Don McDaniel writes about the U.S. Treasury bonds held in the Social Security ‘trust fund’ that “Far from being ‘worthless IOUs’ [as claimed by Charles Krauthammer], 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” (Letters, March 15).
But those bonds are held by the same party that issued them, namely, Uncle Sam; the creditor here is one with the debtor. If Uncle Sam’s future stream of tax receipts falls short of his future spending obligations, meeting those obligations will require tax hikes or spending cuts. The bonds in the ‘trust fund’ are no independent source of revenue for Uncle Sam to tap into to meet his Social Security obligations as these bonds would be if they were issued instead by, say, Microsoft or by Her Majesty’s government in the U.K. Revenues used to redeem the bonds held in the ‘trust fund’ must be raised through Uncle Sam’s power to tax – the very same power that Mr. Krauthammer and others warn will have to be exercised in a much more Draconian manner if Uncle Sam doesn’t rein in the growth of entitlements.
Wednesday, March 23, 2011
More on the ‘Trust-Fund’ Fraud
Here’s a letter to the Washington Post: