Imagine this: On his next trip to Japan, President Bush visits the vault at the Bank of Japan, where that country's $712 billion in United States government bonds is stored. There, as the cameras roll, he announces that the bonds, backed by the full faith and credit of the United States, are, in fact, worthless i.o.u.'s. He does the same thing when he visits China and so on around the world, until he has personally repudiated the entire $2 trillion of United States debt held by foreigners.
Mr. Bush rehearsed just that act on Tuesday, when he visited the office of the federal Bureau of Public Debt in Parkersburg, W.Va. He posed next to a file cabinet that holds the $1.7 trillion in Treasury securities that make up the Social Security trust fund. He tossed off a comment to the effect that the bonds were not "real assets." Later, in a speech at a nearby university, he said: 'There is no trust fund. Just i.o.u.'s that I saw firsthand."
Consider the following:
- A man borrows $500 from his friend, and he writes an I.O.U. to his friend. His wife goes to his friend's house and announces that the I.O.U. is worthless.
- A man gambles away $500 from his savings account, and he writes himself an I.O.U. His wife has an argument with him and says the I.O.U. is worthless.
Aren't these two entirely different scenarios? Is the Times editorial board dense, or are they being willfully obtuse here? There is no trust fund -- there is a commitment by the govt. to fund social security from funds that they don't have. There is a huge difference. A bond is an asset for the holder, and a liability for the issuer. When the holder and the issuer are the same, it is both, and therefore neither.