The Wilmington morning star., 1940-10-03
AS To l. O. US

The current political campaign has brought
a renewal of charges that improper methods
are employed in handling the Federal Old-Age
and Survivors Insurance Trust fund.
These criticisms can be reduced to:
l. The funds brought in by Social Security
taxes are being spent as fast as received and
as a result there is no money in this partcu-
lar fund, but instead a stack of government
II. O.. US.
2. Since the money has been spent, it will
be necessary to raise it all over again when
benefits are paid, and that means that taxes
will again be levied, and we shall have double
taxation.
These statements and the resulting conclu-
s1ons are both in error. Much of the careless
thinking on the subject is due to a mlscon-
ception of what constitutes money. Appar-
emily, a great many people think OF money IN
the same sense as cash in their pocketbooks.
Carried to its logical conclusion then, the trust
fund would consist of dollar bills, Federal Re-
serve notes and loose change. Dlsregardlng
the fact that such a fund would not be IN
vested and, in consequence, would be non-in-
terest bearing, it would continue to be essen
TALLY a stack of I. o. US, for without metallic
backing that is precisely what a dollar bill or
Federal Reserve note is.
AS a matter of fact, money IS in general
an I. o. U. When the taxpayer makes payment
to the treasury, he will in most cases do so
by check. That is an I. o. U. The treasury
then deposits the check in a bank, at which
point it becomes a bookkeeping entry, an
other form of I. O. U. Sooner or later, the
treasury will draw a check in favor of a bene-
ticiay of Old-Age and Survivors Insurance.
another l. O. U. From the time the original
taxpayer makes his contribution until he or
the money has never ceased to be an 1. O.
U.
To those who would still feel safer if they
thought currency was piled up under lock and
key in the trust fund, it might be suggested
that they pick up a statement of their nearest
bank and see how cash on hand'' compares
with deposits. They may be Mortified to find
that the depositors' money Just isn't there"
If the critics are looking for trouble, they
will find many similar trust funds devoid of
CASH. The government has for years main
ldIned a variety OF Such tundS. IN these, the
money is invested in government securities,
and for all practical purposes, there is no
cash in such funds. Among them may be men,
toned the Postal Savings system, containing
over a billion dollars of the peoples savings,
the Civil Service Retirement fund, the gov
eminent Life Insurance fund, and 20 or more
similar funds most of which were established
long before Social Security came into being.
Precisely the same criticism can be made of
all of these. The money has been spent, in
the sense that it has been invested in govern
ment bonds and the funds therefore consist of
stacks Of I. o. U.s.
Then there is the double taxation complaint.
1t is inaccurate to say that because the money
has been spent. new taxes must be imposed
to pay benefits in some future year. This
wholly disregards the tax income arising in
a particular year, which by itself, without
interest on the investment is estimated to ex.
coed benefit payments for many years to come
Under these conditions, there is obviously no
need for additional or double taxation.