For a lockbox

If we had to, we could set up Social Security as a separate legal entity. That would end the silly argument about whether the Trust Fund is real.

Once you take apart the argument for wrecking Social Security, it comes down to the proposition that the General Fund is now so bankrupt it will never be able to pay its Social Security obligations, and that in fact it won’t. The Trust Fund, we are told, is merely mythical, not a real, enforceable obligation, since it consists of federal debt held by a federal agency.

The General Fund bankruptcy problem is real, of course, and ought to be addressed. (The Poorman posted the key graphic.) But the problem of not trusting the people we elect to run the Federal government to pay what it owes is fixable.

As Kevin Drum pointed out, the Trust Fund could sell its bonds on the open market and by other assets; at that point, no one would doubt that the bond obligations were real, or that the assets were real assets of the Trust Fund.

But the problem would remain that the trustees are mere servants of the current administration, with no authority to sue if the President and the Congress refused to spend the Trust Fund assets to pay Social Security benefits. So here’s Plan B:

Make the Social Security System a separate legal entity, as the Federal Reserve System is, with its own governing body and the right to sue. The trustees would be appointed by the President, of course, but they would have a fiduciary obligation to Social Security beneficiaries and the right to sue the Federal government if it tried to confiscate retirement assets to spend them for other purposes.

I’m not sure this is necessary, but it’s certainly possible. And since it’s possible, the argument that we can’t ensure that the Social Security Trust Fund will be spent to fund the pension system is simply false. We can. We should.

The question is whether we will. It’s a simple choice between keeping promises and breaking them.

Author: Mark Kleiman

Professor of Public Policy at the NYU Marron Institute for Urban Management and editor of the Journal of Drug Policy Analysis. Teaches about the methods of policy analysis about drug abuse control and crime control policy, working out the implications of two principles: that swift and certain sanctions don't have to be severe to be effective, and that well-designed threats usually don't have to be carried out. Books: Drugs and Drug Policy: What Everyone Needs to Know (with Jonathan Caulkins and Angela Hawken) When Brute Force Fails: How to Have Less Crime and Less Punishment (Princeton, 2009; named one of the "books of the year" by The Economist Against Excess: Drug Policy for Results (Basic, 1993) Marijuana: Costs of Abuse, Costs of Control (Greenwood, 1989) UCLA Homepage Curriculum Vitae Contact: