In an ideal world of the sort studied by modern finance, the Social Security trust fund isn't needed, since (in theory) the US government could simply take some of general revenues and then apply them to deal with any deficit that the Social Security system has.
However, that solution has been ruled out politically (though it's okay to use the present SS surplus to help finance the government's deficit). If we take the (one-way) firewall as given, then having a bunch of T-bills (etc.) in a trust fund makes sense, since it represents a surrogate solution: as Max points out, the T-bills represent claims on the government's ability to tax the population -- above and beyond the SS tax. In essence, it's pledging general revenues to help SS in the future, side-stepping the firewall. The right-hand pocket (the normally-defined government budget) owes money to the left-hand pocket (the SS system) but that's simply a pledge by the right-hand pocket to help the left-hand pocket in the future. Jim Devine, e-mail: [EMAIL PROTECTED] web: http://myweb.lmu.edu/jdevine/ > -----Original Message----- > From: PEN-L list [mailto:[EMAIL PROTECTED] On Behalf Of Doug > > Devine, James wrote: >>In justifying his vague proposals for Social Security privatization, Bush has recently said that the IOUs in the Social Security trust fund are mere worthless pieces of paper. >>If people believe this, they should send me their "worthless" Treasury bills, notes and bonds, along with the titles to all of the mutual fund accounts that are based on them. Thanks ahead of time!<< Doug writes: > Bush has a point here. They're worthless in the sense that they're IOUs from one branch of government issued to another. That's completely different from bonds sold to outsiders. It's like your left pocket lending money to your right pocket. Even by the standards of modern finance, that makes no sense.<
