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The Washington Post/Bloomberg Business section recently published an op-ed by Allan Sloan arguing that the only relevant point about Social Security is it’s current negative cash flow.
Only current cash flow matters, he says. So if Social Security payroll taxes are currently taking in less revenues than current payouts to beneficiaries, that means Social Security is in trouble, and not later, but now.
Sloan says this cash flow situation will continue years into the future. Since the Trust Fund doesn’t matter in his accounting, this means Social Security is trouble today, right now, not just in 2036 or so when the Social Security Administration’s most recent official reports tell us the Trust Fund balance runs out.
if I’m not mistaken, this is a classic bait and switch argument he’s making, the one we’ve been warned about before by Paul Krugman, Dean Baker and others.
You can view Social Security accounting two ways: First, you can view it as a separate fund, in which case the Trust Fund surplus of $2.5 trillion is very relevant. Or you can view the issue from the perspective of the entire budget, and ask, “how much of the total is paid for by total incoming revenues?” But what you can’t do is mix the two; you can’t honestly switch between the two accounting perspectives just to make a political point about Social Security.
Viewed as a separate fund, Social Security has enough money coming in via payroll taxes, plus the value of the Trust Fund surplus, including interest, to fully fund all benefits through at least 2036 (and longer if economic assumptions improve — as in, where is our jobs program?).
Under this perspective, if you have a program separately funded by payroll taxes, and it has a huge $2.5 trillion surplus, you could put that surplus in a bank savings account, and also deposit incoming payroll taxes. You then pay benefits from those taxes plus interest plus withdrawals from the savings account as needed.
The same is true if instead of using a bank savings account, the folks who run Social Security put that $2.5 trillion into government bonds, backed by the full faith and credit of the US, and accrue a surplus plus interest in that way. When you need to help pay benefits, you can cash out the bonds as needed. There is no problem here, when viewed separately.
But here’s Sloan’s bait and switch. Sloan switches in mid argument to the general budget, and says that SS is taking in less cash at the moment than it’s paying out, thus ignoring the money in the Trust Fund, which is SS’s savings account. He then says, it’s in immediate trouble.
No, it’s not. You might as well say the Defense Department or the Afghan war is in even more serious crisis, because the revenues collected in taxes dedicated to DD or the war, which are ZERO!!, is $600-700 billion less than what DD spends or the war costs! Cash flow problem at DD!!!
Or Congressional salaries are in immediate crisis, because the tax revenues devoted to them, which are zero, are not enough to pay Congressional salaries. The argument applies to everything in the budget; it’s not specific to Social Security.
Ironically, by Sloan’s logic, Social Security is in the best shape of any government program. With a dedicated tax, it is virtually paying for itself, and has a huge savings account on top of that, whereas most other government programs are in crisis, under this thinking.
If Sloan wants to talk about the total general deficit, that’s fine, but that’s an overall revenues versus outlays budget problem. It’s not a distinct “Social Security problem” any more than it’s a Congressional salaries problem, or a Defense Department problem, or an unfunded war problem, and so on.
So this is just another bait and switch to scare people that Social Security needs to be singled out because it’s in crisis, when it’s not.
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Even if it is gibberish and disregards the trillions in the trust funds, Sloan succeeds in drawing attention away from our unrealistically low tax rates and low revenues, and away from our unfunded wars. By irrationally hammering on ‘entitlements’ and never addressing the economic conditions which have lead to unusually low revenues, and the cost of the military and the wars, these conservative propagandists have successfully captured the messaging from newspapers and from the airwaves. I fear for all of us.
sorry, we temporarily lost the bottom half of the post, but it’s now restored. Might even make sense now.
The revenue is down because there is approx. 32 million Americans either unemployed or under employed. The more the repugs keep up this Social Security/Medicare farce the worse they look.
As an American citizen I wonder why we can bail out the banks three times, the auto industry, the airlines, the BP disaster, etc. but they can’t repay what they have taken out of the trust!
Instead of citizens listening to the garbage they spill about reasons to do away with the programs, they need to answer some questions from us and provide the real facts.
Yes, it is “three card monte” that WaPo/Bloomberg are playing.
But this intrigues me: “Or Congressional salaries are in immediate crisis, because the tax revenues devoted to them, which are zero, are not enough to pay Congressional salaires.” ; so where does the money for the salaries come from? And where does the money for ‘knowledgable staffers’ -not interns- come from?
From General Revenues, i.e., taxes collected by the Federal Government.
Ah, so the key in reading is “devoted to them”; now if Congress would only use the money from ‘general revenues’ for it’s “budgeting”, it might have to be held accountable for choosing either “guns or butter”.
The switch is a distraction from where the policy focus should be — on our national priorities. If Social Security is a priorty we’ll fund it. If war is the priority we’ll fund that.
Both parties take refuge in the bafflegab. Pin them down on their priorities.
Viewed as a separate fund, Social Security has enough money coming in via payroll taxes, plus the value of the Trust Fund surplus, including interest, to fully fund all benefits through at least 2036 (and longer if economic assumptions improve — as in, where is our jobs program?).
so here’s what they plan;
they really don’t want to eliminate or reduce the tax that was servicing ss, they need that money to fund the gifts to the middle class
so in reality, they love the fact that ss was created because now they can steal even more from it then they did in the past
Agree, but what citizens do you see demanding answers to the very real questions that – and others here – raise?
Most citizens are willfully ignorant and asleep at the wheel, or else they call themselves “libertarians” and claim that expecting a return on our investment into Soc Sec is expecting the “nanny state” to take care of us. Both courses of action are beyond foolish and dunderheaded, but that’s all I see happening most of the time.
Yes.
At least part of the goal is to force Soc Sec to be privatized so that the middle & upper working class will be forced to gamble away our hard earned cash-dollars in the giant casino/ponzi scheme called Wall St.
It’s not *enough* that US taxpayers have been on the hook to bail out these parasites numerous times before, now they really want us all to be true “wage slaves.”
Pigs!
“So this is just another bait and switch to scare people that Social Security needs to be singled out because it’s in crisis, when it’s not.”
Yes, and it’s working, more’s the pity. I hear any number of folks going on & on about how they don’t “expect” to have Soc Sec when they get older and are ready to retire, that it’s “just for my mom & dad.”
When I ask why, I get a bunch of gibberish. And when I explain what’s going on, their eyes glaze over & they change the subject. This has happened to me quite often. Albeit anecdotal, I find it both interesting & depressing that citizens are so *willing* to just give up on the notion of Soc Sec without really finding out what’s going on and/or at least fighting for it a little.
I guess the power of Rush Limbaugh cannot be denied. His tirading rants against Soc Sec have been going on for years, and far too many citizens are powerfully influenced by that overfed overpaid POS. Alas.
Just another day in the ongoing, so far successful, effort to steal all the money from the poor & middle class to give it to the rich.
I meant they wanted to fund the gifts to the wealthy provided by the middle class
Barry has helped the destruction of Social Security along by establishing the catfood commission and then by going along with the deficit hawks by signing off on the tax holiday for Social Security payments.
Same logic throughout: you wanna make sure something dies a slow death, reduce payments that support the program and use a lot of numbers. It’s a sure-fire way to confuse the idiots currently passing for the American people.
I thought “join and bmaz won’t call you” was already taken.
Well, if you’re interested in joining and you’d LIKE Scarecrow to call you, I can attest to the fact that he is a very interesting fellow.
Drop a note in the comments and I bet I can hook you up.
I have never heard of this woman.
OK, then, if they want to consider the payments for Social Security as just a part of the federal budget paid with current taxes, then the taxes we pay should just be merged in with ordinary income taxes and figured under the same rules.
This process would reveal the great swindle of the so-called Reagan tax cuts, which were actually a transfer of the tax burden from the wealthy to the bottom rank of taxpayers. Reagan cut taxes on wealth and unearned income, but raised FICA taxes and Medicare premiums, as if Social Security was a separate thing, funded in a separate rate into a separate fund. IN fact they told us that the increased tax was to go into a fund to be saved up for when the Baby Boomers started to retire. That was the plan, and that was what we were promised. That was the fix. Social Security was fixed; it is fixed; there is no need for another fix. Either than or Reagan was the great Liar instead of the great Communicator.
FICA taxes are 15.6% of gross income from the first dollar – no personal exemption, no deductions, full taxes at a huge rate on everyone, except for the income over a cap where the high income people don’t have to pay any more. If you are a low income person you might not have to pay income taxes, but you get a huge bite for FICA and Medicare.
If they are going to change the terms of the game then they need to abolish the FICA and Medicare tax deductions and just re-figure the income tax to put the money through the general fund. Then there will be deductions to help the low income people and no cap to shelter the rich. I wonder if they would agree to that?
Allan Sloan talks about projections and not actual figures.
How about 2009?
wiki
social security
During 2009, total benefits of $686 billion were paid out versus income (taxes and interest) of $807 billion, a $121 billion annual surplus.
How about looking at 2010? I’m no accountant (far from it), and I don’t understand all the categories etc,. but I would expect better from Sloan than a bunch of projections this way and that way, which usually turn out to be wrong anyhow.
How about actual figures? They seem to show a surplus cash flow in 2010.
from census.gov for 2010
receipts
Social insurance and retirement receipts receipts $876B
expenditures
Social Security Administration on budget 85
SSA off budget 684
Rec’d.
“So this is just another bait and switch to scare people that Social Security needs to be singled out because it’s in crisis, when it’s not.”
No, what’s really going on here is that first Reagan, then GWB, then GHWB, have stolen from the Trust Fund. (Clinton ended with surpluses, remember.) They’re trying not to get caught and be held to account in history books.
Why get all excited? This is only what rich people do to make a living. They steal from other people.
I don’t believe that’s necessarily true, and I also believe it’s stereotyping.
It’s the entire corporate media, not just Rush Limbaugh. They want to do a reverse Robin Hood with Social Security. They used the money to fund the tax cuts for the rich, wars, etc. Now they don’t want to pay it back by raising taxes on the rich. That’s why the Dems are pretending to fear that the rethugs won’t raise the debt ceiling. In fact, it looks a lot like what happened with health care. It’s Kabuki.
spot on -
if they insist on treating SS as general revenue, then kill the payroll tax and raise FIT rates to cover via surtax on all brackets
Since the GOP will never raise FIT rates lets take SS “off the table”.
Is there a “We want to pay a traditional rich person’s share of the cost of government “CLUB FOR GROWTH” ” group that I do not know of?
I am guessing that whether the funds are actually there or not, they should be. 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 broken probably wants to break it themselves.
One thing that is certain; All this palaver could be ended with a once-sentence piece of legislation:
“All Americans will pay Social Security taxes on 100% of their income every year starting today.”
Currently, only those of us who earn less than $107,000 per year must pay social security taxes on 100% of our income. Those earning more than $107,000 don’t have to pay Social Security tax on amounts above $107,000.
Interesting that this bunch of plutocrat freeloaders include all 525 members of Congress. Currently they don’t pay Social Security taxes on approximately $67,000 of their $174,000 taxpayer funded salaries.