My wife is very efficient and detail-oriented. In our home we have a metal, 2-drawer filing cabinet, one whole drawer of which holds manila folders containing medical and other personal records for everyone in the family, titles and maintenance records for our vehicles, product instruction manuals and warranties and other valuable documents that have saved our butts many times. It’s amazing how much she has managed to fit into that drawer for the benefit of four lives.
According to this article by Deroy Murdock in National Review, however, my wife is more wasteful than the federal government, which somehow keeps the entire Social Security Trust Fund for generations of Americans stored in the locked bottom drawer of a gray filing cabinet in…Fort Knox? No, Parkersburg, West Virginia.
That drawer, inside an office of the U.S. Bureau of Public Debt, contains $1.76 trillion worth of special-issue U.S. Treasury bonds. Each of these, 225 pieces of paper in all, is contained in one of two white, loose-leaf notebooks that hold plastic page covers. Despite the protective plastic, these certificates have no more financial value than the ink with which they are printed.
Well, at least the drawer is locked. And the plastic page covers are a nice touch. I’d feel better, however, if there were also a sign outside the office that reads “Beware of the Leopard!”
“The paper is symbolic,” Bureau of Public Debt spokesman Pete Hollenbach explained in a February 26 Associated Press dispatch. As a 2004 Congressional Budget Office report observed, the trust fund is an “accounting mechanism” with “no economic resources.”
Well, our money is purely symbolic, too, right? Certainly there must be some assets out there accumulating on our behalf…right?
The key reason these notes have no value is that the money that should be behind them — the excess payroll taxes not devoted to today’s retirees — instead gets spent by Congress on everything from farm subsidies to national parks to armored Humvees.
In fiscal year 2004, Cato Institute scholar Michael Tanner reports, the Treasury collected $570.7 billion in payroll taxes and credited Social Security with $89 billion in interest. Social Security recipients received $501.6 billion in benefits. This $158.1 billion balance — which could have funded personal-retirement accounts — instead flowed into general revenues. Congress spent that amount no differently than income-tax proceeds. In corporate America, this misallocation of funds is punishable by law. In Washington, it’s the law.
I think this is a great approach and obviously a real space-saver. I think we as citizens should do the same. Instead of paying Social Security taxes with real money, we simply give the government I.O.U.s and tell them to call us when it needs the money. Oh, wait…I think that’s what we’ve already done.
(HT: Amy Ridenour).