All the President's IOUs

President Bush's campaign to destroy – oops, I mean "rescue" – Social Security is in big trouble. Nobody, not even Bush, genuinely believes that privatizing the system will do anything to solve its eventual financial problems. Economists cringe at the thought of piling on trillions of dollars in additional debt to achieve the transition. It is widely recognized that the campaign and its associated scare tactics are based not on economics but on an ideological loathing of Social Security's very existence.

Even Congressional Republicans, getting an earful in their home districts, are telling the Bush Administration that this just isn't flying. Of course, Senators and Congressmen do not have the advantage of living in the President's dissent-free bubble; they actually have to interact with their constituents and listen to what they have to say. They do not have the luxury of speaking only with people who have been pre-screened to weed out anyone who might be so rude as to express anything other than utter and slavish devotion.

So it is a measure of how desperate things must be getting that Bush was sent to visit the Bureau of the Public Debt in Parkersburg, West Virginia on Tuesday. There, he struck a dramatic pose next to a filing cabinet containing the records of the $1.7 trillion in U.S. Treasury bonds in which the Social Security trust fund is invested. Bush, of course, put it rather differently.

"There is no 'trust fund,'" Bush proclaimed, "just IOUs that I saw firsthand, that future generations will pay for either in higher taxes, or reduced benefits, or cuts to other critical government programs. The office here in Parkersburg stores those IOUs. They're stacked in a filing cabinet." Playing to his usual audience of handpicked sycophants, he smirked, "Imagine: the retirement security for future generations is sitting in a filing cabinet." (What did he expect – Scrooge McDuck's money bin, perhaps?)

In other words, Treasury bonds, widely regarded as the gold standard in safe and secure investments, are just worthless slips of paper.

For someone who brags about being the first MBA President, it's pretty obvious that Bush doesn't know squat about economics. A Treasury bond is not an "IOU." It's still money, just like a share of stock, a privately issued bond, or the totals printed on a bank statement. Everyone who has ever had a checking account knows that a paper check is money, too. Does the President of the United States really believe that money in any form other than bills and coins is worthless?

Bush's financial ignorance aside, casually dismissing Treasury bonds as IOUs is particularly reckless. He seems to have forgotten that thanks to his obsession with tax cuts über alles combined with huge hikes in federal military and homeland-security spending, the government is running a $400 billion annual budget deficit with no end in sight.

To understand why this is so irresponsible, all you have to do is realize that the deficit is financed by selling Treasury bonds – the very same bonds in which the Social Security trust fund is invested. Those bonds are increasingly being bought by foreign investors, who are already spooked by the Bush Administration's utter disregard for any notion of financial restraint. And if bondholders listen to Bush's statement and decide that the bonds really are worthless, that the government can't or won't make good on its debts, they may either (a) refuse to buy any more bonds or (b) demand higher interest rates on bonds they do buy. With the White House hopelessly addicted to endless borrowing, either one would send the economy into a tailspin.

And the icing on the cake is that since Bush refuses to raise taxes to pay for his privatization plan, it would be financed by selling – you guessed it: Treasury bonds!

Bush's bizarre ramblings aside, the Social Security trust fund exists. It is real. It is kept in the same bonds which we buy as birthday presents and safe investments. They even earn six percent interest. They may not be sexy, but they're secure, backed up by the "full faith and credit" of the federal government, just like the money in your wallet.

Besides, if Bush's uncontrolled deficit spending really does cause a financial crisis severe enough to put that faith and credit in doubt, Social Security will be the least of our worries.

We sincerely hope that the governments, institutions and individuals who finance the national debt know better than to take Bush's increasingly frenzied theatrics as signs of actual policy decisions. But it doesn't make his wild statements any more comforting.