Pulitzer winner David Cay Johnston says that the government deciding not to pay these bonds would be a form of default. He puts it more convincingly than anyone I’ve seen, so I’ll quote him at length from the comments at Dean Baker’s site, too (emphasis mine):

… if the Congress fails to provide full benefits to those who have paid for them in advance because of the excess FICA tax it would be a form of default on US government debt.

THAT is the issue that needs a great deal of attention: reducing benefits paid for in advance is a form of default.

At its peak the excess tax equaled 4 percent of wages subject to FICA. That excess tax took away half of the savings capacity of the vast majority of Americans.

Factor in the time value of money and the effect of Reagan’s and Greenspan’s excess FICA tax was enormous and helps explain why so many Americans are mired in debt today. Fewer than half of taxpayers have ANY cash savings, while more than half did before Reagan took office.

Because of to Reaganomics, Social Security was converted from a pay-as-you go system into a subtle way to subtle way to overtax wages and thus finance tax cuts for the rich. The integrated federal budget (SS used to be accounted for separately) made this sleight-of-tax possible.

Without overtaxing workers Reagan would not have been able to persuade Congress to give massive tax relief to the few who paid the 70 percent (and later 50 percent) marginal rates.

In other words, this money is owed to Social Security as surely as money is owed to the Chinese for the hundreds of billions of dollars they’ve lent us in the form of bonds.

Note that Johnston says there’s a reason we don’t know this stuff:

it is very hard to introduce into an article history even from as recently as 1983 when the second most valued word in newsrooms is “yesterday,” exceeded only by “early this morning.”

And many or most newsrooms don’t have the institutional knowledge going back that far, much less the journalists who know their history.

Some more reporting on the history of the Social Security trust fund would be helpful.

Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu.