THE WHITE HOUSE AND THE TRUST FUND….This is sort of wonkish, but I want to revisit the question of whether the Bush administration thinks the government should default on the Social Security trust fund. I’ve now read the transcript of Wednesday’s briefing, and here’s the key passage:

SR. ADMIN. OFFICIAL: Well, there’s a implication at the end of your question which ? you have to remember, the current system can’t pay the current guaranteed benefit, so ?

Q ? is to be paid through 2042 or 2052, the point ? are you suggesting that would not be paid?

SR. ADMIN. OFFICIAL: Well, it’s ? well, actually, it’s ? I don’t want to get off on too far of a tangent, but the Congressional Budget Office actually put out a paper this week which made a modification to what they had previously said about what current law was. And they made it very clear that current law is actually the level of benefits the current system can actually pay, as opposed to the level of benefits the current system is promising. So if you ask the question in terms of ?

Q But they also said it can pay current level benefits until 2052 ? correct?

SR. ADMIN. OFFICIAL: But the Congressional Budget Office is also very careful to say that starting in 2019 or 2020, the resources are not there to pay those benefits.

Now, I’ll grant that interpreting this stuff is sort of like reading Peking wall posters in post-Mao China, but the SAO is actually being more explicit here than I had thought. Currently, the trust fund is scheduled to redeem its bonds between 2019 and 2052, and the reporter asked about benefits during that period. In reponse, SAO said two things:

  • CBO says current law is about benefits that can be paid, not benefits that are promised.

  • Starting in 2019 or 2020, promised benefits can no longer be paid.

The only way that promised benefits can’t be paid is if the government defaults on the trust fund. So SAO appears to be saying that default is both legal and likely.

This is why someone ought to ask explicitly about the administration’s view of defaulting on the trust fund. After all, everyone knows what a treasury bond is: it’s a call on the tax revenue of the U.S. government. Bonds in the Social Security trust fund are no different, and workers who pay payroll taxes have been funding the purchase of bonds on that basis for over two decades.

Every Social Security plan I’ve seen in print assumes that the trust fund will be redeemed. Does the White House plan also assume that? If it doesn’t, they ought to let us know.