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Our Turn

Shaheen is right: Social Security not part of deficit mess

PolitiFact, the widely cited fact-checker, recently criticized U.S. Sen. Jeanne Shaheen for stating that Social Security “has not contributed to the debt and the deficits.” However, Shaheen is right and PolitiFact is wrong.

By law, Social Security cannot spend more than it takes in. It can only pay benefits if it has sufficient income to cover the cost. It has no borrowing authority. According to the most recent report of Social Security’s board of trustees, Social Security had a $69 billion surplus last year alone. Far from increasing the deficit, Social Security loans money to the federal government that reduces the deficit.

While the relationship of Social Security to the debt of the United States is a source of misunderstanding and confusion, it is not a matter of conjecture or opinion. By law, when Social Security has a surplus, it must invest that surplus in the safest investment on Earth – interest-bearing Treasury obligations backed by the full faith and credit of the United States. Including last year’s surplus, Social Security currently has an accumulated reserve of $2.7 trillion.

Just as the law requires that employers keep assets from their pension trusts carefully accounted for, separate from their general operating funds, so the law requires that the assets of the people’s pension – Social Security – be held in trust separate from the general fund of the United States. The Social Security contributions deducted from the paychecks of America’s workers, and matched by their employers, are funds dedicated to the exclusive purpose of paying for Social Security; they are held in trust for the beneficial use of working families.

The individuals PolitiFact consulted are wrong in stating that “the interest payments earned by Social Security only amount to a reshuffling of government dollars.” If the federal government borrows money to pay off its obligations to Social Security, it owes more to the general public but less to Social Security. This does not add to the deficit, nor change the debt obligation. Rather, as the economist Dean Baker has pointed out, it “simply changes the identity of the owner of the debt.”

For those used to thinking about Social Security as just another spending program and Social Security contributions as just another tax, the fact that Social Security does not and cannot contribute to the federal debt and deficit may seem counterintuitive, but it is true.

In a matter of months, the federal government will reach the debt ceiling, the limit on the amount of money it can borrow. Cutting Social Security’s expenditures or increasing its income will not reduce the amount of debt subject to that limit. This sharply differs from cuts to expenditures from the government’s general fund, such as agricultural subsidies or defense.

If a program paid for from general-fund revenue were cut by $100 billion and nothing else changed, the federal government’s borrowing needs would go down by $100 billion. As a consequence, the federal debt would also go down (or more realistically, given the current large deficits, would go up less than it would have, without the cut). If the savings from that hypothetical cut were offset dollar-for-dollar by a cut in income taxes or an increase in other expenditures funded from general revenues, the federal debt subject to limit would be unchanged.

In stark contrast, if Social Security benefits were cut by $100 billion, the federal debt subject to limit or total debt would remain unchanged. If the $100 billion savings from cutting Social Security benefits were offset dollar-for-dollar by a cut in income taxes or an increase in general-revenue spending, the total federal debt would increase!

Cutting Social Security’s benefits does not reduce by a penny the federal deficit or the total value of debt instruments issued by Treasury.

In short, Shaheen is right. We thank her for her comments and urge her to oppose any deficit reduction bill that includes cuts to Social Security.

(Stephen Gorin is chairman of the New Hampshire State Committee on Aging and executive director of the New Hampshire chapter of the National Association of Social Workers. Nancy Altman is do-director of Social Security Works; she served as Alan Greenspan’s assistant in his position as chairman of the bipartisan commission that developed the 1983 Social Security amendments.)

Given that Republicans insist on extremely low tax rates for the wealthy (compared to the 79% average top bracket rate prior to 1982), and given that Republicans have suddenly come to realize in the last 4 years that our credit limit is a problem, their scheme now is to cut SS benefits to create more surplus for them to steal in order to continue paying for their ongoing Reagan/Bush tax cuts for the wealthy. Stephen, Nancy, and Senator Shaheen are correct: "Social Security currently has an accumulated reserve of $2.7 trillion......backed by the full faith and credit of the United States." But consider this: For 30 years our Treasury has borrowed about $5 trillion in order to make up for the revenue shortage caused by the Reagan and Bush tax cuts (mostly for the wealthy). About $10 trillion more has been borrowed over the same period to pay for the long term interest expense on the $5T tax cut borrowing, bringing the total tax cut borrowing up to $15T. About 1/3 of that $15T has been borrowed by the Treasury from our SS and other trust funds. The other 2/3 has been borrowed from the public in the form of Treasury bills, notes, and bonds, in order to pay interest on the borrowing from our trust funds and on the Treasury bills, notes, and bonds. The interest payments from the Treasury to SS are even borrowed from SS by the Treasury, leaving nothing but "interest bearing Treasury obligations" (IOUs) in our SS Trust Fund. The "full faith and credit of the United States" is now questionable, as reflected in the fiscal cliff/debt ceiling debate and the downgrade of our credit rating, thanks to 30 years of extremely low tax rates for millionaires and billionaires.

Yea, and I'm sick and tired of it being called an entitlement, too. I paid for it and I've got to pay taxes on it.

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