It’s only the validity of the public debt of the United States government

May 2, 2005

Today’s White House press briefing included a lengthy exchange on whether the president believes in supporting the Treasury’s obligations. It didn’t go well.

A reporter asked Scott McClellan about the president’s belief that the current Social Security system “leaves behind file cabinets full of IOUs.” The journalist asked if the president is suggesting that there’s a possibly that the government would default on the sovereign debt of the United States. It was a simple question — the right answer was “no” — but McClellan refused to cooperate.

“I think that the President, if you’ll recall, went to West Virginia and stood in front of the file cabinet to point out to people what the trust fund really is. I mean, most people when they think of a trust fund, I think you would agree, believe that money is being set aside in account, and that it’s their money and that they’re going to receive that money back. Well, that’s not the case. In terms of the so-called Social Security trust fund, it is a file cabinet of paper IOUs. And that’s what it is.”

So, the press corps tried again, noting the inherent guarantee behind Treasury notes that the government will repay its debts. Right, Scott?

“What is happening now under the current Social Security system, as the President has talked about, is a pay-as-you-go system. Money is being paid in to support today’s retirees. So that money is not being set aside, it’s being spent by the government. And the President, one thing he has talked about, is the importance of personal accounts…. Personal accounts will be something that is your money, it’s being set aside, it’s real savings. It’s not phantom savings.”

Again the reporters followed up, saying that there seems to be an indication that the U.S. would default on its debts, to which McClellan responded:

“It’s the difference between real savings and phantom savings. It’s what I just explained. Would you agree that a trust fund is where you set aside someone’s money, and it’s their money, and that they get it back?”

Three times reporters gave the White House’s top spokesperson a chance to defend the validity of the public debt of the United States government. Three times, the spokesperson demurred.

If foreign investors watched the press briefing, I wonder what they’d say about McClellan’s responses?

Anyone with half a brain and at least listening with one ear ought to be very afraid that Bush and his Repugs in Congress WILL in fact DEFAULT on the Trust Fund. After all, they all laughed when Gore talked about his lock box, and when Gore talked about using the then-expected $5 trillion surplus to shore up Social Security.

Instead, the pigs have stolent the surplus we have all been building since the 1983 compromise, and gave it to the rich fucks. It’s all prelude to the coming economic disaster that Bush and his whore Greenspan have been cooking. As my late father-in-law used to say, give your sould to Jesus because your ass belongs to Bush.

Makes me — and I’ll bet lots of others — nostalgic for Gore!!

  • This should be front page new’s!!! Every paper should be repeating what McClellan is saying in Bushes name.
    Everyone out there reading this: now is the time to write letters to your newspaper. How I would love to see the tables turned and George and his cronies have to live the life they keep preaching is good for everyone else.
    Start writing. Send those letters. We must be strong in the face of these crooks.

  • Any idea how many T-bills some of the more prominent wealthy liberals own? I’m thinking of Soros, Gates, etc. Do you think any of them, or some prominent foreign investors, would be willing to dump their T-Bills in a public statement of “no confidenceâ€? in the T-bill’s safety, based on these recent statements by Bush and his privatization allies? Even some traditional conservatives might go along if they’re disgusted enough about the way the U.S. budget is being destroyed by the Republicans.

    A bad idea if that would have an actual negative economic effect (would it?), but it might make for some powerful symbolism. At the very least, Bush would have some explaining and backtracking to do. On the other hand, it might backfire if Faux News and friends can spin it as phony grandstanding, or as disloyal to the U.S. economy, or as somehow confirming their “Social Security is going broke� lie.

    Substantively, I think whoever did this would actually be getting a jump on the U.S. Government debt crisis that’s currently approaching like a runaway train.

  • Common Knowledge,

    Do you think any of them, or some prominent foreign investors, would be willing to dump their T-Bills in a public statement of “no confidence� in the T-bill’s safety, based on these recent statements by Bush and his privatization allies?M

    Actually, in order to “dump their T-Bills” they’d just sell them to another buyer. Not really very effective. However, if they choose not to buy at the next big issuance of T-Bills *and* enough other investors closed ranks with this effort, this would have a dramatic effect. In the near term it would drive up short term interest rates and probably drive up long term interest rates. This might crowd out some private investment, but it would certainly make the debt and its attendant interest payments larger. Assuming the government actually wants to curb the deficit, presumably gov’t spending would decrease or taxes would go up. Arguably either of those would hurt the economy (I would argue that the former would hurt, but the latter isn’t so unequivocal).

  • I noticed one little gleaming ray of sunshine in all of this. The fact the the press is slowly starting to get aggressive with the White House. It’s only 4 and a half years to late, but as the old saying goes better late than never.

    It’s worth noting that the United States public debt is backed by bonds, around 40% of which is held by foreign countries, China and Japan being the 2 largest holders of these bonds. I wonder what they think of Bush’s statements about the bonds being nothing more than worthless IOU’s.

  • I believe what the Bush administration is trying to argue here is that US treasury bills owned by someone other than the US government are safe and the US will never default on those debts. The US treasury bills in the SS trust fund on the other hand are an obligation for the US government to pay some money to another part of the US government. Therefore, the US government can, if it chooses, decide to “forgiveâ€? this debt to itself, rather than pay it back. This should have no effect on the confidence of private investors in US treasury securities.

    There is no question that the US government has the authority to do this, but it is a political decision. People who say that the trust fund is invested in worthless IOUs are basically saying that they think the US government should forgive this debt to itself rather than pay it back. They are basically saying they lied when told us that the extra payroll taxes were being collected from citizens over the last 20 years to create a trust fund to handle the baby boomers retirement. The extra money had nothing to do with the baby boomers retirement. It was just so they could reduce income tax rates.

    The real question is, if the SS trust fund is being invested in worthless IOUs, why does the Bush administration and Congress continue to allow this money to be placed into worthless investments that will never be repaid? In order to strengthen SS shouldn’t Congress immediately look into investing the SS trust find into something safer than worthless IOUs?

  • There is no question that the US government has the authority to do this, but it is a political decision.

    Actually, there is some question.

  • That money was collected from us for the specific purpose of Social Security. If the g’ment wants to borrow from that money and repay (with interest), that’s acceptable, I suppose.

    If they don’t repay, it’s theft. I can think of no other way to look at it.
    In that case, I demand impeachment, imprisonment and restitution.

  • the pathetic part of this whole debate is this: when bubble boy was sputtering about this the other night during his primetime
    “news” “conference” … he should have been nailed right then and there for his asinine stupidity and contradictory statements.

    check the transcripts: within ten minutes of invoking his ‘filing cabinet of worthless iou’s’ story, he was also talking about how low risk private accounts could be: he actually suggested that if private account investors didn’t want to invest in the markets …

    … wait for it …

    they could fill their new accounts WITH T BILLS !!!

    i never thought i’d see the day when a president would come along that made bush 41 look brilliant in comparison … or make richard nixon look like honest abe.

    what a goddamn maggot.

  • hawtreyandthedeafaids, I heard that and was somewhat nonplussed by this guys ability to talk out of both sides of his mouth with the utmost distain for any possibility that he will be called on it. I don’t give Bush credit for much but he’s willing to flatout bullshit millions with complete conviction. He’s so bogus but I’m much more bummed with a public that can hear this obvious crap and just let it slide.

  • The corruptness of the media allows the theft of our financial security.

    Suggest creating 2 or 3 TPMs, and sticking to them.

    1) Republicans are like teenagers with credit cards, AND can’t be trusted with our tax money.

    2) Of COURSE it’s going “broke” (deep sarcasm) We paid into it so we COULD draw it all out when needed.

    3) It’s a RETIREMENT FUND, got it? So tell Bush to put it ALL back. I ain’t got another 50 years to work to pay Bush more taxes, besides, he’ll steal them, too!

    Something along those lines.

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