So let's see where we are.
The president went to Parkersburg today and said, didn't hint, but said that the Social Security Trust Fund doesn't exist. In other words, he said that the Treasury notes that make up the Trust Fund won't be paid back. And that means that he intends for the government to default on that portion of the national debt.
I know he didn't unpack it that way. But that very much is what it means
Let's break it down to essentials and explain what we're talking about.
For two decades your Social Security payroll taxes have been used to offset the cost of upper-income tax cuts. If I'm not mistaken that money has been used at the highest rate (i.e., in absolute dollars terms per year) under this President Bush. The money is supposed to be paid back, with interest.
That's the deal. That's what bonds are.
But now the president stands there holding on to one of these notes and jokes that they're not worth anything.
Foreigners hold quite a bit of US debt. What are theirs worth? Are they going to get their money paid back?
Wealthy Americans do too. In fact, most of President Bush's personal wealth is in the form of US government debt. Is he going to get his money paid back?
He wants to borrow $5 trillion more. Are those folks going to get paid back?
That's what this is all about. Defaulting on that portion of the federal debt. Those folks will all get their money back. But the president figures you can be stiffed.
If you pay most of your taxes in payroll taxes (like the overwhelming majority of Americans) he's trying to play you for a fool.
Simple as that.
Late Update: Here's a number someone should run. President Bush has been president for four years. He's run very big deficits and during that same period, if I'm not mistaken, Social Security has been running very big surpluses. So his government has been sticking the Social Security administration with Treasury notes that he says and believes are worthless. Obviously the debt obligations of the United States government don't begin and end with each new presidency. That would what, at least until recently, differentiated us from the banana republics of the world. But if he really believes these obligations will never be paid back, why did he use that money -- what must amount to hundreds of billions of dollars -- to subsidize his tax cuts?