02 Feb Confusion about the trust funds – even among conservative thought leaders
On Friday, former White House Chief-of-Staff Karl Rove spoke to talk show host Sean Hannity about the debt ceiling (audio recording available <a href=”http://www.hannity.com/article/rove-don-t-be-bullied/13278″ target=”_blank” rel=”noopener”>here.</a>). Warning about the dangers of not raising the ceiling (and putting the President in control of financial decisions), Rove stated the following:
<blockquote><i>…he [President Obama] will unilaterally put our country in a place were we will trim back defense, he will do things like, he could delay payments, you know, lots of payroll taxes come in for Social Security Benefits. What he could do is say, “You know what , we’re not to put that over in the Social Security trust fund. I’m going to use that to keep Social Welfare spending going, and I’m going to fund it that way”. We don’t want to put him in complete command of our countries’ finances.</i></blockquote>
I’m not sure what to make of this statement. Karl Rove is a smart individual, so perhaps he’s using concepts he feels the average American can understand. But to be clear, <b>there is no money</b> in the Social Security or Medicare trust funds, nor has money ever been deposited into these “funds”. There is no danger of the President “not put[ting money] in the Social Security trust fund”. The trust funds consist of something called Government Account Series (GAS) Securities, which are effectively an IOU written from the Government to the Government. At best, the trust funds track whether incoming collections exceed or lag behind outgoing benefit payments. They do not contain marketable securities.
I talk about the Social Security and Medicare Trust Funds in great specificity in Chapter 2 and 4 of my book.