"The treasuries issued for this purpose are almost meaningless."
Then this whole "trust fund" thing is just a con job.
Con job is probably too strong of word. "Accounting fiction" might be a better one. "Political spin" might be applicable as well.
And the government intends to default. And you seem to agree.
I've never indicated or implied that I think they will default. My point has nothing to do with default, and holds whether or not government defaults. My point is simply that the "trust fund" is an accounting fiction. It is not an actual store of wealth from which later benefits can be drawn. The later benefits have to be drawn from actual government income, either social security taxes, incomes taxes, or some other government taxes of fees. If the "trust fund" didn't exist even as an accounting fiction, or if it had 1 penny, $100 bil, or $10^854 it wouldn't change this fact.
The "trust fund" is shown as being an accounting fiction because the money is spent, but even if the money had not been spent it would be far less useful than you might think. If we had a pile of bills in some government warehouse, sufficient to pay all the obligations for future retirees, that wouldn't mean we would have the actual resources to pay them. If the government prints extra bills to have this pile created then it has increased the supply of money. This money isn't circulating now, so it shouldn't contribute to inflation (except perhaps indirectly by increasing inflationary expectations), but when it is actually distributed it would be inflationary. If instead of printing money we take money out of circulation (with taxes) and store it than you get deflationary pressure. Either way your tinkering with the money supply not storing real wealth.
The government probably won't default on its required payments on the bonds associated with social security, but it won't default, not because it has some store of wealth to make the payments from but because it has the power to tax or borrow money to make the "payments" to itself, as social security spending rises |
