In an April 6 New York Times article, reporter Anne E. Kornblut asserted that President Bush “was on solid ground when he said it [the Social Security trust fund] was basically 'just I.O.U.'s.' ”

If this description of the trust fund is accurate, it is also an accurate description of every mutual fund account, every personal savings account, every checking account, every certificate of deposit, and every money market account owned by Americans, as well as hundreds of billions of dollars of U.S. treasury bonds owned by foreign central banks worldwide. All of these are “just I.O.U.'s.” In fact, the private account plan that Bush has been advocating, which would allow workers to divert nearly two-thirds of their share of payroll taxes into portfolios that would include stock funds and government bonds, would also be “just I.O.U.'s.”

The Social Security Administration (SSA) is obligated to purchase Treasury securities with its surplus payroll taxes, and the U.S. Treasury is legally obligated to redeem them as needed by the SSA. Currently, the trust fund contains about $1.7 trillion worth of these securities. The total amount of outstanding debt issued by the Treasury, including both debt owned by the public and intra-governmental holdings, is currently about $7.8 trillion.

Allan B. Hubbard, director of the White House National Economic Council and assistant to the president for economic policy, extolled the security of U.S. Treasury bonds in an April 6 Wall Street Journal op-ed touting Bush's Social Security plan. “Furthermore, the president's proposal clearly shows how we can minimize risk. The owner's personal retirement account could remain invested entirely in risk-free government bonds,” Hubbard wrote.