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Bonds held by the Social Security trust fund have the same legal weight as bonds held by the public: defaulting on them would be a violation of federal law. The

Bonds held by the Social Security trust fund have the same legal weight as bonds held by the public: defaulting on them would be a violation of federal law. The Treasury has no option to say “it’s only an internal IOU, we don’t feel like paying.” Bonds held by government programs are real (not optional) demands on future government revenue. When Congress passes a budget each year, that budget has to cover all payments on outstanding debt, including intragovernmental holdings, not just those held by the public. Social Security bonds, when redeemed, fund Social Security benefits, which go to real Americans. Defaulting on bonds held by Social Security would result in real reductions in income outside the government.

caturopath 5y ago
When one party -- a company, a person, a government -- owes itself by its own rules, that does not mean anything externally. https://www.cbpp.org/research/recommendation-that-presidents-fiscal-commission-focus-on-gross-debt-is-misguided https://www.cbpp.org/research/recommendation-that-presidents... notes > Most economists agree that the debt held by the public is what really affects the economy. As the Congressional Budget Office stated in its June 2009 report on the long-term budget outlook, “Long-term projections of federal debt held by the public, measured relative to the size of the economy, provide useful yardsticks for assessing the sustainability of fiscal policies.” In contrast, “gross debt . . . is not useful for assessing how the Treasury’s operations affect the economy.”