You are skirting around the “lockbox” debate that went on in the 2000 campaign. Social Security collections would have to remain outside of the government’s accounting system to actually pay for present benefits. That would have prevented Bush from applying those to deficit/debt reduction.
While most non-economists relate the debt to the total of Treasury bonds held by non-government entities, the truth is that every dollar ever created is balanced with a dollar of debt to satisfy the dual entry spreadsheet system used to track money by all banks/governments. Digging below the level of comfort for most politicians would show that the government never “has” dollars because it “has” the debt that created each dollar. Placing them both in the same accounting sector immediately balances them to zero. At one time, that debt, or at least a large portion of it, was represented by the gold reserve.
Logic would tell one that collecting taxes isn’t possible until spending distributes the newly created currency in the economy to be available for collecting/borrowing. It simply isn’t possible for any tax to “pay for” any spending without seriously depleting the money supply of the private sector. This logic must be applied across the board to all fiscal functions of the government. While this isn’t comfortable for those who can’t get their thinking out of “household budget” mode that places funding before spending, it is the reality of our monetary system that is universal in application.
When micro-economic functions within an accounting sector require more detailed records, such as individual contributions to tax liabilities, the numbers never represent actual dollars in existence, because they don’t exist in reality. This is why we separate money into categories that are determined by the degree of availability of the dollars they represent. When bonds mature they are re-funded to reserves to be spent by Congress appropriating new money to retire them. This, in a fiat currency regime, makes bonds a mostly useless function for anything other than drawing down reserves in the bank system. Here is a clip of Greenspan schooling Paul Ryan on Social Security.
