President-Elect Obama Suggests Defaulting on the National Debt

President-elect Obama apparently believes that the crisis brought on by the collapse of the housing bubble will require defaulting on the national debt. The New York Times reported today that Obama believes that "changes in Social Security and Medicare will be central to efforts to bring federal spending in line."

While Medicare is projected to face shortfalls because of the incredible inefficiency of the U.S. health care system, the Congressional Budget Office projects that Social Security will be fully funded until 2049 from its own stream of tax revenues and the U.S. bonds it holds.

If Mr. Obama plans to cut Social Security in the near future, then this effectively amounts to a default on the bonds held by the trust fund which were purchased with workers' Social Security taxes. If the budget situation is so dire that it is necessary to default on the government debt, then surely we should be considering defaulting on the bonds held by Robert Rubin, Peter Peterson, and other wealthy bankers, not just the bonds that were bought to pay Social Security benefits for the country's workers.