The Honorable Mike Johanns
404 Russell Senate Office Building
Washington, DC 20510-2705

Dear Senator Johanns,

After a recent vote on the extension of the payroll tax cut, you said "...the Social Security trust fund is filled with IOUs to begin with, and moving money around [to pay for the extension] will only make it worse." You went on to say that you would prefer direct payments to stimulate the economy rather instead.

I appreciate your position on direct stimulus checks and hope that more members of Congress consider this option. However, the idea that the Social Security trust fund is full of IOUs is not true. The recommendations of the Greenspan Commission in 1983 led to the growth of a large surplus in the Social Security trust fund that has since been used to buy U.S. bonds, widely considered to be among the world's safest investments. The government sold these bonds to the Social Security trust fund, just as it sells bonds to individuals and private corporations every day of the week. Just as with any funds that come from the purchase of bonds, the money is borrowed by the government, but repaid at the end of the term of the bond. While any bond can be called an “IOU” this is not the normal term used in either business or political discussions. By referring to the government bonds held by the trust fund as IOUs you are misleading your constituents and others who hear your comments.

While it is commendable that you recognize the need to further stimulate the economy, I hope you and your staff will have the opportunity to further review the design and finances of Social Security as you prepare future public statements on the topic. If you would like any additional background on the program, I would be happy to assist you.