Posted by the chieftain of seir on Jun 15th, 2006




This is the plain truth, Mr. President and it is terrifying — Emile Zola


I am your typical red-blooded ignorant hillbilly. I am not prone to wishing for aid from any Frenchman. Even less am I prone to wishing for the aid of a member of the French intelligentsia. To even think of such a thing somehow feels as if I am betraying all of the great unwashed who are my brethren.

And yet, I can’t help myself. I wish that Emile Zola was alive today to say what needs to be said. I wish that he was alive to bring charges in the court of public opinion against those who are spewing out lies unchallenged. Since I know that cannot be, since Emile Zola himself can not come back from the dead, then I wish that some spiritual heir of his would spring forth. Let someone come who can write with Zola’s mixture of eloquence, politeness, and anger. And let that heir bring charges against the perverse liars that make up America’s political and social elite.

But as much as I look for an heir to Zola, I have yet to see one. The charges thus lie unheard while the liars continue to prattle about. I would bring the charges myself, but I lack the eloquence and politeness necessary to get a hearing. All I have is anger. And anger without eloquence or control only fuels a futile fire.

Those futile fires have already been lit a number of times. I have seen them burn to no avail and I had no wish to join them. Those fires were lit by people who heard the lies that I hear and were as angry as I am. But those angry people lacked Zola’s artistry and stature and so they were unable to make their charges heard. All that these people managed to accomplish was to shout to an empty room or to stir up the anger of people who already agreed with them.

I am not a stranger to the theory and practice of shouting to an empty room, but I dislike preaching to the choir with a passion. I know that my blog is as vain and as pompous as any other blog. But in a vain attempt to avoid being ordinary I had wanted to differentiate my blog by writing about subjects that had not already been rehearsed by the various ideological choirs. But when I kept seeing the same lies bandied about, anger weakened my resolve to the point were I could hardly restrain myself.

What sparked such anger? What is such a horrible lie that I would welcome the aid even of Frenchmen to help me prosecute? What is driving me to write something against my better judgment? I am almost embarrassed to confess. People will laugh that something so ridiculous has got me worked up.

But anger has trumped decorum in this case. I cannot stand being silent while liars say that the Social Security trust fund will help pay for the Baby Boomers retirement.

I know, I know. It is such a passé thing to get angry about. Nobody talks much about it nowadays. Nowadays sensible people are only supposed to get angry about the lies that led to the war in Iraq. Or the lies that say that it was lies that lead us into Iraq. It all depends on your political persuasion what particular lies you are angry about. But however much they differ on niggling little details, everyone agrees that Iraq should figure into your anger one way or another. Especially if you are going to prattle on about how angry lies make you.

But I think that lies about the Social Security Trust funds efficacy are in a special category all their own. Accusations of lies usually revolve around two competing stories that have their own internal logic and make sense in and of themselves. The dispute usually centers on what the facts are and whose story they support. But people who claim that the Social Security Trust fund will help pay for the baby boomers retirement are different.

Unlike most liars, they do not even attempt to create a plausible story. Instead they simply spew out a brazen denial of reality. What they say cannot possibly be true even if you accept their version of the facts. Their lie is so brazen that it violates the English language in ways that would shock even Orwell. They are so caught up in….

I suppose I had better make an attempt at politeness. It does not do to verbally abuse my opponents before I gave them a chance to speak. So let us look for someone of the opposing camp who has lowered themselves to respond to the heretics who deny the efficacy of the Social Security Trust fund.

The best response that I have found comes from the Social Security Network. I find the name slightly misleading, because the web site is in no way associated with Social Security Administration or any other part of the Federal Government. But I could spend all day pointing out things that they do that I consider misleading. The only thing on their web site that concerns us at the moment is the little article where they take issue with those who deny the efficacy of the Social Security Trust fund. They call denying the efficacy of the Social Security Trust fund a myth. Here is there little argument in its entirety. …

Myth #3: Social Security’s trust funds are filled with worthless IOUs.

When investors become worried about the economy and the stock market, they “flee to safety” by selling their other securities in exchange for U.S. Treasury bonds and bills. Backed by the full faith and credit of the United States government, U.S. Treasury securities are considered to be the safest, most reliable investment worldwide. Because the federal government is legally obligated to pay back interest and principal on those securities, it would take an almost unimaginable calamity for a default to occur. Social Security’s trust funds, which now amount to $1.5 trillion and are expected to grow to $5.3 trillion by 2018, hold nothing but U.S. Treasury securities.

Alan Greenspan, now the Federal Reserve chairman, led a bipartisan commission in 1983 that recommended changes to Social Security explicitly to produce the large trust
funds that the system will draw on to pay for the baby boom generation’s retirement from roughly 2008 to 2030. Those reforms, signed into law by President Ronald Reagan, were widely hailed at the time by both parties as a model of effective government. If anything, those reforms have turned out to be even more successful than originally imagined, as the improved forecasts in recent years for the program demonstrate. The central reason for that success was the Greenspan Commission’s idea of building up trust funds invested in safe U.S. Treasury securities.

That is it, folks. That is the entirety of their argument. I almost admire these people’s command of the liar’s craft. These are people who could teach Bill Clinton how to conduct a discourse on the meaning of the word “is”. It takes some skill to pack so much misrepresentation, misdirection, and misinformation into a couple of paragraphs. Yet, the ridiculousness of their lie is still so evident that one has to wonder how they can promulgate it without shame. One wants to say, “Have you no sense of decency, sir, at long last?”

People who are either more charitable than I or more naive, might challenge my characterization of them as liars. After all, even if they are wrong, is it not possible that they believe what they are saying? And don’t we only call people liars who know what they are saying is false?

But for people who have such qualms about my language let me ask you this: do you think that the people behind the Social Security Network would call me a millionaire if I wrote out a paper that said that I owed myself a million dollars?


Even if I showed them that I had perfect credit and that I was making interest payments to myself? The answer is obvious. We all know that owing yourself money does not increase your net worth.

Would the people who argue for the efficacy of Social Security Trust fund also argue that companies can spend all the money in their pension funds and if they promised to pay it back when it was needed?


Even if the company had a good credit, put its own bonds in the fund, and promised to honor them? It would be insulting someone’s intelligence to even ask the question.

Would the people who talk about how the trust fund will put off any problems with Social Security for a long time, recommend raiding your 401K to pay for hot cars and fancy vacations as long as your credit rating was good?


It is obvious to any one with enough intelligence to read that spending money now and promising to pay it back later is not an asset but a liability. Nobody would be so uncharitable as to accuse the Social Security Network or any other group of recommending that private companies run their pensions or insurance funds the way the federal government runs Social Security. In fact, such actions would be illegal under current law for the obvious reason that money that you owe yourself will not help you pay future needs.

If it is so obvious to everyone what the truth would be if a private individual or company tried to do the same thing that the Federal Government is doing with Social Security, why should we believe people are being honest when they try to get others to believe that the trust fund will help matters? Would they dare explain what the Federal Government is doing with Social Security in language that a class of six-year-olds could understand? Just try and imagine it…

Now, class, Social Security is very important. It helps your grandparents to pay for their food when they are too old to work. Your mommy and daddy are going to need it to help feed themselves when they get too old to work, too. But wise people a long time ago figured out that when all of your mommies and daddies retire, Social Security would not be able to pay them all the money they need to take care of themselves. If nobody did anything, all you little boys and girls would have to solve the problem. But that would not be good at all, for the wise people knew that when you grow up you will have lots of problems that you need to take care of yourself without having to worry about whether your mommy and daddy have enough to eat. So the wise men came up with a plan to fix the problem. They had all your mommies and daddies pay more money to Social Security so that Social Security made more money than it needed to take care of your grandparents. The Wise People took that extra money and spent it on wars, roads, and other such stuff that governments do. They kept careful track of all the extra money they spent so when your mommies and daddies want to retire they know how much money you owe them.

The last part is the part is the part that would be tough to explain to any six year old. Some things that adults do are so stupid that you cannot explain them to a child. Just trying to think of a way of doing so makes my head hurt.

Teacher, what would happen if the trust fund did not exist?

Well, if the trust fund did not exist and it came time for the baby boom generation to retire, congress would either have to cut benefits, raise taxes, or issue more public debt.

Teacher, how is the trust fund going to change that?

When the baby boomers start to retire, Congress is going to have to raise taxes to pay what is owed to the trust fund, or it is going to have issue more public debt to pay what is owed to the trust fund, or it is going to cut benefits so that it does not have to pay the trust fund.

Teacher, if Congress is going to have the same three choices even though the Trust Fund exists than what is the trust fund doing for us?

Umm…. What are you supposed to say? It’s a lie. Though I suppose if you wanted to be polite you could call it a legal fiction. Whatever you want to call it, the trust fund serves no purpose except to deceive people. And the people who go around saying that the Trust Fund will help this nation pay for Social Security are perpetuators of this deceit. I will not stop calling them liars until the day comes when they are willing to advocate that the same accounting practices the federal government is using should be applied to everyone.

Even if I were to grant that they truly believe that the Trust Fund will help pay for Social Security in the future I would still call them liars. For the fact that they truly believe in the worth of the Social Security trust fund would only prove that they are so desperate to believe what they want to believe that they are willing to throw out everything they know and confess to be true. If they will do all that just so that they will not have to give up that one delusion, how is that morally any different than lying?

It would be less absurd for people to go around saying that I have murdered someone than for them to say that trust fund is efficacious. The charges would be slanderous as I have never murdered anyone (yet). But to say that the Chieftain of Seir has murdered John Doe would do no violence to the English language. It could be true depending on the facts. But to say that the Social Security Trust fund is both a liability that demands that the Feds pay up and an asset that enables the Feds to pay up is a farce as soon as it is uttered. It makes the words asset and liability meaningless before one even begins to look at the facts.

I first became aware how widespread this lie was as a teenager. At the time I could hardly believe what I was reading. I suppose I should not have been surprised. Being the good little religious fundamentalist that I am, I had read in the Bible that people would love lies rather than the truth. But I always thought that the lies that people would love would at least be somewhat plausible. I never thought that I would live in time where people would openly say things that made a farce out of English language
itself and expect people to believe it.

This would not be anything to be excited about if it were only few crack pots promulgating this lie. But it is not. I have heard politicians of both parties say that the trust fund will keep Social Security solvent for a long time. I have read it in the New York Times (not that it means much anymore). I have read it in union newsletters. In fact, the general consensus of the political elite seems to be that Social Security will not have real problems until the trust fund “runs out”.

When I was younger, I worried about facts and figures that seemed to me to show that the western world was heading towards a grave crisis. I still pay attention to that sort of thing, but I no longer give them as much weight in my thoughts as I once did. As I have meditated on history I have seen that it is not so much the problem that creates the crisis as it is how people react to the problem. To name just one example; World War II became such a big problem not so much because of the Nazis, but because of how people chose to react to the threat that they posed.

That is why I have harped so heavily on the deceitful nature of the trust fund and those who would have us put our faith in it. You can argue that Social Security is sustainable without being a liar. For the question of Social Security’s sustainability is a question about the future. And nobody knows what the future will bring. But if you cling to a lie to bolster your faith in Social Security’s future, it speaks ill of your character and your ability to deal with what problems the future will bring.

The fact that this nation’s elite has readily embraced a lie so absurd that it would discredit a child’s intelligence is more disturbing than a mountain of data that seems to show problems ahead. It reveals something terrible about the character of this nation that bodes very ill no matter what problems the future holds.

Sadly, the issue of honesty is lost in all of debates about Social Security. Most of the people who try to point out that the Trust Fund is a lie have issues that prevent the dishonesty of the Trust Fund from being clearly highlighted. They are usually ideologues who never saw a government program they did not want to destroy, or they are survivalists who are always looking for signs that the world is heading towards Armageddon. Their arguments are so full of data and overblown rhetoric that the simple charge of dishonesty tends to get drowned out. It all blends together and sounds like just another ideological debate.

I am as guilty as the next party. That is why I wish for someone with talents like Zola. I want the charge of lying to be clearly heard apart from the ideological debates. Not because I believe that some talented man can come and save us. I simply want someone to fulfill the role of the prophet and leave people with no excuse to say “we did not know.”

Maybe Tom Wolfe will volunteer.

3 Responses

  1. Irving Fisher Says:

    I can never tell when your overheated rhetoric is just a poise that you expect people to see through and when it reflects your real sentiments. This makes honest discourse with you hard because one is never sure when you are going to say “ha, ha, ha, you fool, you were not supposed to take that seriously.” Even in this day and age when it is hip to keep a knowing smirk on one’s face at all times there are still those of us who prefer straightforward discourse to a discourse that is filled with irony and mockery.

    But even though I do not approve of your manner of discourse, I still feel that it is worthwhile to take issue with your concern that the social security trust fund is a lie. Your fear is shared by a large number of people, especially among those who are less educated. I think that more needs to be done to address this fear. Too often the more educated among us tend to take the easy route of mocking the beliefs of those not as fortunate as them instead of the harder but more rewarding effort of education. I believe that unfortunate mockery tends blow back against us in the form of the bitter rhetoric that you have just used.

    I would like to break this vicious cycle. I have the highest respect for you, though I fear that in this age of perpetual irony you will feel compelled to reject that statement. Even so, it is true. Moreover, no matter what you might say of me, I do not believe you are a liar. Nor do I think you are stupid. Your reasoning is perfectly fine given the knowledge you possess.

    But I am afraid that you make a mistake that many smart people made back when the science of Economics was first emerging as a separate discipline. You are confusing what is true of micro economics with what is true of macro economics. Now please don’t go assuming that I am just trying to deceive you by hiding behind fancy terminology. What I am saying is really quite simple if you will only let me explain.

    Two individuals such as your self and imagine that one borrows a sum of money from the other. Now one individual can say that he has an asset (the promise of someone else to pay him) and the other can say he has liability (the promise to pay a sum of money to someone else). You of course, know all this, but what you may not know is that the study of individuals and their economic decisions is called Micro Economics.

    Now, let us take a step back and look at the nation as a whole. When we look at the nation as whole we are practicing what is called Macro Economics. Now let me ask you a question: Did the transaction of those two individuals that we previously talked about raise or lower the amount of assets in the nation as a whole? As I am sure a smart man such as yourself can easily see that the transaction does neither. The liability cancels out the asset so we are left with the same amount of assets in the nation as a whole as we had before their transaction. (Actually, the way they really add up national accounts, this is not quite true. But I am trying to keep this from getting too complex, so I have simplified how things work somewhat.)

    Now I am sure you are wondering what this has to do with the Federal Government and its ability to pay for Social Security. Well, let me throw this at you: The economic effect of federal government’s actions can only be understood using Macro Economics. Now please don’t reject that out of hand. Stop and think about it for a little bit.

    Is there any limit to how high Congress can raise taxes? The only real limit (other than the wrath of the voters) is size of the US economy. In other words, the federal government can call on the resources of the entire nation. And as we have said, Macro Economics is the study of the entire nation.

    Okay, you say, what has this got to do with trust fund? Well, let us stop and think for a moment. What is the macro economic effect of taxes? It takes money that could have been spent by the private sector and allows it to be spent by the government. Now what is the effect of the Federal government selling Treasury Bonds? It takes money that could have been used by the private sector and allows it to be spent by the Federal Government.

    Now let us say that the Federal Government set up what you would call a “real” trust fund. Let us say that this trust fund was full of high quality corporate bonds. Now what would happen if the Feds sold bonds out of this “real” trust fund? It would transfer money out of the private sector to the Federal Government in the same way that selling Treasury Bonds would!!! The Macro economic effect would almost exactly the same as selling treasuries.

    I put that caveat “almost” in there because there would be one difference. Corporate bonds are not as liquid as Treasury Bonds. When economists use the word liquid they mean that you can not buy or sell a lot of them with out causing big swings in prices. Now we know that anything the Feds do, they do in a big way. So if the trust fund were real by your definition, corporate bonds would be having big swings in price every time the government did something with the trust fund.

    This would be bad because it would allow smart people with money to make windfall profits. This would be as unfair as if the government gave free money to some people and not others. That is why most people who are educated in economics agree that it is better for trust funds to have treasuries in them instead of other types of investments.

    I hope I have helped you to understand why though the trust fund might not seem to make sense from micro standpoint, but when you look the big picture (or macro economics) it makes perfect sense.

    But you want to know what the really good news is? We probably will never have to use the trust fund. One of the sad things about life is that people love to run around telling people bad news even if it is not true. But sadly people are not so good at spreading good news. And the good news for the last decade or so is that the date at which economist think that we will have to start drawing on the trust fund keeps on being moved farther into the future. This is because the US economy has been doing so much better than anyone has expected.

    I expect this trend to continue. I think that because of advances in technology and scientific knowledge, we have reached permanently high plateau of economic growth. I think this will change all our lives for the better in ways that we can not even imagine right know.

    One more thing I would like to mention. You said that the way people react to problems is more important than the problems themselves. I could not agree more. I would just like point out that research has shown that people who have a positive attitude toward life’s problems handle them better than those who have a negative outlook. So I leave you with this thought…

    Embrace hope, not fear.

    Irving Fisher

  2. The Ethereal Voice » J’ACCUSE…… Says:

    […] The Ethereal Voice Front Page – Politics – Money – Knowledge – Art – Food – Fun Masthead J’ACCUSE…… By The Chieftain of Seir | January 13, 2007 – 7:14 pm Posted in Category: Money I am your typical red-blooded ignorant hillbilly. I am not prone to wishing for aid from any Frenchman. Even less am I prone to wishing for the aid of a member of the French intelligentsia. To even think Click Here to continue reading. […]

  3. Ape Man » Blog Archive » Et tu, Setser? Says:

    […] Brad Setser runs one of my favorite blogs on economics. So I was a little disturbed to see him jump on the “Social Security Trust Fund has lots of assets” bandwagon. My feelings on this score are pretty close those expressed in the Chieftain of Seir’s essay J’accuse (Though I have to say that the Chief is a little over the top). […]

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