Using a government filing cabinet as a prop, President Bush yesterday played to fears that the Social Security Trust Fund is little more...

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WASHINGTON — Using a government filing cabinet as a prop, President Bush yesterday played to fears that the Social Security Trust Fund is little more than a stack of worthless IOUs.

If the IOUs are worthless, however, so is the “full faith and credit” of the federal government, independent financial analysts said. The reality is a little more complicated than Bush acknowledged, and it goes to the heart of the debate over Social Security’s future.

Experts say both sides in the debate over Social Security mischaracterize the trust fund’s worth to make the case that the retirement system essentially is sound, as many Democrats contend, or that it’s on the verge of a crisis, which is Bush’s message.

“I don’t like the Democrats saying everything is fine any more than I like the Republicans saying, ‘House on fire! House on fire!’ The truth is somewhere in the middle,” said Timothy Smeeding, a professor at Syracuse University’s Maxwell School of Citizenship and Public Affairs.

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Bush visited the Bureau of Public Debt in Parkersburg, W.Va., yesterday to highlight the fact that there’s no actual cash in the trust fund, even though Social Security has piled up a $1.7 trillion surplus since it was created in the late 1930s. Payroll taxes collected from workers have exceeded benefits paid to retirees every year since 1984.

Instead of socking away the surplus, the government has spent it on other programs and promised to repay it later, with interest. The IOUs are in the form of special-issue Treasury bonds that are stored in a filing cabinet.

“There is no trust fund, just IOUs that I saw firsthand, that future generations will pay,” Bush said after inspecting the storage site. “Imagine — the retirement security for future generations is sitting in a filing cabinet.”

Democrats quickly labeled Bush’s trip to Parkersburg as nothing more than a gimmicky photo-op meant to mislead Americans into thinking that drastic reform is needed to fix the system’s solvency problems.

“Americans who paid into Social Security are legally entitled to have that money fund Social Security until 2052 — as estimated by the Congressional Budget Office — just as all other investors in U.S. bonds are entitled to their return on their investments,” New York Rep. Charles Rangel, ranking Democrat on the House Committee on Ways and Means, said in a statement.

The Social Security Administration for years has tried to downplay fears that the IOUs are an empty promise. The agency’s Web site includes a section that addresses the question: “Is there really a Social Security Trust Fund?” The SSA’s answer: “Yes.”

Another SSA Web section addresses concerns that the bonds are of little value.

“Far from being ‘worthless IOUs,’ the investments held by the trust funds are backed by the full faith and credit of the U.S. government. The government has always repaid Social Security, with interest,” the agency says. “The special-issue securities are, therefore, just as safe as U.S. savings bonds or other financial instruments of the federal government.”

Current projections indicate that the value of the government’s promise will be put to the test in 2017, when Social Security payroll taxes will fall short of promised benefits. At that point, the Social Security Administration will have to start cashing in its IOUs.

The government could meet its commitment by raising income taxes or Social Security payroll taxes, by trimming future benefits or by combining the two approaches, and it could issue more bonds — new debt — to raise the money.

Abandoning the commitment to pay off the trust-fund bonds isn’t considered a realistic option, even by those who like to say the trust fund is worthless.

“The Social Security Trust Fund is a promise to raise taxes later,” said Brian Riedl, a budget analyst at the Heritage Foundation, a conservative research center. “It’s worthless in the sense that you cannot pay benefits with the IOUs in the trust fund.”

Bush’s plan for private investment accounts is a side issue.

He acknowledges that his proposal to let younger workers invest some of their Social Security taxes in stocks and bonds would do nothing to make Social Security solvent. He hopes workers could use profits from the accounts to offset cuts in their future retirement benefits under traditional Social Security.

Both sides agree the key to fixing the program is finding a way to make sure the government can meet its future obligations.

“There is a trust fund backed by the full obligation of the U.S. government, but that doesn’t change the fact that we do have a problem,” said William Novelli, chief executive of AARP, a seniors’ organization that opposes Bush’s plan for private accounts. “We ought to address it now.”

Rangel’s response was reported by The Associated Press.

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