QA From the SSA web site:
"Is there really a Social Security trust fund?
"Yes. Presently, Social Security collects more in taxes than it pays in benefits. The excess is borrowed by the U.S. Treasury, which in turn issues special-issue Treasury bonds to Social Security. These bonds totaled $1.5 trillion at the beginning of 2004, and Social Security receives more than $80 billion annually in interest from them. However, Social Security is still basically a "pay-as-you-go" system as the $1.5 trillion is a small percent of benefit obligations."
muir_redwoods wrote:
"What there is, is a pile of government IOU's called treasury notes obligating the government to pay itself back at a future date. Obviously a failure to repay cannot be pursued legally because no entity can sue itself."
Very true that there is no "lockbox" or similar entity to raid. The beef with President Bush would be that he has allowed debt to accumulate that would prevent the government from repaying its treasury bonds. This might not be prosecutable, but wouldn't it be a huge blow to the American position in the global financial markets? The government has issued treasury bonds to many citizens and to foreign financial institutions. What would be the financial results (especially globally) of the U.S. government refusing to honor these bonds issued to the Social Security Administration? Wouldn't it be a rather high-profile alarm alerting other countries to stop financing U.S. debt?
Well, since the Social Security Administration is part of the "U.S. government," I don't think the situation will ever be allowed come to that. Congress will either raise taxes, borrow money, or cut Social Security benefits (or, most likely, some combination of the foregoing) so that the issue of one part of the government "refusing to honor" it obligations to another part of the government never comes up.
If there was a wholesale default on treasury bonds and other obligation instruments it would be a huge blow to the US economy but if the government defaulted on notes it owes to itself there would be far less of an impact. I leave it to philosphers to explain the concept of an entity bearing a debt to itself.