The Washington Post published a sensational story last Sunday that claimed that Social Security is already broke . “Adding billions to US budget woes,” the headline read. Instead of piling up surpluses, as the Social Security trust fund has done for nearly thirty years, this year the system became “cash negative.” Social Security, the Post warned, “is sucking money out of the Treasury.”
This is alarming news, if true. Fortunately, it is not true. The Post committed what I call fact-filled mendacity—a pejorative mash of scary buzz words and opaque statistics that encourages readers to reach false conclusions. The newspaper’s obvious objective is goosing the so-called supercommittee whose Congressional members seem to be reluctant about whacking Social Security benefits. The formerly liberal Washington Post has long urged that as a solution to federal debt and deficits. Its ideological posture influences its reporting and also what “informed observers” think. Last night, I heard a TV anchor remark in passing, “We just read that Social Security is in the red.”
Baloney. The truth—if truth is still relevant to Washington politics—is that Social Security has never contributed a dime to the federal budget deficits. Therefore, cutting Social Security for the elderly will do nothing to relieve the deficit problem. Senate majority leader Harry Reid has made this point, so has President Obama. Not true, the Post story flatly declares.
In fact, Social Security has piled up enormous surpluses—now $2.7 trillion—which the federal government has borrowed and spent on other things, wars or highways or corporate tax breaks.
The nation’s largest creditor is not China. It is the working people of America and their employers who collectively have amassed Social Security’s huge surplus through the weekly FICA contributions required by law. This wealth is the nest egg that will pay for swelling benefits as the baby-boom generation retires. Far from being broke or “sucking” billions from the Treasury, the Social Security trust fund will continue to accumulate larger and larger surpluses during the next ten years, reaching $3.7 trillion by 2022, according to the system’s trustees.
The Post managed to concoct an opposite version by ignoring such fundamental facts and by distorting others. This has been typical of major media. Reporters and pundits mindlessly repeat the establishment propaganda that turns reality upside down. Social Security is not a source of the deficits, as you have read so many times, but a giant savings program that actually helps offset the effects of the government’s red ink. Editors or reporters are too lazy (or dim-witted) to dig into the accounting complexities and discover that elite wisdom is bogus.
The Post started with a fact that is not news and already widely known. With the deep recession, Social Security revenue dropped sharply because so many millions are unemployed. If you wish to blame this problem on Social Security, why not also blame it on the Pentagon which really contributes big time to federal deficits? With reduced revenue, the cost of paying out Social Security benefits in 2011 will slightly exceed (by about $46 billion) the trust fund’s income from FICA payments. Evidently this is what the Post meant by “cash negative.” That’s not a term Social Security trustees use and does not quite mean what the Post implies.
In fact, Social Security’s total income, if you include the interest payments it routinely receives on the trillions already lent to the federal government, does cover all of this year’s payouts (with a surplus of $70 billion left over). So Social Security did not “suck” any money out of the Treasury except what it was already owed as the leading lender to the federal government. To suggest that these billions in interest payments somehow add to the federal deficit is like blaming the deficit on China because it also collects interest on its Treasury bonds.
The Post compounds its distortion further by complaining that the Treasury had to pay $106 billion to the Social Security trust fund to replace the revenue it lost when Congress and President Obama enacted a one-year reduction in the FICA payroll tax. One notes that the Washington Post editorial page endorsed this measure as a good and proper way to stimulate the economy.
Defenders of Social Security (including myself) objected that suspending the payroll tax would undermine the long-term solvency of Social Security unless the government replaced the lost revenue. Congress agreed. It ordered Treasury to replenish the trust fund, dollar-for-dollar. The Post complains now that another $267 billion will be required if Congress enacts Obama’s proposal to expand the payroll tax holiday. This spending, one can argue, did indeed add to the federal deficit. But why blame Social Security and punish Social Security recipients when the deed was done by the President and Congress, egged on by the Washington Post?
Surely, you see the point. Social Security is a stand-alone program financed by its own revenue stream, not by other tax sources. It has always operated that way. The ordinary people who pay in their FICA deductions are the beneficial owners of this wealth, not the Treasury. Fortunately, people at large understand this, even if Washington elites do not. That’s why politicians are a little leery about pullng this swindle on the old folks.
The Washington Post has a popular feature called “Fact Checker” that vets the accuracy of campaign rhetoric made by the presidential candidates. I suggest the newspaper turn this matter over to Mr. Fact Checker and let him decide who’s telling the truth.