Dean Baker contributes to the progressive oeuvre to be filed under "Social Security Denialism", assuring like-minded NY Times readers that there is no Social Security crisis, there will be no crisis, there never was a crisis, and all this talk of a crisis is merely a Republican scheme to oppress the oppressed.
Do tell. Back in reality, Social Security is contributing to the growth of our publicly held national debt and is projected to do so for the foreseeable future, so yes, if we have a long term debt problem Social Security is part of it.
Over to Dean Baker:
Millions of people are rightly outraged to hear that Social Security is in the gun-sights of both Speaker Boehner and President Obama in their budget negotiations. There is no reason that our political leaders should be discussing cuts to the country’s most successful social program.
We will come to the reasons soon enough. Dean Baker segues to a discussion about the transient nature of our current recession-induced deficits and admits that even the Evil Bush Tax Cuts didn't permanently scuttle out fiscal ship:
The budget deficit was just 1.2 percent of gross domestic product in 2007. Before the collapse of the housing bubble the deficit was projected to remain low for the next decade and the debt-to-G.D.P. ratio was actually falling. This would have been the case even if the Bush tax cuts were allowed to continue.
I am not finding the conclusion about the Bush tax cuts in the CBO link he provides but I welcome assistance in support of my own fantasies.
In any case, Dean Baker enters into Social Security Denialism here:
Record low interest rates on government bonds demonstrate that the current deficits are not a real problem. But even if they were, it is difficult to see how cutting Social Security could to be part of the solution. Under the law Social Security is not supposed to be part of the budget. It is an entirely separate program financed on its own.
This is not just a rhetorical point. We can talk about Social Security facing a financing shortfall in the future precisely because it is solely financed by its own revenue stream.
That is not just a rhetorical point and it is not just a factual point either. Due in part to the stimulative cut in the payroll tax (which I supported), Social Security ran deficits in 2010 and 2011. Looking forward, even with the payroll tax restored Social Security is projected to run a primary deficit (benefits paid exceeding taxes collected) for the foreseeable future. Let's hear from the Social Security trustees:
Social Security’s expenditures exceeded non-interest income in 2010 and 2011, the first such occurrences since 1983, and the Trustees estimate that these expenditures will remain greater than non-interest income throughout the 75-year projection period. The deficit of non-interest income relative to expenditures was about $49 billion in 2010 and $45 billion in 2011, and the Trustees project that it will average about $66 billion between 2012 and 2018 before rising steeply as the economy slows after the recovery is complete and the number of beneficiaries continues to grow at a substantially faster rate than the number of covered workers.
But what about the Social Security Trust Fund? What indeed? Accountants will insist that as the Trust Fund collects interest and redeems principal (accumulated in prior years when tax receipts exceeded benefits paid) the program remains in balance. Economists will note that transferring money from the Treasury is only an accounting device; to make such a transfer either the Treasury issues new debt to the public or it collects more taxes or it de-funds other programs. Let's hear from the CBO (p. 140):
Excluding interest, surpluses for Social Security become deficits of $45 billion in 2011 and $547 billion over the 2012–2021 period.
Or we can turn to Alice Rivlin, also writing in the Times:
Social Security currently adds to debt, because it pays out more benefits than it receives in taxes. While it accumulated credits when the higher ratio of workers to retirees was bringing in excess funds, Treasury has to borrow to redeem these credits.
...The truth, Mr. Holtz-Eakin [then director of the Congressional Budget Office] said, is somewhere in between. The trust fund is more than an empty promise, he said, and less than a solemn obligation backed by the full faith and credit of the United States.
A main reason for the confusion is that from the creation of Social Security, politicians have used the trust fund to mask several realities.
...Once benefits exceed annual tax revenues, the government will have to increase taxes, cut spending elsewhere or issue more bonds if it decides to pay full Social Security benefits.
But trust fund or no trust fund, bonds or no bonds, Social Security is only one program with a claim on the federal budget.
There will be highways to build and, perhaps, wars to fight. There will be expenses for education and health care and many other government activities. And there will be citizens - voters - who do not want their taxes to be raised.
Maybe because of the trust fund, the politicians will decide that Social Security has the strongest claim.
But if so, that will be a political decision, not a legal one.
And if Congress and an Administration decide not to "honor" the Trust Fund, there is no need to default on the Trust Fund obligations - they will simply legislate a new, lower level of benefits that restores the program to balance. No defaults necessary, despite wishful thinking and handwringing from the usual suspects.
As to the notion that Republicans invented this crisis, well, those of us with a bit of a memory will recall that Bill Clinton was warning of the eventual doom of Social Security and exhorting the nation to Save Social Security First rather than submit to the siren song of Republican tax cuts. The Big Dog, 1999:
So, with our budget surplus growing, our economy expanding, our confidence rising, now is the moment for this generation to meet our historic responsibility to the 21st century.
Our fiscal discipline gives us an unsurpassed opportunity to address a remarkable new challenge, the aging of America. With the number of elderly Americans set to double by 2030, the baby boom will become a senior boom.
So first and above all, we must save Social Security for the 21st century.
Early in this century, being old meant being poor. When President [Franklin D.] Roosevelt created Social Security, thousands wrote to thank him for eliminating what one woman called "the stark terror of penniless, helpless old age." Even today, without Social Security, half our nation's elderly would be forced into poverty.
Today, Social Security is strong, but by 2013, payroll taxes will no longer be sufficient to cover monthly payments. By 2032, the trust fund will be exhausted and Social Security will be unable to pay the full benefits older Americans have been promised.
The best way to keep Social Security a rock solid guarantee is not to make drastic cuts in benefits; not to raise payroll tax rates; not to drain resources from Social Security in the name of saving it. Instead, I propose that we make the historic decision to invest the surplus to save Social Security.
In other words, supplement Social Security out of general revenue. It was a plausible suggestion, and it is exactly what we are doing now in an economic sense if not a Trust Fund accounting sense.
But there is a lot of denial out there.