RE: Trust Fund cynicism - right mood, wrong target

["Steven H. Johnson" <info@sscommonsense.org>]

re James comments on the Trust Fund:

"The Trust Fund and the Treasury are at arms length, that is 
why bonds are issued at the weighted average of the public 
capital market Treasury Auctions."

Let's try this from a different angle.  The practical question is
this:  Should the existing relationship between the Trust Fund
and the Treasury be kept as it is, or changed?  And, if it should
be changed, in what direction?  And why?

My argument is that it should be changed.  In its first four
decades, when Social Security was essentially a pay-as-you-go
system, it didn't really matter.  There wasn't a signficant 
accumulation of assets to worry about.  But that's different now,
with a Trust Fund worth roughly ten percent of GDP, and heading
for fifteen percent before it starts being drawn down.

And - if the Trust Fund is really to be of help in funding 
tomorrow's Social Security system - it needs to reach 25% of GDP, 
and then stay at that level.  If you don't want to pair Trust
Fund investments with PRA's, then we'll need to have the Trust
Fund grow to 45% of GDP, and remain at that level.

This is a rather radical change.  It's something the nation has
never done before, not at that magnitude.  Continuing to treat
Social Security as a programmatic part of the federal budget
simply is not appropriate as it builds a substantial pool of assets
that rightfully are held in trust for people outside the government.

>From a prudent financial management standpoint, a much longer
arms length relationship is called for.  Social SEcurity should
do its own banking.  The money from employers should go directly
to Social Security.  The payments to beneficiaries should come
directly from Social Security.  The assets held in the Trust Fund,
in trust for retirees, should be acquired and managed independently, 
not acquired directly from the Treasury and held as "internal" debt.

Otherwise, the Congress is exposed to an extraordinary degree of
temptation, on a perpetual basis.  If it thinks the assets are
somehow part of the federal pie, if it thinks the payroll receipts
are somehow part of the federal pie, the potential for mischief
is enormous.  We simply can't accumulate capital worth 25% of GDP
into the Trust Fund without first establishing a much more rigorous
Chinese Wall between Social Security and the operating programs
of the federal government.

-Steve Johnson.