The Voice of the White House January 21, 2005

This month in the Monkey Palace there has been much discussion of the article in the New York Times by Paul Krugman: in which he says: “There are only two things that could endanger Social Security’s ability to pay benefits before the trust fund runs out. One would be a fiscal crisis that led the U.S. to default on all its debts. The other would be legislation specifically repudiating the general fund’s debts to retirees.”

The second statement seems to have put a bright idea in Our Dear Leader’s small brain. He is apparently drooling at the mouth, at the prospect of how many kickbacks (board postions, speaking fees, advisory retainers, hot IPO tips) he can expect from Wall Street firms after he retires in 2008, if he “privatizes” Social Security. There is one small problem to overcome: Social Security is not bankrupt.

The Trust Funds, (four of them), fully invested in obligations of the U.S. Treasury, as of December 2004 stand at $1,686,985,126,000: Krugman is referring to Article 4 of the Fourteenth Amendment to the U.S. Constitution, which begins as follows:

“The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.”

The buzz down the hall is that if confirmed as Attorney General, Judge Alberto R. Gonzales intends to write an opinion for George Bush, which would let his boss propose legislation to allow the Treasury to default on its obligations to retirees, and also let his boss off the hook, if, as a result, the central banks of the world dump their dollars.

The rumor is that Gonzales intends to focus on the phrase “authorized by law,” and to argue that the Constitution does not bar the President from sending legislation to Congress, proposing a default on the $1,686,954,876 of the Trust Fund which is invested in “Special Issue” T-Bills, IOU’s written by the Treasury specifically for the Trust Funds. These Special Issue IOU’s were issued by the Treasury over the years, to cover the use of working Americans’ FICA paycheck deductions to give tax breaks to plutocrat friends of the President.

Not only that, but the Treasury might even be able to recognize this repudiation of its liabilities as income, thereby wiping out all Bush’s deficits, and allowing him to claim record budget surpluses in his second term, trumping Clinton’s record. (Who gives a damn that the cost is the retirement funds of a hundred million Americans?)

The danger is that if the Central Banks of Russia, China, Japan, and other nations, should see the U.S. Government repudiate their obligations to their own old folks, in order to manufacture a Social Security “crisis” merely in order that George Bush can have a sweet retirement, they might ask themselves, what is to prevent the U.S. Treasury doing the same to them? If they believe their T-bills are worthless pieces of paper, the stampede out of dollars and into other currencies will cause a Richter 10.0 earthquake in the financial markets. If that happens, Alberto R. Gonzales takes the fall, (with suitable compensation, no doubt,) and Bush continues to smell sweet like a rose.

You have to give Team Bush credit. The hallmarks of great criminal minds are that there is no trace of morality or conscience, that they think in terms of sums that stagger the imagination, and that the getaway plan is as important as the crime itself. Up to now, the shenanigans have been in the billions or hundreds of billions. Now they’re thinking in terms of trillions.

See our Inside the White House archive: