Congressman Paul Ryan (R WI) has released a new Republican Budget proposal. Unsurprisingly, the proposal includes many cuts to programs for the poor, leading some to call Ryan, the Anti-Robin Hood . The Republicans not only seek to starve the poor and disabled, but also seek to make further tax cuts for the rich and increase defense spending, also known as welfare for defense contractors.
Hidden in the depths of the proposal is the Republicans’ most radical idea – the killing of Social Security. Social Security has a $3 trillion surplus, which has been built up in anticipation of the retirement of baby boomers. Rather than hold onto $3 trillion in cash, the Social Security Administration has invested the money in U.S. government bonds, widely considered to be the safest investment in the world. These are the same bonds that anyone can buy from the U.S. government.
A bond is essentially a loan to the government. Say you purchase a $1000 bond. That money is then used by the government to pay its ongoing obligations. In return, you receive a document promising to pay the money back together with interest. In his budget, Ryan states: “The [Social Security] Trust Fund holds Treasury securities, but the ability to redeem these securities is completely dependent on the Treasury’s ability to raise money through taxes or borrowing.”
Ryan appears to be stating that in order to balance his budget, he wants the U.S. government to default upon its debt to the Social Security Trust Fund and, by extension, default upon its obligations to the elderly of the country. There are ,however, major problems with Ryan’s plan. The main one is that default is unconstitutional. Section 4 of the 14th Amendment states: “The validity of the public debt of the United States … shall not be questioned.” Article I, section 8, clause 4 provides that the Congress can borrow money “on the credit of the United States.”. These 2 provisions together mean that Congress can borrow but can’t renege.
Of course, the other problem is that all of the money in the trust fund was put there by workers and employers for the sole purpose of providing some security for workers in their old age. When Republicans say they don’t want to pay back the money they borrowed for the Iraq war and the Bush tax cuts, what they really mean is they want to help the rich on the backs of the working class.