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Social Security Zombie Lie #3432964 – “The Trust Fund Is Broke ‘Cuz You Can’t Cash In Its Bonds At 7/11!”

The corporate-funded right-wing noise machine has messed with the signal-to-noise ratio in American public discourse for decades, and spewed a lot of reprehensible nonsense for dissemination by its dutiful stenographers and publicists in the establishment press, but the nonsense they spew about Social Security seems to me to be particularly vile. (Or at least it will, until I look at another climate-change-denialist website.)

Most irritating is the noise machine’s ability to keep zombie lies alive and believed years after they’ve been debunked. For instance, there’s this one, sent to me by an alarmed friend:

Much of the Washington debate over Social Security assumes that the government securities in the trust fund are the same as the bonds owned by the government of China and other U.S. creditors. But they are not. The U.S. bonds held by China are marketable Treasury bonds that can be sold in the open market, at any time, in order to raise cash. The trust fund does not hold any marketable bonds.


The $2.7 trillion that the trust fund allegedly holds does not exist. Social Security does not have the money, and the government, who spent the money, no longer has it. The only significance of the number is that it is a measure of how much Social Security money the government spent on other programs.

Guess what — I can’t walk into a 7-11 with a bag of gold bars and use them to pay for my soda pop, so they’re just like Social Security’s bonds in that regard. In other words, this old stinkeroo is yet another specious specie argument promulgated by the Cato Institute and other glibertarian Republican sorts.

How old is it? Paul Krugman was delivering smackdowns to this favorite Cato doctrine in August of 2001 — nearly eleven years ago. Here’s part of a more recent takedown from January of 2005:

Privatizers say the trust fund doesn’t count because it’s invested in U.S. government bonds, which are “meaningless i.o.u.’s.” Readers who want a long-form debunking of this sophistry can read my recent article in the online journal The Economists’ Voice (

The short version is that the bonds in the Social Security trust fund are obligations of the federal government’s general fund, the budget outside Social Security. They have the same status as U.S. bonds owned by Japanese pension funds and the government of China. The general fund is legally obliged to pay the interest and principal on those bonds, and Social Security is legally obliged to pay full benefits as long as there is money in the trust fund.

There are only two things that could endanger Social Security’s ability to pay benefits before the trust fund runs out. One would be a fiscal crisis that led the U.S. to default on all its debts. The other would be legislation specifically repudiating the general fund’s debts to retirees.

That is, we can’t have a Social Security crisis without a general fiscal crisis – unless Congress declares that debts to foreign bondholders must be honored, but that promises to older Americans, who have spent most of their working lives paying extra payroll taxes to build up the trust fund, don’t count.

Krugman has spent so much time having to beat back this Cato Zombie that in 2008 he resorted to quoting himself from a 2005 column — the year when the Bush privatizers, fresh from his 2004 win, made their big move that luckily for us was beaten back by Congresscritters who knew full well that Social Security is still the third rail no matter what the Ayn Rand cultists at Cato might say.

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