Social Security is a glossy piece of paper on which nearly every politician wants to finger-paint an agenda. But Social Security has no need of ornament. It is a very grown-up program. Put some other toy into the political playpen.
Come January, for the first time since 1975, Social Security payments will not be ratcheted upward for inflation. The reason is simple: no inflation.
But now President Barack Obama is pushing Congress to send every senior a $250 check to compensate for ... for ... for what? For the fact that some Social Security recipients expect a "raise" every year, whether or not it is warranted? They saw a 6 percent hike in their benefits last year. But that was not a "raise." It was a cost-of-living adjustment to maintain (not increase) the buying power of their monthly checks.
If the president wants to hand out checks to stimulate the economy, why make them age-specific? Money sent to low-income people, whether young or old, would make far more sense. And the still better stimulus is government spending on roads and other worthy projects. That money gets shot right into the economy.
Sending an extra check to Social Security beneficiaries is also about pandering to older voters. But politicians should first ask themselves, "How many other Americans got 6 percent 'raises' last year?"
There is another proposal to cut payroll taxes. The plan is foolish and reckless — and has drawn bipartisan support. These taxes pay for Social Security and Medicare. Cutting payroll taxes puts those programs in jeopardy, which is why some liberal economists, such as Robert Reich, should hang their heads in shame for wanting to monkey with them.
On the right, meanwhile, there is growing affection for the idea. First off, many conservatives hold that cutting taxes solves all problems.
(That did wonders for the deficit, didn't it.) Secondly, fooling with payroll taxes could undermine the public's faith in Social Security by lending ammo to the false charge that the program's trust fund is all a fraud.
You see, the Social Security taxes now paid by workers and their employers support current beneficiaries. What's left over goes into the trust fund to be tapped in future years, when a surge in retirees puts pressure on the program. It's been a conservative talking point that the Social Security trust fund doesn't exist; the government has spent the money.
Not quite. The Treasury bonds in the trust fund are real IOUs representing real money taken from real workers for more than 25 years. No matter what the federal government did with that borrowed money, it still has to pay it back.
Make the argument, if you must, that the Treasuries sitting in the trust fund's file cabinets are not like the super-safe government securities traded around the world — that the Treasury doesn't have to make good on them. The truth is that these special Treasury bonds are different, but they still cannot be defaulted upon without a vote by Congress.
So here's an assignment for anyone who calls the trust fund's Treasuries "worthless pieces of paper": Find me one member of Congress, Republican or Democrat, who vows to vote against Washington's promise to honor them. I'll buy lunch.
According to the Social Security trustees' latest report, payroll taxes will cover all of the retirees' promised benefits until 2016. After that, the trust fund can make up for any shortfall until 2039. That is 30 years from now. We can worry about Social Security's finances in 20 years.
You know what children with paint want to do with a clean sheet of paper? They want to mess it up. Social Security is a clean program. Let's keep it that way.
To find out more about Froma Harrop, and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate web page at www.creators.com.
COPYRIGHT 2009 THE PROVIDENCE JOURNAL CO.
DISTRIBUTED BY CREATORS.COM
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Dear Froma Harrop,
I have read several of your columns on Social Security over the past few years. You are a real champion for protecting Social Security as am I, and I respect you for your efforts to protect a program, which I consider to be the most successful and most popular program ever created by the United States government. I have been on a relentless mission to save Social Security for the past decade. I have written four books on the subject, appeared on CNN, CNBC, CNNfn, and more than 170 radio talk shows in my effort to alert the public to a little-known fact that threatens the future of Social Security for all of us. I have appeared as a co-speaker with James Roosevelt, Jr. (FDR's grandson) who said he agreed with 90 percent of what I said. I aggressively fought against President Bush's attempt to destroy Social Security, and I oppose the Heritage Foundation, the Cato Institute, and other right-wing organizations who would like to destroy the program.
I felt it necessary to provide the above information before announcing the title of my latest book so that I would not be put into the same category as the above groups. The title is, "THE BIG LIE: How Our Government Hoodwinked the Public, Emptied the S. S. Trust Fund, and caused The Great Economic Collapse. I would very much like to send you a complimentary review copy of the book if you will agree to read it.
Much of the content of the book has been posted on my website at www.thebiglie.net in order to make the information available to the public at no cost. I urge everyone who is concerned about the future of Social Security to visit the website to find out more about me and my efforts to save Social Security. I am currently trying to encourage college students to launch an organized effort to save the program for future generations. Not one penny of anyone's payroll tax contribution to Social Security is currently being saved to pay future benefits.
What can we do? We can ask President Obama to issue an executive order requiring the Secretary of the Treasury to immediately stop spending surplus Social Security revenue on general government and require that all future surplus payroll tax revenue be used to purchase "good-as-gold" public-issue, marketable Treasury bonds as should have been done under the past four presidents.
Allen W. Smith, Ph.D.
Professor of Economics Emeritus
Eastern Illinois University
ironwoodas@aol.com
www.thebiglie.net
Comment: #1
Posted by: allenwsmithphd
Tue Oct 20, 2009 2:19 PM
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Dear Ms. Harrop
I am a regular reader of yours who seldom agrees with your opinion pieces. However, when I started to read your recent article on President Obama's plan to give seniors a check for $250 to compensate for the lack of a “cost of living” increase (when there has been no increase in the cost of living), I thought that finally we have something to agree upon.
After a good start—the $250 per senior check idea is blatant political pandering of the sort I have come to expect from Democrats (not to mention that its total cost would be $13 billion—which the federal government does not have)—the quality of your analysis rapidly declined. Yes, it probably will have bipartisan support, as Democrats will demagogue any Republican opposition as evidence of a “lack of compassion” or “lack of concern” for seniors who are struggling on fixed incomes (never mind that at least a few of the seniors who would get the $250 check have other sources of income that put them is the middle or upper economic classes or that Social Security increases are supposed to adjust for increases in the cost of living).
Where your article really went downhill fast is when you said:
“It's been a conservative talking point that the Social Security trust fund doesn't exist; the government has spent the money.
Not quite. The Treasury bonds in the trust fund are real IOUs representing real money taken from real workers for more than 25 years. No matter what the federal government did with that borrowed money, it still has to pay it back.”
There is a huge flaw in your straw man argument. Surely you do not dispute that the excess Social Security “contributions” that were to be put into the “trust fund” have been spent as fast as they came in, do you? While I, a conservative, acknowledge that a Social Security “trust fund” exists, you, a true liberal, must also acknowledge that there is no actual money in that “trust fund”. So, your “not quite” does not dispute the irrefutable fact that “the government HAS spent the money”. It merely attempts to calm the fears that Americans have about the ability of the “trust fund” to pay future benefits.
Yes, the bonds in the “trust fund” are real IOU's representing real money taken from real workers for 25 years, but THAT “real money” is gone. And yes, the federal government “still has to pay it back.” (unless they vote—at their political peril---not to). But where will the federal government get the real money it will need in less than 10 years to pay Social Security benefits when benefits to be paid exceed Social Security taxes that are received?
The answer is the same place the federal government gets all money it spends: either from (a) increased taxes, (b) increased borrowing (more IOU's, but who will be lending the further huge sums when Uncle Sam is already in debt to the tune of over $10 TRILLION and rapidly rising?), (c) simply printing more money (with the danger of high inflation that accompanies that option), and/or (d) selling federally owned properties, such as the Grand Canyon, or selling naming rights to various federal buildings (how about the Jimmy Dean Sausage Capitol Building?).
So, what is the practical result of the existence of a Social Security “trust fund” holding IOU's that have to be paid back? ZIP, ZERO, NADA. The government would have to choose to do one of the above four options, WITH the trust fund. How is that any different than what the government would have to do WITHOUT the trust fund? Either way, in the absence of real money in the trust fund, the government will have to raise taxes, increase borrowing, print money, or sell assets. That is how members of Congress will “honor” the bonds in the trust fund. We all would have been better off if the Congress had constructed a giant mattress somewhere and put all the surplus Social Security money there until it is needed in a few years. If they had done that, there would be no need to resort to the unpalatable options described above.
Contrary to your reassurance that Social Security is a “clean program” and that the trust fund can “make up for any shortfall until 2039", there is the unaddressed problem of HOW Congress is going to raise the real money to honor all those trillions of dollars of bonds in the “trust fund.” I will look forward to your follow-up article on how THAT will be accomplished. The likelihood is that taxpayers will have to pay again for “surplus” funds that Congress spent from the trust fund.
Comment: #2
Posted by: acriticalthinker
Wed Oct 21, 2009 10:27 AM
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