Social Security Trust Fund

The president is arguing that the social security trust fund is essentially a myth.

"A lot of people in America think there's a trust," Bush told a forum here, shortly after he stopped off at the Bureau of Public Debt, the agency that keeps records on the nation's debt.

"But that's not the way it works," he said. "There is no trust fund -- just IOUs."

What the president calls IOU's are government bonds, backed by the credibility of the United States. If those bonds are worthless, as the president basically argues, what's he saying about our country? The Social Security Administration explains that

most of the money flowing into the trust funds is invested in U. S. Government securities. Because the government spends this borrowed cash, some people see the current increase in the trust fund assets as an accumulation of securities that the government will be unable to make good on in the future. Without legislation to restore long-range solvency of the trust funds, redemption of long-term securities prior to maturity would be necessary.

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.

The president's comments are an example of what Ted Rall once called "fuzzing it up." This is where the president says something that is actually correct, but which conveys a meaning that is not correct. What he said is technically correct. There is no bank account with all the money that is supposedly in the trust fund. Rather, the money is tied up in government bonds, and what are government bonds but glorified IOUs? However, the impression given by the president's comment is that the IOUs comprising the trust fund value are worthless, which in turn means the trust fund has no real value. This is, of course, wrong.