What instruments would one prefer to have in the SS Trust Fund?
I think the Social Security trust fund should probably have been incorporated and filled with publicly-held-debt Treasury bonds, rather than the not-publicly-held special bonds in it today.
But beyond that distinction (one I may be wrong about, for that matter), there is nothing irrational or fishy about it being full of Treasury notes.
What is the alternative? Cash? Cash would have been eroding from inflation the whole time it sat in the lock-box.
Stocks? If we wanted our SS money in the stock market we would have let Bush privatize SS.
It makes sense that the trust fund is full of bonds. Bonds offer the highest likelihood of real-dollar capital preservation. (i.e. the lowest risk way to reduce erosion of value from inflation.)
And US treasuries are excellent bonds, since the only repayment risk is in terms of devaluation of the dollar. (Since we can always make more dollars if push comes to absolute shove the only question is what the repayment dollars are worth, in different scenarios.)
Thus it is wrong to suggest that anyone stole something from the trust fund to pay for X or Y. It was never going to be a pile of money... a bank saving account.
Say the USA had sold bonds to China to finance the Iraq War, instead of "selling" them to the trust fund. What changes in that scenario? Was China robbed to finance the war?
Again, I wish the bonds had always been part of publicly-held debt so I am not saying the arrangement is perfect, but the fund simply cannot be held in cash, without losing the fund's value to inflation before it is even time to use it. And particularly since SS outlays are inflation indexed. The trust fund money needs a de-facto COLA just to keep up with the costs of the program itself.
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Pablo Casals.
Sorry about that.
