Wednesday, April 06, 2005

NRO Acknowleges Trust Fund Generates Real Interest Payments, Too!

A couple weeks ago, the WSJ editors acknowledged that the Social Security trust fund bonds generate real interest income.

Now, National Review says the same thing:

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.

Both the WSJ and NRO want to have it both ways. First, they say the trust fund is worthless. Then, they say at the same time that the interest paid on the worthless trust fund bonds can be used to put real cash into private accounts.

The NRO says the interest paid is so real that it flowed into general revenues last year. That's sort of like saying the interest on savings bonds flows into general revenues as long as you don't cash in your savings bond. Well, maybe, guys, but the revenue had to flow OUT of general revenues to pay the interest, so, for savings bonds, and for the SS trust fund bonds, the interest payments really are just bookeeping entries, until the bonds are redeemed.

But the basic point is this. The WSJ editors, and National Review, are making a political statement. They have no qualms about diverting the Social Security trust fund assets and interest into private accounts. But they do have qualms about using the trust fund assets and interest to pay traditional Social Security benefits. They've never liked Social Security, they've always wanted to get rid of it, and they're playing gamees with the trust fund - which they can claim as an asset if it is a way to phase out Social Security, and a liability if it must be used to pay benefits to people who've paid Social Security taxes all their working lives.

But come on, guys. You can't have it both ways. If the trust fund is good enough to generate interest payments that can be diverted to private accounts, it is good enough to pay the benefits that congresses for the past 70 years have structured it to pay. No more whiny, hypocritical conservatism, please.


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