Social Security Isn’t In Crisis – WE ALREADY PAID FOR IT!

This is an article written by someone on Facebook and when I saw it I knew the message had to be sent out there! So this article is by David L. Rutledge, I am just the messenger. (I have permission to post just as an FYI).

Yes, I’m going off on a rant again. : ) I recently made the comment, “Social Security isn’t in crisis, didn’t and won’t add one dime to the national debt, and isn’t a hand-out. WE ALREADY PAID FOR IT!” A friend, no doubt hoping to save me from the embarrassment of having to eat my words, sent me this.

A rebuke from used to carry a lot of weight with me, but not any more. The article is misleading at best. The truth is that buying back securities sold to the Social Security Trust Fund will increase the budget deficit, if the government doesn’t raise taxes to pay its own bills, BUT THAT IS NOT RED INK ON THE PART OF SOCIAL SECURITY!

Because past payments into Social Security exceeded benefits paid out, the fund currently has a surplus of something like $2.6 trillion (money already paid by American workers and their employers). The “deficit” to which the fact-check article refers, then refers to current Social Security payroll tax revenues falling short of benefits being paid out. The government has to buy back Treasury securities sold to the Social Security Trust Fund in order to cover current benefits. If the US government doesn’t have the revenues to buy them back, this creates a deficit, but that is not a deficit in Social Security. That is a deficit in the general budget. And by law, Social Security operates entirely outside the general budget. They are two completely separate entities.

Because of the Republican tax cuts for the richest Americans, two Bush wars they never funded, and the economic crisis they created, the government will have to borrow money in order to buy back Treasury securities sold to the Social Security Trust Fund. This does indeed create a deficit, but blaming Social Security for the current red ink is more than a little disingenuous – like the enormous deficits run up by Republican administrations, it is a political trick intended to create a fiscal crisis that can be used to attack one of the most successful programs the Democrats ever created to benefit middle-class and poor Americans.

Just to clarify, the problem isn’t that the government is using the Social Security Trust Fund money. This is how our money earns interest. That’s a good thing. The problem is when Republicans try to scare people who don’t understand the mechanics of the operation into thinking the Trust Fund doesn’t exist or is “full of worthless IOUs” so that they can use this as a political tool to destroy the program.

Having a surplus, it’s better to invest that money than to let it sit around losing value because of inflation. You’re private savings account is just as much an IOU as the Social Security trust fund, except it doesn’t earn as much interest. You don’t think they have your money sitting in a vault somewhere, do you? That money is loaned out to generate interest. If these IOUs were worthless, why would governments around the world be buying them?

Because of the interest owed on those Treasury securities in the Social Security Trust Fund, even while the republicans scream that it’s losing money, the Trust Fund will continue to grow for some years to come, even while expenditures exceed payroll tax revenues.

The Social Security Trust Fund surplus is currently projected to cover benefits paid out until 2037, with no changes to the current structure. If we don’t do anything, in 2037, the Social Security fund would be forbidden by law from taking money from the general budget; therefore, Social Security benefits would simply decrease. In the meantime, we can do several things to prevent that from happening, like raising the retirement age, raising the ceiling for taxable income, means testing, etc.

The current shortfall in Social Security revenues is largely a factor of the economy – less people making money, therefore, less taxable income. Also, the Republicans recently negotiated a payroll tax holiday, starving Social Security revenues ever further, which I assume they did for exactly the same reasons they ran up the national debt – in order to gin up a fiscal crisis, which they could use politically to attack Social Security.

To sum up, the “deficit” comes from the fact that the government now must borrow money to buy back bonds in order to cover current Social Security expenditures. BUT THAT IS NOT A PROBLEM CAUSED BY SOCIAL SECURITY!

Republican Propaganda Talking Points:

1. “The Trust Fund/surplus doesn’t exist.”
The Social Security Trust Fund is as real as your government insured savings account (if you still have one).

2. “It’s full of worthless IOUs.”
Those so-called “worthless IOUs” are special issue securities from the United States Treasury – the most trusted investment instruments in the world – backed by the full faith and credit of the United States Government.

Despite derision from the likes of Ron Paul and his Republican friends, who are using every trick they can think of to try and undermine it, the full faith and credit of the U.S. Government still carries a lot of clout around the world. This is why, in the wake of the global financial crisis (we created), with the US mired in two wars, with bailouts and ballooning debt, countries and corporations around the world began hoarding US dollars. For all the griping, nobody’s about to replace the US dollar as the global currency any time soon.

3. “Social Security is a ticking time bomb.”
?”Ticking time bomb” is not just hyperbole but a Republican fear-mongering talking point. If we do absolutely nothing, in around 2037, benefits will simply decrease. Is that equivalent to a bomb blowing up?

Meanwhile, in order to prevent a future shortfall because of our aging population, we can make any of a number of adjustments to prevent that from ever happening. I would favor increasing the ceiling on taxable income. As income inequality in the US has increased, more income is going to the top, and only a fraction of that income is taxable to Social Security. The current cap on taxable income is around $106,000.

Growing income inequality has caused the share of earnings above the cap to nearly double over the last three decades. This is because incomes for the rich have increased massively while the rest of us, whose incomes are fully taxable, are getting less. The Social Security Administration estimates that eliminating the cap on taxable earnings would close the projected shortfall.

4. “Social Security is not a 401K – it’s a shell game, an illusion.”

Do you have a savings account? Do you have any investments? Are these also a “shell game” or an “illusion”? No, Social Security is not a 401K – you can lose money with a 401K (especially with Republicans running the show). The Social Security Trust Fund buys special issue US Treasury Bonds, which can be redeemed at face value. They cannot lose money.

5. “Social Security is a Ponzi Scheme – paying benefits from revenues coming in.”

True, SS pays benefits mostly from current revenues. We all pay our bills mostly from current revenues. When you get a paycheck, do you sell stock to pay your bills and then buy more stock with the money from your paycheck? I’m guessing not.

Until 2010, with revenues depleted by the economic catastrophe wrought upon America by Bush & Co., SS not only paid benefits from current revenues, but it also purchased US Treasury bonds for the future, earning interest. Those Treasury Bonds are now worth in excess of $2.6 trillion and still earning interest. That’s no “Ponzi scheme.” That’s a sound investment – an investment Republicans and their Wall Street cronies would love to get their hands on.

Republicans claiming Social Security adds to the deficit is a lot like wayward youngster, to whom you loaned a couple trillion bucks on Friday, coming to you on Monday, all hung over, and griping that if he gives you twenty bucks for lunch, he’ll have to borrow from the credit card to pay his mortgage.

The problem isn’t caused by Social Security. It’s caused by the behavior of the errant child. We don’t have a deficit in the Social Security Trust Fund. What we are witnessing is a deficit in the integrity of the Republican Party.