The MoveOn Website Misinforms the Voters About Social Security
Sept. 14, 2010
MoveOn.org is a Democrat site. It recently ran what supposedly is a refutation of criticisms of Social Security.
I refute the refutation in my video, Retirement Armageddon. I shorten it here.
Myth: Social Security is going broke.Reality: There is no Social Security crisis. By 2023, Social Security will have a $4.3 trillion surplus (yes, trillion with a 'T'). It can pay out all scheduled benefits for the next quarter-century with no changes whatsoever. After 2037, it'll still be able to pay out 75% of scheduled benefits--and again, that's without any changes. The program started preparing for the Baby Boomers retirement decades ago. Anyone who insists Social Security is broke probably wants to break it themselves.
The Social Security Trust Fund is filled with IOUs from the Treasury. These are explicitly designated as non-marketable assets. There is no way for the Social Security Administration to sell them to any other agency or to private investors. It can sell them only to the U.S. Treasury. Here is what the Social Security Trustees' Report for 2010 says:
What Are the Trust Funds? Congress established the trust funds in the U.S. Treasury to account for all program income and disbursements. Social Security and Medicare taxes, premiums, and other income are credited to the funds. Disbursements from the funds can be made only to pay benefits and program administrative costs. All excess funds must be invested in interest-bearing securities backed by the full faith and credit of the United States.The Department of the Treasury currently invests all program revenues in special non-marketable securities of the U.S. Government on which a market rate of interest is credited. The trust funds represent the accumulated value, including interest, of all prior program annual surpluses and deficits, and provide automatic authority to pay benefits.
So, whenever income from FICA taxes plus income from the Treasury (interest payments) are less than payouts to beneficiaries, the Trust Fund must sell the IOUs back to the Treasury. Where will the Treasury get the money? Three places: taxes, sales of debt to investors, and sales to debt to the Federal Reserve System.
The Social Security Trust Fund is in two parts: Old Age (OA) and Disability Insurance (DI). The 2010 Trustees Report says:
What is the Short-Range Outlook (2010-19) for the Trust Funds? For the short range, the adequacy of the OASI, DI, and HI Trust Funds is measured by comparing their assets at the beginning of a year to projected costs for that year (the "trust fund ratio"). A trust fund ratio of 100 percent or more--that is, assets at least equal to projected costs for a year--is considered a good indicator of a fund's short-term adequacy. That level of projected assets for any year means that even if expenditures exceed income, the trust fund reserves, combined with annual tax revenues, would be sufficient to pay full benefits for several years, allowing time for legislative action to restore financial adequacy.By this measure, the OASI Trust Fund is financially adequate throughout the 2010-19 period, but the DI Trust Fund fails the short-range test because its projected trust fund ratio falls to 93 percent by the beginning of 2013, followed by exhaustion of assets in 2018.
The system is going broke. This year (as we shall see) the income from FICA taxes is less than outflow. Only Treasury interest payments -- producing a deficit in the general fund -- are sustaining it. The system is in deficit mode.
Myth: We have to raise the retirement age because people are living longer.Reality: This is a red-herring to trick you into agreeing to benefit cuts. Retirees are living about the same amount of time as they were in the 1930s. The reason average life expectancy is higher is mostly because many fewer people die as children than did 70 years ago. What's more, what gains there have been are distributed very unevenly--since 1972, life expectancy increased by 6.5 years for workers in the top half of the income brackets, but by less than 2 years for those in the bottom half. But those intent on cutting Social Security love this argument because raising the retirement age is the same as an across-the-board benefit cut.
Raising the retirement age is only one of 13 proposals to defer the day of reckoning. This was the report of the U.S. Senate's Special Committee on Aging (May 13, 2010, pages 55-65).
Myth: Benefit cuts are the only way to fix Social Security.Reality: Social Security doesn't need to be fixed. But if we want to strengthen it, here's a better way: Make the rich pay their fair share. If the very rich paid taxes on all of their income, Social Security would be sustainable for decades to come. Right now, high earners only pay Social Security taxes on the first $106,000 of their income. But conservatives insist benefit cuts are the only way because they want to protect the super-rich from paying their fair share.
If the government taxes rich people more going in, it must pay them more when they retire. If MoveOn is saying to tax them on their income going in, but then refuse to pay them in retirement, then MoveOn is admitting that Social Security is not a retirement program after all -- just a way to tax the rich. Note: Jimmy Carter and Bill Clinton did not propose such a revision. Neither has Barack Obama.
Myth: The Social Security Trust Fund has been raided and is full of IOUsReality: Not even close to true. The Social Security Trust Fund isn't full of IOUs, it's full of U.S. Treasury Bonds. And those bonds are backed by the full faith and credit of the United States.7 The reason Social Security holds only treasury bonds is the same reason many Americans do: The federal government has never missed a single interest payment on its debts. President Bush wanted to put Social Security funds in the stock market--which would have been disastrous--but luckily, he failed. So the trillions of dollars in the Social Security Trust Fund, which are separate from the regular budget, are as safe as can be.
I don't need to comment.
Myth: Social Security adds to the deficitReality: It's not just wrong -- it's impossible! By law, Social Security funds are separate from the budget, and it must pay its own way. That means that Social Security can't add one penny to the deficit.
The Treasury is paying more to Social Security this year than it is taking in from FICA taxes. This adds to the deficit.
Here is what the Trustees' Report for 2010 says:
Social Security expenditures are expected to exceed tax receipts this year for the first time since 1983. The projected deficit of $41 billion this year (excluding interest income) is attributable to the recession and to an expected $25 billion downward adjustment to 2010 income that corrects for excess payroll tax revenue credited to the trust funds in earlier years.
These people go along with the pretense that the unfunded liability of Social Security is not part of the government's deficit merely because it's kept on a different set of books.
In short, these people have no intention of dealing with the problem. They pretend that the system's red ink is not flowing today.
Then there is Medicare....
