With the 2012 election season fully underway, all parties are digging in for the battles over what they think is important. That’s what we do in America. But as the battles get more and more heated, sometimes the facts upon which these stands are taken get a little bit fuzzy. Therefore, if a huge part of either party’s push is going to be based on a false premise, or an operation which is not understood, the country could save a lot of time and angst by clearing up the problem as early as possible. This is an attempt to do that. I’m referring to the debate about Social Security and it’s effect on the Budget Deficit and the National Debt. I know that the talk is all about Medicare, right now, but Social Security is the ultimate target of the medicare detractors. But Medicare rides on the back of Social Security, so it has to go first!
As a participant in the Social Security program, I don’t look at this as a partisan issue. But it does seem that the majority of those trying to kill it are Republican. They’ve been doing that since 1935. This time they’re claiming that somehow the Treasury is required to pour billions into the Social Security Trust Fund to keep it afloat and that it has become a major cause of our budgetary woes. The thing that’s really worrisome about this ploy, other than the fact that it’s not true, is that it just keeps building on itself. The White House has double dribbled the issue by not shining a spotlight on it. All they did was trot out the Chairman of the OMB to explain it in perfectly simple terms, but that isn’t good enough for the Internet! He wrapped it up by agreeing that the system needs to be fixed. Well, everybody knows that it needs to be fixed. If they would hire an actuary, he should be able prescribe a reasonable array of fixes in a couple of hours. It just isn’t that difficult! There aren’t that many options. They should fix it! OK. But there are much more pressing economic issues to attend to, first! And it would be a huge benefit if the people making those decisions at least knew how the system worked!
I’m aware of the effect of the passage of the Bush tax cuts extension on the premises of the argument but it was a one time transaction which was done for political reasons unrelated to Social Security. Therefore, please spare me that technicality and allow me to keep that for a separate thesis.
A few Congressmen, and others, have declared that “not one penny of taxpayer money has gone to support Social Security!” That has been shouted down and put on page 27. Even the most unbiased institution in the country, FactCheck.org, has been spun! In fact, it seems the entire Fourth Estate has retreated to page 27! We gave these guys our very first constitutional amendment so that they can keep an eye on everybody, but they’d rather cover the “buzz”! The economy is the most important story in the country, right now, and it’s only going to get louder and dumber until the election. There are almost 2 1/2 TRILLION dollars sitting in the Old Age & Survivors Insurance Trust Fund right now, and Wall Street is drooling all over it! For you who believe that the fund doesn’t really have any money in it, we paid $119 Billion in interest on it last year! That should be easy to verify.
Doesn’t the press take some sort of Hippocratic Oath, or something, that when there is so much spinning and fear-mongering by politicians, that when there is that much money at risk, that when one party has vowed to obstruct anything the Administration proposes to move the country forward, when aggressively ignorant and arrogant politicians scheme and plot to control those funds, shouldn’t the press at least ask somebody what’s going on? I’m not talking about asking Paul Ryan, John Boehner, Harry Reid, Nancy Pelosi, any of the presidential candidates or pretend candidates. Ask maybe, the Social Security Administration? Not the commissioner. He’s the one who reads all of those reports to the President. That’s where spin begins! Ask the guys who write those reports; the actuaries. They’re the ones who know how things work and they have no agenda! If the press would just ask each politician to explain their plan for solving this “perceived” problem, it would go away and there would be room for more serious economic debate, because the “problem” does not exist! Why can’t they “out” these guys?
Social Security works just the way you always thought it did, before people started trying to confuse you. Every payday you contribute 6.2% of your check and your employer matches that. That goes into the OASI Trust Fund to pay your benefits when you retire. It’s at this point that the Republicans want to give all this money to their Wall Street friends for them to play with. But, from the very beginning, the law has required that your savings be invested in US Treasury bonds. That’s right. We buy Treasury Bonds because they’re the safest investment in the world. I’ve heard stories that when the Treasury gets real pressed, they borrow huge amounts from the Trust Fund. That’s ludicrous! The Treasury borrows every penny that flows into the fund, every day of the year! Just as the law requires. How could they borrow more, on special occasions?
All of the money in the Social Security Trust Fund has always come from you and your employer, interest earned from the Savings Bonds, plus the income taxes that retirees pay on the benefits they receive. That’s it! So, when politicians claim that this is the biggest expenditure in the budget, I get nervous. First of all, they don’t tell you that this is a trust fund and isn’t even in the budget! Second, I don’t see any money in there that came from the general fund, except the interest. It ALL came from workers and employers! They call it a “payroll tax”. It is a tax for your employer. For you, it’s a contribution to your retirement insurance annuity. That’s why they call it “The Old Age & Survivors Insurance Trust Fund!” The government doesn’t contribute to the fund, nor does it subsidize the beneficiaries. Not even a tax break. Kind of makes you wonder what Congress is up to, doesn’t it? They talk like it’s their money and we’re all a bunch of moochers, sucking on the public teat (thank you for that, Alan Simpson)!
After scouring the rules and accounting procedures that govern the SSA, looking for that secret trick that allows Congress to throw billions in there and not have any of it appear “on the books”; after reading countless speeches and interviews of people who swear that the budget and/or debt cannot be fixed unless Congress intervenes into Social Security, FactCheck.org unwittingly exposed the fallacy of this whole issue. They presentsd an irrelevant chart that shows something called the “Social Security Primary Deficit”, which shows the Trust Fund as having a deficit of billions for each of the next 10 years! If you go to that link and click on the CBO link directly under that chart, you’ll quickly realize that these are the numbers for the fund, which is held in US Treasury Bonds, without the revenue from the interest. So, in ten years, instead of a $118 billion deficit, which they claim, there will be a $45 billion surplus! I believe that the CBO charts those “Primary Surplus” numbers in order to comply with their “Unified Budget” requirements.
So, that’s it. That’s the spin. Social Security is the biggest drain on the federal budget because it keeps buying more and more bonds with that “deficit” it seems to accumulate and that silly Treasury insists on paying interest on it’s debts! Really? Wouldn’t it be more correct to say that Wall Street is a bigger problem? They hold more Treasury bonds. It seems to me that if Congress ever fixes the Trust Fund’s balance problem, the more bonds will be bought, the more interest will have to be paid and the louder these guys are going to cry! That’s exactly the same as the board of a bank complaining about the amount of interest they pay, so, they must have too many savings accounts! How do you tell the public that the more interest the Treasury has to pay the SS trust fund, the healthier it is? What would the “Blogosphere” do with that? I hate to use the “Bailey Building & Loan” analogy, but I will if I have to.
Well let’s just “Privatize” the whole thing and everyone will be happy! The Boys down on Wall Street will be going nuts! How much is the commission on 2 1/2 trillion? Then there’s the question of how to make the most profit when that infusion of money into the market makes all the prices go up. Here’s a chance to make that plunge into the Chinese equities market! But we can make that moot by just making sure the derivatives market gets first crack at it! Wow! Call Boeing and Airbus. The orders for big private jets will be rolling in! Make a note that we need to get rid of that Capital Gains Tax! The Treasury owes OASI that 2 1/2 trillion so they’ll have to sell some bonds to get the cash. Chinese will probably buy them. (lol) Do you think that they’re going to want interest on that?
So, let’s review our accomplishments. The Treasury doesn’t have to pay that enormous amount of interest to Social Security anymore. They have to pay it to the Chinese instead! So the amount that we owe and the amount of interest we pay remains the same. But now we owe a foreign country instead of our own people. And our retirement money is now invested in multinational conglomerates, foreign banks, hedge funds and derivatives, all administered by Wall Street bankers, instead of government backed bonds overseen by our elected representatives. What can possibly go wrong there?
Fixing the problem? No matter what, don’t let Congress put any money in it, or they will own it! That being said, we only have limited options. Increase the income or lower the out go or some of each. We’ve already discussed the four components of income. We can’t control the interest rate but a little kick in the tax would be available. On the debit side, a tinkering with the retirement age or lowering the benefit. That’s it! That’s all we have to work with and it must be done! The sooner the easier. So make up your mind and tell your Congressman what HIS options are.
Benediction: FactCheck.org got this one wrong and isn’t going to admit it. But that hardly ever happens! Send them some money. We’re really going to need them and they are going to be overwhelmed! And learn how to use Snopes and Politifact, too!
Here is an interesting read for both sides: http://www.politifact.com/truth-o-meter/statements/2011/jun/17/herman-cain/herman-cain-touts-alternative-social-security-used/