"Social Security has nothing to do with the deficit"

[_Kevin Graham]

Just saying ... since Droopy appears to be back I figured he'd might want to take over where he left off when he demonstrated his abject ignorance on the debt and deficit.

[_cinepro]

I'm not Droopy, but maybe he was thinking of this...

Andrew Biggs, a scholar at the American Enterprise Institute and former principal deputy commissioner of the Social Security Administration, explains it this way:

Budget experts use two main measures of the budget deficit: the "on-budget" balance, which includes everything except Social Security and the postal service, and the "unified budget," which merges the on- and off-budgets.

The unified budget approach is by far the most common for budget experts and the media -- and when the Obama White House talks about a 2013 budget deficit of $901 billion, it's the unified budget deficit that's being cited.

On a unified budget basis, when Social Security's financial position worsens, the budget deficit grows. Social Security contributes about $53 billion to the budget deficit.

But let’s go a little deeper, relying on experts such as the Tax Policy Center’s Howard Gleckman and the work of our PolitiFact colleagues and the Washington Post Fact Checker.

Social Security’s red ink

Although Social Security used to run surpluses, over the past few years it hasn’t collected enough in taxes to pay in benefits.

And the trust fund consists not of prior Social Security surplus funds, but of interest-bearing securities provided through federal government borrowing -- thus the link to the deficit.

Social Security is a pay-as-you-go system: Payroll taxes paid by current workers and their employers go to pay benefits to current retirees and other Social Security recipients.

From 1984 to 2009, Social Security collected more money in payroll taxes than it paid out in benefits. That surplus was transferred from the Social Security program to the federal government's general fund. In return, the Treasury gave Social Security bonds that it could redeem to pay future benefits.

The government, in turn, incurred obligations to repay the bonds, plus interest, to the Social Security trust fund.

Since 2010, Social Security has been paying more in benefits than it has collected in payroll taxes. To meet its payments, Social Security began redeeming the bonds, plus interest, from the federal government.

In other words, money was transferred from the government’s general fund to Social Security.

That has an impact on the government’s deficit because the Treasury has had to borrow money in order to make such a transfer.

Pocan noted that in the fiscal year that ended June 30, 2012, Social Security had a $36 billion surplus. But he ignores the fact that Social Security had to tap its trust fund.

A closer look shows that Social Security actually had a cash flow deficit and used roughly $110 billion in interest to help make benefit payments.

Because the government had to borrow money in order to pay the interest to Social Security; that contributes to the federal deficit.

Indeed, White House figures show the Social Security shortfalls contributing to the overall federal deficit. And Obama has acknowledged that Social Security adds to -- though isn’t the primary driver of -- the deficit.

http://www.politifact.com/wisconsin/sta ... t-us-rep-/

(emphasis added)

[_Kevin Graham]

Yeah this represents the usual spin and misunderstanding of both SS and the deficit.

Tell me cinepro, if SS never existed, what would our current deficits and debt be?

Exactly as they are today.

Fact Check: Social Security Does Not Increase the Deficit

The American people love Social Security, and with good reason. It protects seniors and the disabled from poverty, and it is the most important life and disability safeguard available to the nation's 75 million children. The program is a bargain: Its administrative costs are lower than privately managed retirement plans. Social Security returns in benefits more than 99 cents of every dollar collected, whereas a typical 401(k) could easily eat up 20 cents of that dollar in fees. The program is fiscally sound and prudently managed — a policy triumph.

There are basically two categories of people who want to see Social Security cut: 1) financiers who wish to move us toward privatized retirement accounts so that they can charge us fees; and 2) rich people who do not like to pay taxes. Their main champions are conservatives at the Heritage Foundation, libertarians at the Cato Institute and Wall Street financier Pete Peterson.

Just about everybody else in America is against cutting Social Security, as poll after poll demonstrates. The people have continued to speak loudly and clearly, and yet Washington can’t seem to get the message. This is obviously because a lot of media people and politicians rely on money from the two groups mentioned above. So they have to come up with arguments to try to convince the public that up is down and red is blue. It’s a war of attrition: repeat lies and distortions often enough and maybe they’ll come to be taken as facts.

The latest volley is a shameful and distorted editorial in the Washington Post which attempts to downplay the retirement crisis faced by Americans and to stoke generational tensions by suggesting that Social Security is a burden on young people instead of a vital safeguard. The editorial actually mocked a sensible bill introduced by Sen. Tom Harkin (D-Iowa) that would boost Social Security benefits by increasing taxes on the wealthy. The Washington Post's nonsense was blasted by Senator Elizabeth Warren, who spoke out strongly against cuts of any kind, including Obama's "chained CPI" cut which would prevent Social Security from keeping up with seniors' increasing costs.

A favorite tactic of Social Security's foes is to push the notion that the program somehow drives up the federal deficit, an argument that is completely without merit.

In the first place, the federal deficit is shrinking. That’s a highly inconvenient truth for people trying to stoke deficit hysteria, but they’re banking on the fact that a lot of Americans don’t know about the deficit going down. So they go on pretending that the federal deficit is a dire, pants-on-fire problem, even though most of them know that’s a bunch of hot air.

Even if the deficit were rising — which it’s not — the sensible way to deal with that would be to concentrate on putting people back to work and to invest in productive things like education and infrastructure. That gets the economy going and then, guess what? As tax revenues come back, the deficit goes down on its own, which is what’s happening right now.

Taking money out of people's pockets, which is what cutting Social Security would do, actually could have the perverse effect of increasing the deficit because it means that people can’t buy the stuff they would normally buy with this money, like food and healthcare. What that happens, the businesses trying to sell those items have to scale back and lay off employees, which means less tax revenue for the government. And so on. Not exactly a recipe for a booming economy.

In the second place, it’s a plain economic fact that Social Security is not a driver of the deficit. Nevertheless, irresponsible people continue to confuse the public by using various tricks such as predictions of the future that have little basis in reality and accounting methods applied in devious ways.

We’re going to cut through all of that. By the end of this article, you will be able to confound all Republicans and centrist Democrats who offer up nonsense linking Social Security to the deficit and spread hyperbolic rhetoric.

1. Social Security is a self-financed program.

First, let’s talk about how Social Security works. If you are employed, you most likely pay a certain amount of your paycheck, generally 6.2 percent, to Social Security. Your employer kicks in the same amount. (The exception would be a few state and local workers who get public state pensions instead of Social Security).

The Social Security program has an independent budget that is separate from the rest of the federal government. Social Security is fundamentally a pay-as-you-go system, which means that payments collected today immediately go to pay benefits.

The finances of the Social Security program have been managed extremely well, and until the recent financial crisis and recession, more payments were collected than were needed for benefits and the surplus was placed into a trust fund. The Social Security program has loaned this extra money to the U.S. government, which used it for other things. In return, Social Security gets interest-bearing Treasury securities, or bonds.

The Wall Street-driven financial crisis and recession reduced the payroll collections, and in 2010, Social Security began to tap into its trust fund, which had been built up for just such an emergency.

You might hear some guy from the Cato Institute getting clever by pointing out that Social Security is using interest on the government bonds it holds to help pay for benefits, and therefore adding to the deficit because the government has to pay that interest. That’s a bit like saying that because I was smart and saved money and then loaned it to my profligate neighbor, I am somehow responsible for increasing his debt when I ask him to pay back what he borrowed. Would any reasonable person make such an upside-down claim?

No. Yet people calling themselves “fact checkers” are promoting this absurdity in the mainstream media.

As economist Dean Baker has explained, it’s a perfectly ordinary thing for bond holders to use interest collected on bonds. Grandmothers with pensions do it, and they aren’t generally accused of adding to the deficit. Just for fun, Baker uses the example of Pete Peterson as an illustration: “If Peter Peterson used $5 million in interest on government bonds he held to finance the startup of his Campaign to Fix the Debt, would it be accurate to say that he had contributed to the deficit? I suspect that most of the fact checkers would say that it is not.”

2. Social Security is not in danger of running out of money.

Another thing you hear is that Social Security is going to run out of money sometime in the future. Actually, by the forecasts made on the part of the Social Security Trustees, the program isn’t going to run out of money even if its trust funds — and that’s a big if — get depleted some decades down the road (2033 is the latest projected date).

The Trustees report is based on predictions that are deliberately conservative. Yet even with its worst-case scenario reasoning, the report says that the tax income would still be enough to pay about three-quarters of scheduled benefits through 2085. Does that sound like a crisis? No, because it isn’t. The real crisis is the growing number of Americans who will face retirement without traditional pensions and not enough money in their 401(k)s. Cutting Social Security would only add fuel to that fire.

3. There is no justification for tampering with Social Security’s financing right now.

Economists are not very good with crystal balls. If you don’t believe this, look at how few of them predicted the last financial crisis. Yet they are addicted to making prognostications.

Social Security’s finances are in perfectly good shape: the Social Security Trust Fund has a $2.7 trillion surplus and will continue to grow until 2021. Perhaps there will be more trouble some decades down the road, but we will be better able to make those assessments when we actually see what the reality is. To cut benefits right now because of a problem that might occur years from now is ridiculous, unless of course your real concern is to cut taxes, which is naturally the desire of America’s Ebeneezer Scrooges.

If you insist on doing something right now, there is a very simple way to generate more revenue for the program, and it doesn’t involve cutting benefits in all the myriad ways the politicians and pundits have proposed: Raise the cap on earnings taxed to pay for Social Security from its current $113,000 to something like, say, $200,000. Presto! You now have loads more revenue and you did not keep grandma from buying medicine.

You don’t hear the greedy rich jumping on board with this idea, because they don’t like to pay taxes, even when doing so might benefit the economy where they make their millions. You don’t hear the financiers cheering this approach, because they really want to see the program destroyed so they can get their mitts on your retirement money. But it would certainly suit everybody else.

[_Kevin Graham]

Then, there is always Lord Reagan: https://www.youtube.com/watch?v=ihUoRD4pYzI

[_ajax18]

The American people love Social Security, and with good reason.

Absolutely disgusting. Let's all get on SSI.

[_Kevin Graham]

What's so disgusting about dramatically reducing poverty among the elderly??

[_Analytics]

Andrew Biggs, a scholar at the American Enterprise Institute and former principal deputy commissioner of the Social Security Administration, explains it this way....

That's a pretty cynical view. The question really comes down to this: what did Ronald Reagan really do in 1983 when he increased Social Security taxes?

Trusting View
The trusting answer is that the extra money went to beef up an assets owned by the Social Security Administration in a fund called the Social Security Trust Fund. This was done in order to pre-fund much of the retirement needs of the baby boomers. The money in the trust fund is invested in the safest interest-bearing bonds that exist: U.S. government bonds. As we've always been told, purchasing U.S. government bonds is both a safe and patriotic way to invest your money. According to this trusting view, the U.S. government securities owned by the Social Security administration are just as real as the securities owned by your insurance company, your pension fund, your grandmother, and China.

When Ronald Reagan signed the 1983 payroll tax increase, that was his argument--"save" social security by funding a real trust fund.

If one holds this viewpoint, what Kevin has been saying in this thread is correct. When the SSA cashes in the assets it owns in the trust fund in order to pay benefits, the effect this has to the federal government is a restructuring of debt, not an increase in debt. It's just like an individual transferring a balance from their Visa to their MasterCard. Yes, the money you owe MasterCard goes up, but your total debt does not.

Cynical View
In contrast, the cynical view is that Ronald Reagan was essentially lying, and that the increase in Social Security taxes really had nothing to do with "saving Social Security", but rather was a way to give the working poor and middle class a huge tax increase without actually increasing "Federal Income Taxes."

From this cynical viewpoint, there really isn't a Social Security trust fund. Rather, the whole thing was just a shell game: a scheme in order to create more funding for the war on communism and the war on drugs for a couple of decades without increasing the taxes on the rich and without borrowing from outsiders.

If one takes this cynical perspective, then Andrew Biggs (cinepro's reference) is correct. Cashing in the trust fund isn't a balance transfer between Visa and MasterCard: it's a cash advance on Visa to pay off a debt you owe to yourself, so that you can use the money you pay back to yourself to take a vacation to Cancun.

I can see the point, but I have to insist that people who hold this point of view be consistent and admit that the increase in Social Security taxes that Reagan signed had nothing to do with "saving" Social Security, but rather was just a tax increase, mostly just on the poor and middle class, made under false pretenses.

[_Kevin Graham]

Bingo.

The reason why this is such a big deal is because the Right consistently lies about the effects of "entitlements" on the deficit and debt. For instance, it is common for their "think tanks" to write up articles about how those evil "entitlements" take up roughly a third of the entire Federal Budget. But what they don't tell you is that we could do away with Social Security completely but then we'd have to subtract all the revenues that comes from Social Security taxes as well. That leaves us with the same deficit as before. If you take away the self-funding programs like Social Security and Medicare, you're left with Defense spending being the single greatest component of the Federal budget, and that just doesn't jive with the narrative they like to shape.

They like to refer to entitlements as things lazy people get because they want to live off the wages of others. This is why racist morons like ajax are always so confused about these things. Just listen to him talk about how social security is "disgusting", obviously because he thinks people who receive it are just moochers. But the only people who receive it are those who pay into it first. How is that mooching?

[_ajax18]

But the only people who receive it are those who pay into it first. How is that mooching?

Do you even believe your own lies at this point? How many people on SSI/disability paid in to the social security fund as much as they're getting out? Most of them who write down on their occupation, "disability," are younger than I am. You might argue that they still work on the side, but they do that illegally, hence they don't have to pay social security taxes or any taxes on the work they're really out hustling.

Right now the age to draw social security for people in their 20s is 72. The only way most of them will ever live to see any of the money they paid into social security is if they can manage to get a doctor to say they're disabled. Most will never see a dime of the money they paid into social security, while in the past men worked from 25-55 and then lived another 30 years on social security and job pensions. That was unsustainable and most of the job pensions are gone because of it. Now it's my generation and my kids generation who are going to be paying the interest on the debt taken out to fund for their golden years.

Social security and the people who get money for nothing when they're plenty capable of working in some capacity are an abomination.

[_Analytics]

Bingo.

The reason why this is such a big deal is because the Right consistently lies about the effects of "entitlements" on the deficit and debt. For instance, it is common for their "think tanks" to write up articles about how those evil "entitlements" take up roughly a third of the entire Federal Budget. But what they don't tell you is that we could do away with Social Security completely but then we'd have to subtract all the revenues that comes from Social Security taxes as well. That leaves us with the same deficit as before. If you take away the self-funding programs like Social Security and Medicare, you're left with Defense spending being the single greatest component of the Federal budget, and that just doesn't jive with the narrative they like to shape.

They like to refer to entitlements as things lazy people get because they want to live off the wages of others. This is why racist morons like ajax are always so confused about these things. Just listen to him talk about how social security is "disgusting", obviously because he thinks people who receive it are just moochers. But the only people who receive it are those who pay into it first. How is that mooching?

Furthermore, Social Security taxes are highly regressive. You start paying at 12.4% on your first dollar, but once your income for the year hits $118,500, it suddenly drops to zero. The net result is that Joe Worker pays 12.4% of his income in Social Security tax, and Mitt Romney pays much less than 1% in Social Security Tax.