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The Therapy Sessions
Tuesday, January 11, 2005

Deceiving the willingly ignorant

The New York Times is reputed to be staffed by some of the smartest journalists around (smartest journalists...errr, no comment).

From this elevated perch, they crow about the problems of the day, and people take them seriously because they must know what they are talking about.

For critical thinkers, watching the Times editors bump into facts and not realize their import is quite frustrating. It is like watching monkeys trying to figure out how place boxes on top of one another to get at a banana. (Except the monkeys usually figure things out...)

Don't believe me?

Consider this argument, For the Record on Social Security:
In suggesting that 2018 is doomsyear, the president is reinforcing a false impression that the trust fund is a worthless pile of I.O.U.'s - as detractors of Social Security so often claim. The facts are different: since 1983, payroll taxes have exceeded benefits, with the excess tax revenue invested in interest-bearing Treasury securities. (An alternative would be to, say, put the money in a mattress.) That accumulating interest and the securities themselves make up the Social Security trust fund. If the trust fund's Treasury securities are worthless, someone better tell investors throughout the world, who currently hold $4.3 trillion in Treasury debt that carries the exact same government obligation to pay as the trust fund securities. The president is irresponsible to even imply that the United States might not honor its debt obligations.

This is the amazing financial ignorance the we must confront:

1. Social Security's "trust fund" full of treasury bonds (True.)

2. Treasury bonds are the safest investment out there, backed by the full faith and credit of the US government (True.)

3. When the time comes to redeem these bonds, the US government will go to the US government and ask it to pay the bond's price and its accumulated interest. (Hint: this might be a problem!)

4. The US government considers its Social Security obligations to be off-budget and it hasn't planned for them. But it will conjure up the money somehow
(trillions and trillions of dollars) and honor its obligations anyway, paying these treasury bonds plus interest because it always does.(Mayday! Mayday!)

5. Viola! Social Security is "solvent" until 2193 or something....(Hello?!!)

You could drive a truck through the holes in the argument.

But who are people going to believe? The Ivy-League educated, prize-winning journalists at the New York Times or some chimp form Crawford, Texas who pretends to be the President?

You see, the Times editors can't be wrong: they are the smartest journalists out there.

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