Marion thinks she hears Matt ask if we want coffee. "Coffee yes, coffee yes," she says to a surprised Matt. "You won't let us in the building cafeteria, but at least you could give us a cup." Matt doesn't know what to do. Howard makes an awkward face. We move on.
We have traveled more than seven hours to inquire whether the fund exists. Matt assures us it does and points to the four funds, right there on page 7, in which the money can be found.
I ask if the trust fund is real, since the bonds can't be sold to anyone but the government. Of course it's real, says Matt, pointing me to the work of Robert Reischauer, the former Congressional Budget Office director and Brookings fellow who will soon head the Urban Institute. Matt walks us through the process of how the trust fund is filled. The money from our paychecks is combined with the employer portion and sent to the government. The government makes an accounting entry and invests the money that very day in a bond that will mature on June 30 of that fiscal year, with an interest rate that equals the average of all marketable bonds that have a maturity of more than four years.
Clear on that? After June 30 of each year, any funds that haven't been paid out to beneficiaries get "reinvested in buckets of one to 15 years." Matt starts writing numbers on a presentation board, illustrating how $150 billion would be invested in $10 billion increments to mature in each of 15 years. He passes around a printout, a quarter-inch thick, documenting each bond the fund owns.
Howard pulls out a real bond. I can't wait to get my hands on it, but it seems stuck with Marion, who is sitting to my left. It is a regular piece of paper that reads: "The United States of America For Value Received and Promised to Pay to The Federal Old-Age and Survivors Insurance Fund $23,218,801,000." The interest rate is 6.25 percent. On the bottom it reads, in boldface, "Non-transferable."
Marion asks it she can take the $23 billion bond back to Florida to show her seniors. Howard has to say no. Matt asks Marion to find the bond in the ledger. She, being a former accountant, does so.
I want to get back to the issue of whether the Social Security Trust Fund is just an accounting fiction, as many noted D.C. analysts insist. I ask what happens when the bonds are sold. Matt asks what happens when I buy a security from a broker such as Merrill Lynch. I give them money, I say, and they credit me with a security. So your money is gone? he asks. I say yes. That's what happens here, he replies. The government gives us money, we credit them with a security, and the money is gone. Ergo, it's real. I'm not convinced.
I point out that in 1998, when the government supposedly ran a surplus, its debt increased. This, I say, was like putting money in a bank account and having the balance decrease. Didn't this have something to do with how the Social Security Trust Fund is credited? I propose that we follow a dollar of the Social Security surplus as it is supposedly invested in government bonds. It comes into the fund, I say; you buy one of these pieces of paper, which you consider a real good; and then the government spends the dollar again, either on a real good or to buy back another bond. So the dollar is essentially spent twice: once on a Social Security bond and again on whatever the government wants to buy.
This line of questioning goes nowhere, so I try another approach: What happens when the bonds are redeemed? Don't taxes have to increase or other spending decrease? Matt agrees, I think. But time is running short, so we decide to take a look at the actual trust fund--the safe--which is our primary objective.
3:05 p.m. I expect to take an elevator down to a basement vault, perhaps to pass through a metal detector. Even submitting to a body search isn't out of the question. But we halt outside Howard's unit: Room 309-1, Division of Special Investments. The safe is inside--a yellow, fireproof, five-drawer filing cabinet, sitting nonchalantly in front of a white pillar. The safe weighs 535 pounds, according to a sign at its base. A security log records the time it is opened each morning and closed each evening. Howard tells us that we can't take a picture of it. I ask why. After a contemplative pause, he says, "Security."
Not 10 feet away sit the Dell personal computer and Hewlett Packard laser printer that produce the bonds. This we can take a picture of, Howard says, and Steve gets to work.
3:40 p.m. We're back on the Porkbuster. The mood is upbeat--there's almost a post-coital glow, so pleased are we to be among the few who have seen the trust fund.
5:50 p.m. We pull into a Bob Evans restaurant somewhere in West Virginia for dinner. I buy a six-pack of Coors Light, a cigar, and a deck of cards from a gas station. Steve buys a six-pack of Budweiser. Back on the bus, we sit down at the table, conveniently close to the refrigerator, for five hours of cards and what would technically be considered a round of binge drinking. I keep beating him at gin. I teach him cribbage. I beat him at that too.
1:20 a.m. I climb off the Porkbuster at the Holiday Inn in Rossyln, Virginia, still unconvinced that the Social Security Trust Fund exists.
Date: Fri, November 5, 1999 2:36:01 PM
From: mlynch@reasondc.org
Subj: Doping in D.C.
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