This information is vital when debating right-wingers who blame a large part of the deficit on Social Security…
“Social Security has not added one penny to the deficit.”
— Sen. Richard Durbin (D-Ill.), Nov. 27, 2012
In 2011, we evaluated a similar statement about Social Security and gave it a relatively rare rating — “true but false” — which seemed to please no one. Yet as the “fiscal cliff” negotiations have heated up, Democrats have once again been using this talking point to shield Social Security from the chopping block.
Durbin, to his credit, in a speech to the Center for American Progress this week, acknowledged that Social Security’s long-term financing is an important issue that cannot be deferred. He advocates creating a commission that would separately address how to ensure 75 years of solvency to the program. So we don’t mean to pick on Durbin since plenty of Democrats in recent days have made similar comments.
But we remain troubled by the reemergence of this talking point, especially given the further decline in Social Security’s finances in the past year. We do not think this line is a slamdunk falsehood, as some believe, but it is certainly worth revisiting.
Social Security is a pay-as-you-go system, which means that payments collected today are immediately used to pay benefits. Until recently, more payments were collected than were needed for benefits. So Social Security loaned the money to the U.S. government, which used it for other things, which in effect masked the overall size of the federal budget deficit. In exchange, Social Security received interest-bearing Treasury securities, which now total more than $2.7 trillion.As we have repeatedly explained, the bonds held by Social Security are backed by the full faith and credit of the U.S. government. The bonds are a real asset to Social Security, but — here’s where it gets complicated — they also represent an obligation by the rest of the government. Like any entity that issues debt, such as a corporation, the government will have to make good on its obligations, generally by taking the money out of revenue, reducing expenses or issuing new debt.
So what is happening today? The Congressional Budget Office tracks the flow of money in and out of the Social Security fund, and below is a summary of the data for fiscal 2013. To keep things simple, we will include transfers made for the payroll tax holiday as part of “other income.”
- Where do Democrats draw the line on entitlements? (tv.msnbc.com)
- Sen. Dick Durbin Says Social Security Should Not Be Part of Any Fiscal Deal (crooksandliars.com)
- Repeat after Me: Social Security Adds To The Deficit (nationalreview.com)
- TurboTax – Video: Social Security Tax – Who Is Exempt? (turbotax.intuit.com)
- Dick Durbin: ‘Social Security Does Not Add One Penny To The Deficit’ (nalert.blogspot.com)