US Treasury Bonds are just IOUs

[ysengrin]

From U.S. Rep. Peter DeFazio (D-OR):

But the President did say today something extraordinary, in Parkersburg, West Virginia, and suggested something unconscionable. The President said, "There is no trust fund." And then he went on to suggest that our Nation might not honor its debt to Social Security. This is what the President said does not exist.

Let me read from this. This is a Social Security Trust Fund bond, considered the best investments in the world, U.S. Treasury Bond. This is the most privileged of Treasury bonds issued to Social Security, redeemable at any time at full face value, unlike any other bond that they issue. These are the most privileged of their bonds. The President says it is nothing but an IOU. Well, here is what it says: This bond is incontestable in the hands of the Federal Old Age and Survivors Insurance Trust Fund. The bond is supported by the full faith and credit of the United States. And the United States is pledged to the payment of the bond with respect to both principal and interest.

The President questions that?

You can read DeFazio's entire speech here in the Congressional Record. So, US Treasury Bonds may be only worth the paper they're printed on? Might that send ripples through the US economy, especially if the one saying that is the US President?

"A lot of people in America think there is a trust -- that we take your money in payroll taxes and then we hold it for you and then when you retire, we give it back to you," Bush said later in a speech at the University of West Virginia at Parkersburg. "But that's not the way it works. There is no trust fund, just IOUs that I saw firsthand," Bush said. Democrats charged that the president's remarks were misleading, as well as dangerously close to implying that the federal government won't stand behind trillions of dollars in debt held by creditors around the globe

"If the 'full faith and credit' of the United States means 'just IOUs' then our entire financial system will come tumbling down," said Rep. Charles Rangel, D-N.Y., the senior Democrat on the House Ways and Means Committee. [source]

Comments

[bosn.livejournal.com]

Doesn’t anyone screen what this dorkwad (president) says? I honestly believe he wants to bring about the prophecies in Revelations. He wants to be the President when Jesus comes. Why else would he try and spark all out war in the middle east, Bring down world economy and rape the environment?

[kaysho.livejournal.com]

I think by now everyone is accustomed to the two-step White House communications process:

1. The President says something.

2. Someone else clarifies that it's not what he meant to say. :)

Although the President is correct ... the whole "trust fund" is essentially a myth. Since Social Security payments are a government obligation, and Treasury bonds are government obligations, it costs the government the same amount to pay out a dollar on each one. If you take future Social Security obligations and "invest" them in Treasury bonds, you've accomplished nothing, since the government has to raise a dollar to pay out a dollar in Social Security payments either way. Whether you take a dollar in taxes and immediately pay it out as a Social Security cheque, or you take a dollar in taxes and use it to pay off a Treasury bond that was cashed in to pay a Social Security cheque, is a distinction without a difference.

And of course, since Social Security is "on budget", the budget deficit already captures the supposed trust fund accumulations, which means that the supposed trust fund is actually being spent in the same year the money for it is being raised.