Friday, March 25, 2005

WSJ editors acknowledge value of "Worthless IOU's".

In today's Wall Street Journal, the editorial board equates interest on the US treasury assets held by the Social Security trust fund with revenues from payroll taxes.

That is to say, the editors consider the interest from what they call "worthless IOU's" to be real money.
That number is $2.2 trillion, which is the difference between the current size of the Social Security "Trust Fund" ($1.7 trillion) and what it will grow to become over merely a decade through 2014 ($3.9 trillion). More precisely, that is the amount of payroll tax revenue that workers will pay between now and 2014 that exceeds what will be spent over that same period on retiree benefits.

The editors appear to be referencing this table from the 2005 trustees report, where net assets at the end of the year are projected to be $3.964 Trillion at the end of 2014. But if you look at the table, you'll see that $1.4 Trillion of that $2.2 Trillion increase of assets will come from interest paid on the treasury bonds held in the Social Security trust fund.

The editors are now on record equating interest paid on "worthless IOUs" with payroll tax revenues. And hey, so is the Club for Growth

The editor's intent was to justify diverting that $2.2 Trillion to private accounts, since congress will otherwise just spend the money.

How about this advice to Congress: if you borrow the money and spend it, future congresses will have to come up with interest payments and eventually repay the debt, since the bonds held by the Social Security trust are just as real as the bonds held by individuals like George W. Bush. There's already a lock box on the money, according to the WSJ editors. The real problem is that the current President and Congress are spending a whole lot more than they're willing to raise in tax revenue.


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