, so much nonsense does get to be tiresome on the eyes, and the nonsense has unfortunately continued at full speed. Take, for example, Jeff Waksman’s recent piece, “Dean and Dems: Get It Together.” There is much silliness to poke at here, so I’ll just point out the most egregious bit: Waksman, in an attempt to demonstrate Democrats’ supposed inability to come up with any new ideas, argues that there is no Democratic plan to ’save’ Social Security.
The author [what's up with anonymous posts?] points to Eriposte, a site run by a guy who defines himself as "socially liberal, fiscally conservative (not the faux conservatism that is the norm these days, but actual conservatism) and somewhat hawkish from a foreign policy standpoint," and tries to give balanced information on various policy questions.
On the Social Security trust fund he quotes various sources. The first being Mark Weisbrot and Dean Baker of CEPR who wrote Social Security: The Phony Crises (which I have read) and excerpt that book in the Washington Post:
Eriposte cites more sources but they are basically reiterating the same theme.
"That money's all been spent": When anyone lends money to the federal government by buying a bond, the government spends it. But the government still pays interest and repays what it borrowed. That goes for the Social Security trust
fund. Social Security has been running annual surpluses (now at more than $150
billion) since 1983. By law it must invest that surplus in U.S. Treasury obligations."
But the trust fund is only holding I.O.U.'s -- just pieces of paper!" Another canard: All bonds are I.O.U.'s. Those "pieces of paper" are backed by the full faith and credit of the U.S. government, which has never, ever defaulted on its bonds.
Ok, so Baker and Weisbrot are correct in saying that, "By law [the SS trust fund] must invest [its] surplus in U.S. Treasury obligations;" I say the same thing in my op-ed, "the Trust Fund buys treasury bills, which are nothing more than government debt." Obviously the government will pay back its debts, as I say in my op-ed, "There is a reason why treasury bills are considered the safest investment in the world; the U.S. government does not default on its debt." But this is not the issue in question.
What matters is what it means for the government to own and finance its own debt. When an individual buys a bond and the government pays it back, money is being transferred from one party on another. However, when the government owns its own debt, no money is actually changing hands because it all happens within the government. It's circular, the only thing that changes is a number in an accounting book. And this is all I am getting at. You cannot claim that the trust fund represents real fungible assets. If the government uses the surplus from Social Security to finance its debt, then when it has to make good on that debt it has to borrow more; it's implicit debt.
If you still don’t believe me, listen to the Social Security Trustees in their report, "Status of the Social Security and Medicare Programs: A Summary of the 2005 Annual Reports, Social Security and Medicare:"
Since neither the interest paid on the Treasury bonds held in the HI and OASDIWhat is it exactly that i am distorting?
Trust Funds, nor their redemption, provides any net new income to the Treasury,
the full amount of the required Treasury payments to these trust funds must be
financed by some combination of increased taxation, increased Federal borrowing
and debt, or a reduction in other government expenditures.