Tuesday, May 03, 2005

IOUs for dummies

Mindless cannot understand why people do not understand that Government money is fungible. Mindless' point is that the overall solvency of the government as a whole (which is what matters, since it is the government as a whole that issues debt) is the sum of all its different parts, and individual surpluses and deficits do not matter. The notion of a social security "trust fund" suggests that one part of the government can be kept solvent even if other parts of the government fall into ruin, and this is false. Moreover, this is false as a matter of accounting, not a matter of whether you can trust government, or whether government is accountable to voters, or whether democracy is a good idea or any of the other crazy notions raised in the comments thread.

I think it was smart for Bush to propose means tested social security benefits. It is amusing to see Democrats (publically) fight to give more money to rich people.


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