Wednesday, April 06, 2005
Hunting for buried treasure.
Here's a fun post, thanks to Dennis Cauchon of USA Today (4/5/2005).
Clearly I'm not being hard enough on our chief executive because on Tuesday, President Bush headed down to West Virginia to check out the U.S. Bureau of Public Debt, where he found a filing cabinet containing records of who owns U.S. Treasury Bonds:
"Bush offered the filing cabinet as proof that 'there is no trust fund — just IOUs.'
"What did (Bush) expect to see there? Gold?" asked Dean Baker, a liberal economist who says Social Security does not face a financial crisis. "The trust fund contains government bonds that are just like any other government bonds."
But Bruce Josten, executive vice president of the U.S. Chamber of Commerce, applauded Bush, saying he punctured a myth.
"The public is fooled into thinking there's actually a fund where deposits and interest sit in some vault in West Virginia," he said. Josten says the trust fund is unlike the federal highway trust fund, whose assets by law can be spent only on highways. By contrast, Josten says, the government spends Social Security taxes on other programs but pretends the money is still kept in a trust fund."
This prompts an interesting question: what is the Federal Highway Trust Fund and how does it differ from the Social Security Trust Fund? Well, according to the Financial Year 2004 Report of the Highway Trust Fund (another excellent read), those funds in excess of what is "needed for expenditures" are invested in "non-interest bearing Treasury non-marketable securities." This appears to be pretty much exactly like the SS trust funds which pay out what they need to pay out (SS benefits) and invest the rest in interest bearing Treasury non-marketable securities. The major difference seems to be that the SS trust fund gets interest (the Highway Trust fund did until 1998) but other than that, they look pretty comparable to me.
I can't even guess at what Mr. Josten might have meant by "the trust fund is unlike the federal highway trust fund, whose assets by law can be spent only on highways." I, for one, am glad that the Social Security trust fund can be spent on things other than highways. As to the allegation that "By contrast, Josten says, the government spends Social Security taxes on other programs but pretends the money is still kept in a trust fund." I'm just not clear on what he means.
For example, in 2004, the OASI Trust Fund received about
* $473B of payroll taxes
* $15B of taxes on benefits and
* $79B of interest income from those mythical trust funds
That's a total of $566B (please excuse the rounding)
In 2004, the OASI Trust Fund pay out
* $415B of benefits and
* $6B of other expenses (including administration and other stuff)
For a total of $421B.
In 2004, the Trust Fund grew from $1355B to $1500B or $145B, exactly the difference between income and outgo. Perhaps what Josten meant is that the SS Trust Fund, unlike the FH trust fund, lends its money to the Government. That is just wrong -- they both lend all of their money to the government.
I suspect that many people who rail against the Social Security Trust Funds have no concept as to what the Trust Fund really is. Actually, I suspect that most Americans have little concept as to what the Trust Fund really is, but most of them (excluding myself) are polite enough to keep mum.
As always, thanks for reading.
Clearly I'm not being hard enough on our chief executive because on Tuesday, President Bush headed down to West Virginia to check out the U.S. Bureau of Public Debt, where he found a filing cabinet containing records of who owns U.S. Treasury Bonds:
"Bush offered the filing cabinet as proof that 'there is no trust fund — just IOUs.'
"What did (Bush) expect to see there? Gold?" asked Dean Baker, a liberal economist who says Social Security does not face a financial crisis. "The trust fund contains government bonds that are just like any other government bonds."
But Bruce Josten, executive vice president of the U.S. Chamber of Commerce, applauded Bush, saying he punctured a myth.
"The public is fooled into thinking there's actually a fund where deposits and interest sit in some vault in West Virginia," he said. Josten says the trust fund is unlike the federal highway trust fund, whose assets by law can be spent only on highways. By contrast, Josten says, the government spends Social Security taxes on other programs but pretends the money is still kept in a trust fund."
This prompts an interesting question: what is the Federal Highway Trust Fund and how does it differ from the Social Security Trust Fund? Well, according to the Financial Year 2004 Report of the Highway Trust Fund (another excellent read), those funds in excess of what is "needed for expenditures" are invested in "non-interest bearing Treasury non-marketable securities." This appears to be pretty much exactly like the SS trust funds which pay out what they need to pay out (SS benefits) and invest the rest in interest bearing Treasury non-marketable securities. The major difference seems to be that the SS trust fund gets interest (the Highway Trust fund did until 1998) but other than that, they look pretty comparable to me.
I can't even guess at what Mr. Josten might have meant by "the trust fund is unlike the federal highway trust fund, whose assets by law can be spent only on highways." I, for one, am glad that the Social Security trust fund can be spent on things other than highways. As to the allegation that "By contrast, Josten says, the government spends Social Security taxes on other programs but pretends the money is still kept in a trust fund." I'm just not clear on what he means.
For example, in 2004, the OASI Trust Fund received about
* $473B of payroll taxes
* $15B of taxes on benefits and
* $79B of interest income from those mythical trust funds
That's a total of $566B (please excuse the rounding)
In 2004, the OASI Trust Fund pay out
* $415B of benefits and
* $6B of other expenses (including administration and other stuff)
For a total of $421B.
In 2004, the Trust Fund grew from $1355B to $1500B or $145B, exactly the difference between income and outgo. Perhaps what Josten meant is that the SS Trust Fund, unlike the FH trust fund, lends its money to the Government. That is just wrong -- they both lend all of their money to the government.
I suspect that many people who rail against the Social Security Trust Funds have no concept as to what the Trust Fund really is. Actually, I suspect that most Americans have little concept as to what the Trust Fund really is, but most of them (excluding myself) are polite enough to keep mum.
As always, thanks for reading.
