April 7th 2005 - The president of the United States told the world that the government doesn't believe in its own debt instruments.
"There is no trust fund," President Bush said as he toured the U.S. Bureau of Public Debt in Parkersburg, W.Va. The paperwork in a file cabinet that Bush peeked into represents $1.7 trillion in payroll tax surpluses. This is what he dismissed as "just IOUs that future generations will pay for in higher taxes or reduced benefits or cuts in other future programs."
This statement is extraordinary -- and damning.
Our entire economic system is based on "just IOUs." What's a mortgage? Just an IOU. What's a bond? Just an IOU. Is the president really advocating that the United States renege on all its debt instruments? Or only those debts involving Social Security?
What's particularly troublesome about the president's "filing cabinet" theatrics is that his very proposal does nothing to solve the problem he's showcasing. Converting a portion of Social Security into private accounts will not solve the program's demographic deficit or improve its long-term solvency. The only way to fix those problems is to increase the age of retirement, reduce benefits to the baby boom generation or some combination of both.
The trust fund obligations are legal U.S. debt. Any solution to Social Security -- and Medicaid, Medicare and the growing problem of pension insurance -- must recognize every debt already incurred. Anything less is called default.
Just an IOU? The same could be said about stock certificates, the U.S. dollar or even private investment accounts.