The Fiction of Social Security Bonds
How is Social Security different in kind from any other government program? Charles Rounds argues that it is not different at all. It is a spending program funded out of revenue. It can be abolished anytime.
When the government speaks of "bonds," it is merely is engaging in non-binding musings with itself about paying itself back for certain monies it has spent out of general revenues for purposes other than social security. They are not assets.
Yes, the social security statute provides that on the face of the "bonds" memorializing the spent surplus there shall be a notation that they are "supported by the full faith and credit of the United States." But this provision can only kick in if the bonds are actually issued by the U.S. to another party. The statute, however, does not provide for this. In other words, the "full faith and credit" language is illusory.
As mentioned, for a bond to be a real bond, there needs to be at least two parties, for example, the U.S. and a citizen who owns a U.S. treasury bond, or the U.S. as owner of a German bond and Germany. The U.S. cannot issue "bonds" to itself and have their terms bind future Congresses. Bottom line: These social security "bonds" are neither assets of the U.S. nor property of workers and their families.
Whichever side one is on in the social security personal account debate, or whether one advocates abolishing social security altogether, there needs to be a common understanding of how the current system is structured, to include an appreciation that the social security "bonds" are not real bonds. As long as general confusion reigns about the law and facts currently applicable to social security, advocates of the status quo will have the upper hand over the reformers and the abolitionists.
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