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To: KyrosL who wrote (114307)	7/24/2001 6:44:08 PM
From: Don Lloyd	Read Replies (2) \| Respond to of 436258

K - Don, I am not disputing the fact that the government will have trouble keeping the current level of SS benefits for future generations. All I am saying is that the trust fund IOUs are equivalent to publicly held government debt. And, therefore, are just as real. Of course, all government obligations depend on the government's ability to tax. The issue of the Trust Fund has nothing to do with how easy or difficult it will be for the government to meet its obligations. The point is that the existence of the Trust Fund simply makes no difference to that ease or difficulty. The Trust Fund IOUs are NOT equivalent to publicly held government debt exactly because they are NOT held by the public, but by the government. Pretend I just wrote myself an IOU to give myself $1M on August 20th. I put it away in my wallet and bring it forth on August 20th. Is there any doubt that this is an entirely useless process? OTOH, if I write you an IOU for $1M, presumably it will be in exchange for something of value which will enable me to pay off my IOU when the time comes. When the treasury sells debt, it gets money for it. The actual notes are pulled off of a pile of pre-printed certificates in a vault somewhere and sent to the buyer. At maturity, the treasury must pay out money to redeem the certificate. In the case of the Trust Fund certificates, they are merely pulled off the pile and sent to the Trust Fund in exchange for NOTHING. (alternately it can be looked at as being in exchange for the right to spend the payroll tax receipts that exceed SS payments for general purposes, in either case the money is GONE, probably to build a road to nowhere in West Virginia)). When it comes time to redeem the certificates from the trust, there is nothing with which to do so. When 2050 rolls around, the fact that the government may tax a dollar, send it to the Trust Fund as a redemption and then have the Trust Fund pay it out in SS is not economically different that paying out the taxed dollar as a SS payment directly, just as if the Trust Fund doesn't exist, which it really doesn't. Regards, Don