Normally keeping “Matt Bai”:http://topics.nytimes.com/top/news/washington/columns/political-times/index.html?scp=1-spot&sq=matt%20bai%20political%20times&st=cse honest is John’s job (see “here”:https://themonkeycage.org/2010/06/does_obama_care_about_leading.html or “here”:https://themonkeycage.org/2010/05/will_the_tea_party_succeed.html ). However, with John off at “Ezra Klein’s blog this week”:https://themonkeycage.org/2010/08/subbing.html, I figured I would step into the breach.
Bai had “a piece in the NY Times”:http://www.nytimes.com/2010/08/26/us/politics/26bai.html on Wednesday on reasons why progressive might want to think seriously about combating the deficit, which essentially revolved around a conversation he had with “Rep. Earl Blumenauer”:http://blumenauer.house.gov/ (D-Oregon). The central argument is interesting – that progressives need the government to be solvent and trusted so that it can continue to fund programs that progressives hold dear, including Social Security. My problem with the article, however, concerns Bai’s explanation for why Social Security is in trouble. He writes that:
bq. The coalition bases its case on the idea that Social Security is actually in fine fiscal shape, since it has amassed a pile of Treasury Bills — often referred to as i.o.u.’s — in a dedicated trust fund. This is true enough, except that the only way for the government to actually make good on these i.o.u.’s is to issue mountains of new debt or to take the money from elsewhere in the federal budget, or perhaps impose significant tax increases — none of which seem like especially practical options for the long term. So this is sort of like saying that you’re rich because your friend has promised to give you 10 million bucks just as soon as he wins the lottery.
Really? The last time I checked 30 Year “US treasuries were trading”:http://www.treas.gov/offices/domestic-finance/debt-management/interest-rate/yield.shtml at 4.06%; 10 year US treasuries were trading at 2.99%. And it turns out that “China owns”:http://www.ustreas.gov/tic/mfh.txt about $843 billion worth of US treasuries. So apparently there are at least a few people out there that think the US government is likely to repay its debts. Perhaps it is more like saying you’re rich because you have a friend who has promised to give you 10 million bucks _and_ can access international capital markets.
To be clear, there are plenty of “problems with the Social Security trust fund”:http://www.kansascityfed.org/PUBLICAT/ECONREV/PDF/1q06hakk.pdf; owning a bunch of US treasuries is just not one of them.