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Beware the Mokita

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The Trobriand Islanders of the South Pacific have a word that has no exact counterpart in English -- mokita -- which means "the truth that everyone knows, but nobody speaks." We have a delicate mokita in the nation's capital that is well known to the politicians but kept secret from the public -- the Social Security Trust Fund is a mirage.

We are constantly being reassured that Social Security is funded until the year 2037 because of the Trust Fund. This illusion helps dampen at least anxiety over the pending fiscal crisis, at least for retirees dependent on Social Security for much of their income.

But the Social Security Trust Fund is comprised totally of federal bonds, which are in effect IOUs that say Uncle Sam owes himself a lot of money. The Trust Fund is a liability, not an asset. As Social Security begins to pay out more than it takes in, which began last year, the difference is being made up from general revenues. The drain on government revenues will grow rapidly over the years, adding to the deficit. The Social Security Trust Fund is of no use. As a practical matter, it is the same as if it did not exist.

To be sure, this truth is not exactly hidden. Annual budget reports from the Office of Management and Budget (OMB) and the Congressional Budget Office (CBO) include language explaining the true nature of the Trust Fund. But few people understand it and almost no one wants to talk about it. It is a mokita.

For his part, OMB Director Jack Lew insists Social Security is solvent and therefore off the table in terms of budget talks. When Lew was OMB Director in the Clinton Administration, OMB explained that Trust Fund balances are nothing more than a "bookkeeping device," but that was then, this is now. Now Lew is echoing the Obama Administration line that Social Security is solvent.

The continuing dustup between Lew and columnist Charles Krauthammer about this issue is really unfair. Krauthammer is free to say what he wants; Lew is obliged by his position to toe the party line. Lew would be wise to clam up and let others shovel this, ahem, detritus.

The real tragedy is that we could solve the Social Security problem easily enough by nudging up the retirement age, eliminating the maximum limit on FICA contributions, and perhaps adjusting the COLA. Unfortunately, before you can solve a problem, you must first acknowledge that it exists. And this is one mokita that neither party is willing to face up to.

Jerry Jasinowski, an economist and author, served as President of the National Association of Manufacturers for 14 years and later The Manufacturing Institute. Jerry is available for speaking engagements.