Wednesday, February 16, 2011

What Social Security Deficit?

A lot of folks are giving our President credit for this:

Now, you talked about Social Security, Medicare and Medicaid. The truth is Social Security is not the huge contributor to the deficit that the other two entitlements are.


I would say too much credit – although in fairness the President was responding to this question:

You’ve been talking a lot about the need for tough choices in your budget, but your plan does not address the long-term crushing costs of Social Security, Medicare, Medicaid -- the real drivers of long-term debt. Can you explain that?


Kevin Drum does deserve a lot of credit:

But unless you believe that the United States is literally going to collapse in the near future, Social Security isn't. Period. The weird thing about this is that Social Security isn't even hard to understand. Taxes go in, benefits go out. Unlike healthcare, which involves extremely difficult questions of technological advancement and the specter of rationing, Social Security is just arithmetic. The chart on the right tells you everything you need to know: Right now, Social Security costs about 4.5% of GDP. That's going to increase as the baby boomer generation retires, and then in 2030 it steadies out forever at around 6% of GDP.


A lot of the current Tea Party hysteria has to do with the current Federal deficit and as Kevin’s chart shows, we are currently running Social Security surpluses. In fact, we have been running surpluses for quite some time adding to the Trust Fund’s assets. Some projections have currently promised benefits outstripping tax revenues such that the Trust Fund’s assets may be depleted in just over 30 years. Fine – then we may have to do some minor changes in either the pay-ins or pay-outs in the future but Social Security is not part of the alleged Federal deficit crisis. But that’s never stopped the modern leaders of the Republican Party from raiding the Trust Fund to bankroll the General Fund irresponsibility that they have created over the past 30 years.

5 comments:

Don Levit said...

So we agree that the trust fund has been raided.
If that was not the case, would the surplus look any different?
Would it be more "real"?
Don Levit

KISSWeb said...

The trust fund has not been raided. "Raiding" means using the funds to pay other expenses, and thereby depleting the funds. That has not happened. Putting the revenues into Treasury bonds means the money has been lent to the government. By law, it must be paid back.

Why is that so difficult for some people to understand? Actually, the answer to that is that they have no desire to understand it, because they desperately hold to the right-wing fiction that the funds are "gone" -- so they can outright lie to younger people and irresponsibly mislead them into thinking they will never see a dime of their Social Security. That is false in every way possible.

Don Levit said...

Are you saying that the FICA surplus dollars were not used to pay for current government expenses all these years, and lowered the deficits to boot?
If so, I can provide governmental links to say you are incorrect.
Those dollars are gone - they are replaced by nonmarketable Treasury securities, whose dollars come from a separate source - not FICA dollars, but from current revenues and debt.
Agree or disagree?
If disagree, why?

Jack said...

Don,
You have had this same discussion repeatedly on this blog and over at Angry Bear. Provide any charts that you can find. The fact still remains that funds from excess FICA are accounted for by the assets of the Trust Fund and described as Special Treasury notes. These are a legislated obligation of the Treasury Dept. In fact the Treasury has been using Trust Fund assets to supplement general budget resources and, as needed and in accordance with the law, those assets are repaid to the Trust Fund which uses those assets to pay benefits when and if FICA revenue is short of payments to beneficiaries.

You need to stop trolling this issue. No amount of restating the issue will change the fact that Social Security has its own independent budget. That budget relates to the general budget only in that the Social Security Trust Fund holds Treasury debt. That debt is equally valid to the debr represented by the T-Bills held by banks, foreign governments, pension plans and private individuals. You know that because it has been explained to you repeatedly. Stop trolling and go home and get some rest.

pudge said...

Jack: first, FICA revenue is already short of payments. That's started now.

And yes, you're right, those notes must be repaid ... which means Social Security is currently a net deficit to our General Fund, because those monies don't actually exist anywhere right now.

So on the one hand, yes, we have no reason whatsoever to tell any retiree, now or soon, that they have to worry about being able to collect benefits (although they may be reduced slightly, depending on legislative action). The Social Security Trust Fund is healthy for now, and the notes that make it up are backed by the full force of law and the Constitution.

But the monies to repay those notes simply don't exist anywhere, and will add significantly to the budget deficit moving forward, should nothing change.