PARKERSBURG, W.Va. – The Social Security (search) trust fund really does exist — nestled in the bottom drawer of an unremarkable government file cabinet.
It's in a pair of white loose-leaf notebooks holding plastic page covers. Each caresses a piece of paper representing a bond worth a staggering amount of money. Say, $8,577,396,000.00 ($8.577 billion), due on June 30, 2013, with 6.5 percent interest.
Actually, the entire setup is, well, a setup:
—The off-white file cabinet in the office building hard by the Ohio River.
—The electronic locks.
—The papers — signed by Susan Chapman of the Office of Public Debt Accounting (search) — obligating the "full faith and credit" of the United States to make good on the money owed.
"The paper is symbolic," says Pete Hollenbach, spokesman for the U.S. Bureau of Public Debt (search), the creation of a 1994 law that anticipated the current debate about Social Security's solvency and whether the trust funds held anything more than IOUs.
As the computer era flowered, Congress passed legislation requiring the Treasury to create a "physical document in form of bond, note or certificate of indebtedness, rather than accounting entry."
"I viewed it as somewhat Biblical ... like doubting Thomas," says Andy Jacobs, the former Indiana congressman behind the law.
In an interview, Jacobs said he wanted to rebut the "disingenuous assertions" that there was no trust fund, even though there was, in fact, no vault stuffed with cash to pay benefits.
Now, as then, the paper is an anachronism in a system that provides benefits to 47 million Americans.
Apart from being the repository of one particular file cabinet, the government facility in western West Virginia is responsible for managing trust funds that were worth about $1.6 trillion at the end of January.
In the computerized world of the early 21st century, the government collects Social Security payroll taxes and credits it to two trust funds. One pays benefits to retirees and their survivors; the other is for disability payments.
Technically, there are four trust funds in all that are fed by payroll taxes, but the other two relate to Medicare.
As a matter of bookkeeping, the government takes the payroll taxes it has collected for Social Security and invests them in short-term, interest-bearing electronic certificates of indebtedness.
Essentially, Treasury borrows these funds and uses them to help pay for the full range of government programs and services, Social Security benefits included.
Each June 30, some of this borrowed money is converted to a series of 15-year Special Interest Bonds (search) at designated interest rates.
The bonds are phased — laddered in investment parlance. This is done in part to invest available funds at current rates and in part to make sure that Social Security has the cash needed to pay beneficiaries each month.
Now, with President Bush urging Congress to overhaul the Social Security system and allow personal accounts, a perennial debate about the existence and contents of the trust fund is flaring anew.
As before, some advocates of Social Security changes say the trust funds contain no money, only IOUs that the government owes itself.
True, although Hollenbach notes, "We've always paid our obligations on time."
Official forecasts by the Social Security trustees estimate that in 2018, the trust funds will begin taking in less payroll tax revenue than they need to pay Social Security benefits. By 2042, estimates are that the trust funds will be empty, and the system dependent on the daily tax receipts to meet obligations.
If so, one problem will pale next to the others.
What to do with those notebooks?