A t-bill or bond is a debt.
It's money for the government to spend today... in exchange for money it owes back in X years.
Indeed.
The SS admin doesn't even get those. It get the "Special" T-Bills. "Special" as in "designed especially for the SSA and not for sale to anyone else, because we have no intention of honoring them." Or, they could be special in the "Special Olympics" sense.
http://www.ssa.gov/oact/progdata/fundFAQ.htmlAll securities held by the trust funds are "special issues" of the United States Treasury. Such securities are available only to the trust funds.
Because the market wouldn't touch them with a 10' pole.
Let me show you in two different ways how useless the trust fund is. The first is a quote from the introduction to the 2009 Social Security trustees report, the second is the graphic by my Fortune colleague Robert Dominguez that accompanies this article.
...
"Neither the redemption of trust fund bonds, nor interest paid on those bonds, provides any new net income to the Treasury, which must finance redemptions and interest payments through some combination of increased taxation, reductions in other government spending, or additional borrowing from the public."
In other words, the trust fund is of no economic value.
If these trust fund bonds represent anything real, why is it that in calculating national indebtedness they are not even included? We measure national solvency by debt/GDP ratio. As calculated by everyone from the OMB to the CIA, from the Simpson-Bowles to the Domenici-Rivlin commissions, the debt/GDP ratio counts only publicly held debt. This means bonds held by China, Saudi Arabia, you and me. The debt ratio completely ignores the kind of intragovernmental bonds that Lew insists are the equivalent of publicly held bonds.
Why? Because the intragovernmental bond is nothing more than a bookkeeping device that records how much one part of the U.S. government (Treasury) owes another part of the same government (the Social Security Administration).
That's why publicly held bonds are so radically different from intragovernmental bonds. If we default on Chinese-held debt, decades of AAA creditworthiness is destroyed, the world stops lending to us, the dollar collapses, the economy goes into a spiral and we become Argentina. That's why such a default is inconceivable.
On the other hand, what would happen to financial markets if the Treasury stopped honoring the "special issue" bonds in the Social Security trust fund? A lot of angry grumbling at home for sure. But externally? Nothing.
This "default" would simply be the Treasury telling the Social Security Administration that henceforth it would have to fend for itself in covering its annual shortfall. How? By means-testing (cutting the benefits to the rich), changing the inflation formula, raising the retirement age and, if necessary, hiking the cap on income subject to the payroll tax.
The $40B that was "redeemed" by the SS trust fund in 2010 was immediately made good by the Treasury issuing $40B in treasury notes of some sort and the Fed Reserve printing money to buy them up.
How long do you think this can go on?Repeat after me, "The Social Security Trust Fund is an accounting gimmick of the sort that got folks at Enron time in Federal 'Pound Me in the ass' Prison."
