Monday, July 18, 2011

Social Security, The Wall Street Journal Editorial Pages and Plumbing the Depths of Ignorance

Surely We Must Be Close to the Bottom

(We are not, and don't call me Shirley)

The Social Security system takes in more money than it pays out (although that may change) and over the decades has collected about $2.6 trillion more than it has distributed.  What has happened to this money.  Well according to Sen. Tom Coburn (R, Ok)
previous Congresses have “stolen” the trust fund intended to make the American people secure in retirement.

coburn, government, stole, social, security“We have stolen $2.6 trillion from it.

The fact that this is just not true does not weigh heavily in the argument.  The $2.6 trillion is in a Trust Fund that has been invested, invested in the most secure and safest investment in the world, U. S. government bonds.  This is of course, exactly what should be done with the funds.

Conservatives in their typical flight from reality do not believe the Trust Fund exists.

This theme crops up regularly with Conservatives, and it came up again in an editorial in the Wall Street Journal.

When Social Security runs a surplus, Congress spends the money immediately on something else and then the government claims its owes a debt to itself. . .

As everyone in Washington knows, the trust fund contains not cash but IOUs. Payroll taxes don't go to some vault in Fort Knox, and they certainly aren't invested.

Well there is this from the Trustee's Report on Social Security and Medicare

What Are the Trust Funds? Congress established trust funds in the U.S. Treasury to account for Social Security and Medicare income and disbursements. Social Security and Medicare taxes, premiums, and other income are credited to the funds. . . .

Disbursements from the funds can be made only to pay program benefits and administrative costs. All excess funds must be invested in interest-bearing securities backed by the full faith and credit of the United States.

But according to the Wall Street Journal government bonds "backed by the full faith and credit of the United States" are not “investments” by the people who own them and in fact are apparently worthless.  This is going to come as a terrible shock to folks like the Chinese and Japanese, who along with other countries hold $ Trillions of these things.

But maybe foreigners who hold far more Government Bonds than the Trust Funds are not as smart as the Wall Street Journal editorial writers (ok, that's a stretch).  So The Dismal Political Economist went to Warren Buffet, certainly one of the smartest, if not the smartest investor ever.  Looking at his holdings in his company Berkshire Hathaway, it turns out that Mr. Buffet has over $2 billion of these things, which is a lot of money even for Mr. Buffet.  And they are listed in the Company’s financial statement under the category of “Investments”.

So the advice of The Dismal Political Economist to the Wall Street Journal editorial writers is that if you don’t know what you are writing about, stop writing.  And if you need to talk to an expert, talk to Mr. Buffet.  He is a busy man but surely he can find some time to educate you so you do not look so moronic.

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