4 ms·

Former budget staffer here-- this part of the article is factually incorrect. The government borrows SS taxes but spends the money, and provides a Treasury IOU

• yequalsx 15y ago
  I don't know much about the bond market but is a Treasury IOU in the sense you mention really much different than a Treasury bond? I suppose the ability to reneg on the IOU without disrupting the bond market would be a difference. Provided this is true. That is, if the Treasury does not pay the IOU to the Social Security wouldn't there be a repercussion in the bond market? I don't see how a Treasury IOU would be different than a Treasury bond.
  • pessimizer 15y ago
    Your confusion is based on the fact that there's no such thing as a "Treasury IOU." It's a made-up prejudicial term to trivialize the Treasury bonds held by Social Security, used by people who argue that SS is insolvent. If the US government selectively defaulted on the Treasury bonds held by Social Security, would there be repercussions on the bond market? I don't know. It depends on whether you would continue to loan money to someone who was stealing from their children's piggy bank to pay off their bills. Maybe, if every other option for storing money was worse. What it would absolutely be was a theft of funds disproportionally levied from low income people to give as a gift to all other bondholders.
    • dmm 15y ago
      Treasury bonds can be sold on the open market. "Treasury IOU"s cannot be sold. SS money just goes into the general fund. SS deductions are just a plain ol' tax.
      • pessimizer 15y ago
        That's just a meaningless assertion. SS money doesn't just go into the general fund, bonds are issued. That's what the entire discussion was about. When you buy bonds, the money goes into the general fund, too. Is buying bonds a "plain ol' tax?"
        • dmm 15y ago
          > That's just a meaningless assertion. Whether something is marketable is meaningful. US bonds are traded on an open market. The securities issued to the SSA cannot be sold on this market or to anyone. If APPL issued me a promised to pay me back for pizza last night I have... a promise. But if they issue me a bond I could turn around and sell it the next day, depending on whether I trusted APPL or had better uses for my money. The securities issued to the SSA are functionally equivalent to "IOU"s. > Is buying bonds a "plain ol' tax?" The SSA has tons of assets, in non-marketable bonds. What's the point of an asset that can't be sold? It's just an accounting detail. If the bonds never existed the situation would not be functionally different.
          • pessimizer 15y ago
            I didn't know the difference between an IOU and a bond is that IOUs can't be sold. I'll need a reference to IOU law for that, because I always thought that they only existed as a talking point from the Heritage Foundation dating from somewhere around the beginning of the Bush administration. edit: You know what functions of government don't hold any bonds? Almost all of them. Are the roads a pyramid scheme? Is all government a pyramid scheme? I still find it tough to believe that there's a group of people who say that: 1. Because the government can selectively default on the bonds held by Social Security if it votes to selectively default on the bonds held by Social Security. 2. Therefore, Social Security is an unsustainable pyramid scheme, 3. Therefore, the government should default on the bonds held by Social Security. The government can also selectively default on the bonds held by me personally, or by China, or by anyone not named Todd. I can also collect their shares of the rent from all of my roommates, deposit it into my general fund at the bank, spend all the money on crack, then set the house on fire. The point of view of the "IOU" people is that my roommates should vote for me to do that, because once the money was in my bank account it transformed into whimsy and unicorns and at least the commitment to the crack binge and imminent homelessness gives them the certainty to plan for the future. If the government is defaulting on any bonds, as an American, you have more to worry about than your retirement, namely roving bands of cannibals in the street and nuclear fallout, or that the Peter Peterson Foundation has finally taken back the White House.
• nostromo 15y ago
  What's the difference between a "treasury IOU" and a treasury bond?
  • dmm 15y ago
    Treasury bonds can be resold on the market. The "Treasury IOU"s issued to the SSA cannot be resold.