Central to persuading Americans that Social Security is broken is the meme offered by President Bush during his privatization campaign 5 years ago, that there is
no trust fund or on alternate days that the trust fund is full of
worthless IOU’s.
This failed pitch is still the cornerstone of the fiscal hawks’ campaign to erode public support for Social Security. The Cato Institute described their long-term strategy (implemented after the last major Social Security reform in 1983) this way:
“the aim is to weaken political support for the present system when the next financial crisis appears.” Achieving a Leninist Strategy, 1983
So here we are. As promised, the American people have been
bombarded
with a steady stream of pronouncements that Social Security is bankrupt, broken, or just too expensive. In truth, what these folks
really mean is that they don’t Washington to honor its obligations to the Social Security trust fund.
Back in 2005, the
Center for Economic and Policy Research estimated:
“defaulting on the trust fund would transfer more than $1 trillion from the bottom 95 percent of the income distribution to the richest 5 percent. The richest 1 percent of families would walk away with nearly $750,000 each.”
According to the
2009 Social Security Trustees report, $2.6 billion in annual surpluses have been collected since 1983 in anticipation of baby boomers’ retirement. Last year alone, workers contributed $137 billion more to Social Security than was paid out in benefits. That’s real money contributed by real workers, no matter how Social Security’s foes claim otherwise. The Trust Funds were also credited with $116 billion in interest from earnings, which represented an effective annual rate of return of 5.1 percent.
The National Committee’s policy department describes the
Trust Fund Surplus this way:
Because Social Security takes in more in taxes than it spends in benefits, it has a current surplus of $2.3 trillion invested in bonds. A bond is like a loan to the federal government that earns interest. While the federal government uses the money loaned by the Social Security Trust Fund to pay for other government spending, just as with other holders of U.S. securities, the government is legally obliged to repay the holder when the bond comes due. There has not been one case of the government failing to pay a bond holder.
But you’re thinking, “wait a minute didn’t I read Social Security is
already broke?”
Economist Henry Aaron explains how
recent media coverage of the recession’s impact on Social Security’s short-term finances has clearly missed the mark:
"Much is being made these days of the projection that benefit payments will exceed earmarked payroll tax revenues. The New York Times treats this development as front-page news. Unfortunately, there is almost no genuine news in this “news.” And, the story contains an important factual error.
The reporter, Mary Williams Walsh, writes:
“[Social Security’s] so-called balance is, in fact, a history of its vast cash flows: the sum of all of its revenue in the past, minus all of its outlays. The balance is currently about $2.5 trillion because after the early 1980s the program had surplus revenue, year after year. Now that accumulated revenue will slowly start to shrink, as outlays start to exceed revenue [sic].”
Aside from the ungrammatical character of the last part of this quotation, Ms. Walsh got a key fact wrong. What she calls “accumulated revenue,” which is usually labeled as “reserves,” is going to rise, not fall, this year and next year and for several years to come."
In fact, the Congressional Budget Office anticipates cumulative surpluses of well over $1 trillion in the next decade. That’s money the federal government owes America’s retirees – and money this Fiscal Commission should not be allowed to use to balance the books in response to a
well-financed anti-Social Security campaign.