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Published: Saturday, 4/9/2005

Full faith and credit

NOW that President Bush has declared that the Social Security Trust Fund amounts to a stack of "worthless IOUs" in a government filing cabinet in West Virginia, what will he do next?

How about a press conference in front of the Treasury Building next to the White House, where Mr. Bush could dramatize the fact that the folding money Americans spend every day is just a collection of "worthless pieces of paper."

The lengths this President will go to confuse and mislead the public never cease to amaze. That was proven once again by his dog-and-pony exposition on Social Security reform the other day in Parkersburg, W.Va.

That was where Mr. Bush toured the U.S. Bureau of Public Debt, which has custody of $1.7 trillion in special-issue Treasury bonds, stored in a large four-drawer cabinet. The bonds represent the Social Security surplus, which Congress - and presidents - have spent over the years for other things.

"There is no trust fund, just IOUs that I saw firsthand, that future generations will pay," Mr. Bush said later. "Imagine - the retirement security for future generations is sitting in a filing cabinet."

What the President was glossing over is that the Treasury bonds are a legally incurred debt the United States government has promised to repay. Defaulting would precipitate an economic crisis too serious to imagine.

In short, the Social Security bonds are just like the Treasury notes, bills, savings bonds, and other securities issued and bought by investors to raise money needed to run the government and pay its debt. This promise to pay has not been breached in the 218-year history of the republic.

Perhaps Mr. Bush hasn't logged on to the Social Security Administration's Web site lately.

"Far from being 'worthless IOUs,' the investments held by the trust fund are backed by the full faith and credit of the U.S. government," the agency says. "The government has always repaid Social Security, with interest. The special-issue securities are, therefore, just as safe as U.S. Savings Bonds or other financial instruments of the federal government."

Ironically, Mr. Bush's plan to restructure Social Security with private investment accounts would require the borrowing of several trillion dollars, a crushing addition to the government's bonded indebtedness. The scheme would require benefit cuts for future recipients but would do nothing to make the system solvent, a point even the President has belatedly acknowledged.

Why make Social Security's long-term shortfall even worse? Why not just shore up the system with a minor tax increase and be done with it?

Mr. Bush doesn't say, which is why most of the American public and even Republicans in Congress are unwilling to invest their own faith and credit in his plan.



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