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Fund-Less Trust Fund
National Review ^ | 04/06/05 | DeRoy Murdock

Posted on 04/06/2005 7:00:24 PM PDT by smoothsailing

April 06, 2005

Fund-less Trust Fund

The filing-cabinet drawer in West Virginia.

Yes, Virginia, there is a Social Security Trust Fund. Actually, Virginia, it's in West Virginia — Parkersburg, to be precise.

President Bush traveled there Tuesday to visit the trust fund. Americans could be forgiven for thinking that he toured giant vaults brimming with gold bars, diamonds, real-estate deeds, precious antiques, and paintings by Rembrandt and Frans Hals. No such luck.

"A lot of people in America think there's a trust," Bush said, "that we take your money through payroll taxes, and then we hold it for you, and then when you retire, we give it back to you. But that's not the way it works...There is no 'trust fund,' just IOUs, that I saw firsthand."

What Bush found inside the H. J. Hintgen Building, not far from the Ohio River, was the trust fund's actual repository: The locked bottom drawer of a gray filing cabinet.

"Imagine — the retirement security for future generations is sitting in a filing cabinet," Bush said in astonishment.

That drawer, inside an office of the U.S. Bureau of Public Debt, contains $1.76 trillion worth of special-issue U.S. Treasury bonds. Each of these, 225 pieces of paper in all, is contained in one of two white, loose-leaf notebooks that hold plastic page covers. Despite the protective plastic, these certificates have no more financial value than the ink with which they are printed.

"The paper is symbolic," Bureau of Public Debt spokesman Pete Hollenbach explained in a February 26 Associated Press dispatch. As a 2004 Congressional Budget Office report observed, the trust fund is an "accounting mechanism" with "no economic resources."

The key reason these notes have no value is that the money that should be behind them — the excess payroll taxes not devoted to today's retirees — instead gets spent by Congress on everything from farm subsidies to national parks to armored Humvees.

In fiscal year 2004, Cato Institute scholar Michael Tanner reports, the Treasury collected $570.7 billion in payroll taxes and credited Social Security with $89 billion in interest. Social Security recipients received $501.6 billion in benefits. This $158.1 billion balance — which could have funded personal-retirement accounts — instead flowed into general revenues. Congress spent that amount no differently than income-tax proceeds. In corporate America, this misallocation of funds is punishable by law. In Washington, it's the law.

Even worse, these special-issue bonds are not traded in the capital markets, where investors could infuse them with cash value. They are merely IOUs under which future Congresses will have to finance the Treasury's Social Security checks by raising taxes, authorizing increased federal borrowing, or cutting retirement benefits or other programs.

Beginning in 2041, Washington will have to bridge an anticipated 30-percent gap between what Uncle Sam will collect in payroll taxes and what retirees are being promised.

That task will be plenty difficult for the senators, congressmen, and presidents of tomorrow. And, as President Bush dramatized Tuesday, they will get precious little help from a drawer full of plastic-wrapped sheets of paper deep inside an Appalachian filing cabinet.

— Deroy Murdock is a New York-based syndicated columnist with the Scripps Howard News Service and is on the advisory board of the Cato Institute's Project on Social Security Choice.          


TOPICS: Business/Economy; Culture/Society; Editorial; Extended News; Government; News/Current Events
KEYWORDS: genx; socialsecurity
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1 posted on 04/06/2005 7:00:24 PM PDT by smoothsailing
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To: smoothsailing

The President should do a commercial explaining and showing us the filing cabinet. People might begin to get the idea.


2 posted on 04/06/2005 7:08:56 PM PDT by somemoreequalthanothers
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To: somemoreequalthanothers

I agree.


3 posted on 04/06/2005 7:20:41 PM PDT by smoothsailing (Qui Nhon Turtle Co.)
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To: smoothsailing
Bingo! I've been saying this for some time in my posts. In the spirit of harnessing dead horses together for speed, consider this:

When SocSec has to dip into this file cabinet and redeem the first piece of paper, how will they cash it? They will go to Congress who has the choice to raise taxes or cut spending. Gee, which would they choose? So, in other words, they tax the value of the paper out of the taxpayer of the day. Now, consider if they didn't have the piece of paper to present but instead just asked for the money. Hey, same result! The taxpayer of the day has to pony up just as much money whether or not the paper exists in that file cabinet!

That is why increasing the payroll tax rate and or extending the cap higher than 90K won't work. All you are doing in making the numbers on those pieces of paper bigger while allowing Congress to spend more money now. Yeah, a bigger inflow might help around 2017 to stave off raiding the file cabinet for a few more years. So why not wait until 2017 to bump up the tax? That is when it is going to happen anyway.

Just as Congress can fake us with a tax increase now to move the date on paper, consider that they could also decide to up the rate on those junk bonds sitting in that file cabinet to also push out the date. After all, what does it matter? How many of them will still be in office in 2017? Their pension doesn't come out of that file cabinet.

4 posted on 04/06/2005 7:27:46 PM PDT by NonValueAdded (The murder of Terri Schindler Schiavo - NOT IN OUR NAME)
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To: smoothsailing

Hmm, the government can use phoney IOUs, but if I try to pay my taxes with an IOU that I print from my computer, I go to federal prison.


5 posted on 04/06/2005 7:38:19 PM PDT by Army Air Corps (I am sick of brownshirts in black robes)
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To: NonValueAdded

There is a reason this is in WV. And a reason Bush went there. KKK Byrd is going to have a surprise if he seeks re-election.


6 posted on 04/06/2005 7:42:09 PM PDT by BobS
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Comment #7 Removed by Moderator

To: smoothsailing
[That drawer, inside an office of the U.S. Bureau of Public Debt, contains $1.76 trillion worth of special-issue U.S. Treasury bonds.]...[They are merely IOUs under which future Congresses will have to finance the Treasury's Social Security checks by raising taxes, authorizing increased federal borrowing, or cutting retirement benefits or other programs.]



1.76 trillion dollars taken out of Social Security so far and nothing but an IOU left in its place.

People in the private sector got to jail for perpetrating such fraud, but A$$#@!%$ in Congress arrogantly believe we should be beholden to them for benevolently managing our money for us incompetent rubes.
8 posted on 04/06/2005 7:48:45 PM PDT by spinestein
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To: NonValueAdded
You see this clearly for what it is,a ponzie scheme.

There is no money for SS unless we allow the govt. to confiscate our money.

The personal accounts are the only way out of this.

We keep our money, the govt.is forced to cut entitlement programs and balance the budget.

The Democrats will fight that tooth and nail.The Republicans and President Bush have got to do a better job of pointing out the reality of the present system and showing that personal accounts are the only way to end this madness.

9 posted on 04/06/2005 7:51:27 PM PDT by smoothsailing (Qui Nhon Turtle Co.)
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To: Army Air Corps

Have you tryed MONOPOLY money? :^)


10 posted on 04/06/2005 7:53:58 PM PDT by smoothsailing (Qui Nhon Turtle Co.)
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To: BobS

Sheets has had it coming for a long time.President Bush is very popular in WV.


11 posted on 04/06/2005 7:55:54 PM PDT by smoothsailing (Qui Nhon Turtle Co.)
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To: hellbilly
Did that have something to do with Hillarys cow futures deal?

there must be a connection.

12 posted on 04/06/2005 7:59:35 PM PDT by smoothsailing (Qui Nhon Turtle Co.)
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To: smoothsailing

LOL! My IOU would fetaure a nice engraving of my portrait with "Trust me, I'm good for it" printed below on a scroll. Also, I could include the phrase, "I promise that I'll this amount after I win the trifecta."


13 posted on 04/06/2005 8:03:45 PM PDT by Army Air Corps (I am sick of brownshirts in black robes)
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To: NonValueAdded; qam1

Unfortunately, you're right.

Fortunately, what Bush has to say about personal accounts is right, too. Because at least that "trust fund" will NOT be in the filing cabinet.


14 posted on 04/06/2005 8:05:22 PM PDT by LibertarianInExile (The South will rise again? Hell, we ever get states' rights firmly back in place, the CSA has risen!)
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To: Army Air Corps
"Trust Me,I'm Good For It"

OR

"IN ME I TRUST"

8^)

15 posted on 04/06/2005 8:11:53 PM PDT by smoothsailing (Qui Nhon Turtle Co.)
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To: Army Air Corps

Send the Gov't a UOMe, tell them to take the taxes out of the money in your Socialist security account. They probably wouldn't go for that either.


16 posted on 04/06/2005 8:19:33 PM PDT by infidel29 ("It is only the warlike power of a civilized people that can give peace to the world."- T. Roosevelt)
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To: infidel29

LOL! They'll just place me on the "Right Wing Nut List", oops, I am there already...


17 posted on 04/06/2005 8:22:11 PM PDT by Army Air Corps (I am sick of brownshirts in black robes)
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To: LibertarianInExile; ItsOurTimeNow; PresbyRev; tortoise; Fraulein; StoneColdGOP; Clemenza; ...
Xer Ping

Ping list for the discussion of the politics and social (and sometimes nostalgic) aspects that directly effects Generation Reagan / Generation-X (Those born from 1965-1981) including all the spending previous generations (i.e. The Baby Boomers) are doing that Gen-X and Y will end up paying for.

Freep mail me to be added or dropped. See my home page for details and previous articles.  

18 posted on 04/06/2005 8:31:28 PM PDT by qam1 (There's been a huge party. All plates and the bottles are empty, all that's left is the bill to pay)
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To: smoothsailing

Life imitating fiction. Sob!


19 posted on 04/06/2005 10:24:39 PM PDT by GladesGuru
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To: smoothsailing
So...what's the moral of the story here? That US Government-backed securities are worthless? I can't imagine that the POTUS was trying to send that message. He says that in public too many times, someone might start believing him. That happens, goodbye economy.

SW

20 posted on 04/07/2005 12:54:52 AM PDT by Snidely Whiplash
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