The Learning Curve

New tricks for an old dog.

Treasury Bills and the Social Security Trust Fund

The Social Security Trust Fund is invested exclusively in Treasury Bills in the amount of $2.5 Trillion, more or less. Personally, I am happy that the Trust Fund did not invest in the common stock of Pullman, TWA, Pan Am, Enron or U. S. Steel, but I digress.

The simple fact of this sizable reserve means that Social Security is projected to be solvent until the year 2042, thirty years from now.  This suggests that Social Security retirement is not a pressing problem that demands immediate adjustment in order to preserve the financial health of the system. In the face of much more pressing financial problems, such as the severe shortage and low quality of employment opportunities, one wonders why the idiots in Washington are bothering with it at all.

It also suggests that monthly Social Security retirement payments are not at immediate risk by reason of any impending Federal default, even if the market value of T Bills held by the Trust Fund might be substantially diminished by a Federal default or credit downgrade.  The question is, can the Social Security Trust Fund sell its T Bills on the open market or to the Federal Reserve?  If the Trust Fund sold some of its Federal debt obligation to the Federal Reserve, the Fed could just invent the money to pay for them. This move would put upward pressure on inflation by central bank fiat increase in the money supply, but at least the monthly retirement checks could continue.  All despite the best efforts of various political saboteurs and anarchists.


Written by Tom Fox

07/22/2011 at 1:17 am

Posted in Politics

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