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Posted at 4:49 PM ET, 02/15/2011

Obama: Social Security isn't the problem

By Greg Sargent

These lines from Obama, at his presser today on the budget, struck me as potentially significant:

You talked about Social Security, Medicare and Medicaid. The truth is Social Security is not the huge contributor to the deficit that the other two entitlements are.

I'm confident we can get Social Security done in the same way that Ronald Reagan and Tip O'Neill were able to get it done, by parties coming together, making some modest adjustments. I think we can avoid slashing benefits, and I think we can make it stable and stronger for not only this generation but for the next generation.

At first glance, this seemed encouraging. After all, Obama seemed to be saying that Social Security, unlike medical costs, isn't the problem, because it isn't contributing to the deficit the way Medicare and Medicare are. That's a case progressives have been itching to hear Obama make.

But Adam Green of the Progressive Change Campaign Committee emails a far more pessimistic interpretation:

President Obama said Social Security is not a "huge contributor" to the deficit. In fact, Social Security has a $2.5 trillion surplus, is not even part of the general budget, and therefore does not contribute one penny to the deficit...

Cuts, tweaks, or slashes to Social Security are the exact same thing -- a broken promise to American workers who paid for and earned Social Security benefits.

I'm not sure I'd go as far as Green here. Green seems to think Obama meant to imply that Social Security, while not a huge contributor to the deficit, is still marginally part of the problem. Perhaps, but he also may have meant that Social Security does not belong in the same camp as deficit-busting programs like Medicare and Medicaid.

I agree with Green that it would be cool to hear Obama say clearly that Social Security "doesn't add a penny to the deficit." I'd also agree that it would be great to hear Obama take any reductions in benefits of any kind off the table, rather than continually claiming he opposes "slashing" benefits," which seems to leave the door open a crack to less onerous sounding reductions. His formulation -- "modest adjustments" -- may sound encouraging, but we don't know what it means.

Still, Obama's suggestion that Social Security is not in the same category as Medicare and Medicaid strikes me as potentially positive. As Digby notes today, this is not something that you hear acknowledged too often in Washington.

By Greg Sargent  | February 15, 2011; 4:49 PM ET
Categories:  Social Security  
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Comments

Greg, Jack Lew said himself that SS doesn't contribute to the deficit. But it still has a problem coming in 2037 where there will be an automatic cut of 22% of benefits being paid out. That's the problem with SS. But it doesn't belong in any conversation on the deficit.

Posted by: calchala | February 15, 2011 4:57 PM | Report abuse

calchala, agreed, but far better to have POTUS making case than Jack Lew, dontcha think?

Posted by: Greg Sargent | February 15, 2011 5:00 PM | Report abuse

Obama is correct, Green is just laying down a marker - which is a good thing to do.

Posted by: shrink2 | February 15, 2011 5:15 PM | Report abuse

While I consider the overhang in the housing market the greatest short term problem we face and are all but ignoring (so as not to hurt "confidence" in the recovery), most experts agree, the greatest long term economic problem we face (deficit driver) is the cost of health care.

Posted by: shrink2 | February 15, 2011 5:19 PM | Report abuse

Social Security does run a surplus. So in that sense it does not currently contribute to the deficit. However, that surplus is now used to fund the rest of the government. As more and more money is needed to pay Social Security benefits, there will be less and less money for everything else. So at some level, Social Security reform (whether that is benefit cuts, SS tax increases, or some combination of these) needs to be part of the fiscal solution.

Posted by: aardvarks | February 15, 2011 5:21 PM | Report abuse

The fact that this is news is a sad commentary on the state of our political discourse.

Still, I guess the best defense against endlessly repeated lies is to endlessly repeat the truth.

Posted by: jimeh | February 15, 2011 5:22 PM | Report abuse

"But Adam Green of the Progressive Change Campaign Committee emails a far more pessimistic interpretation:

President Obama said Social Security is not a "huge contributor" to the deficit. In fact, Social Security has a $2.5 trillion surplus, is not even part of the general budget, and therefore does not contribute one penny to the deficit...

Cuts, tweaks, or slashes to Social Security are the exact same thing -- a broken promise to American workers who paid for and earned Social Security benefits."

The $2.5 trillion Social Security surplus was spent on general budget items. As has already been noted, the only way to redeem the Treasury bills is to cut other spending or to raise other taxes, so in that sense once Social Security goes into deficit (which I believe is now within the next two to five years), it will be part of the problem.

Also, workers haven't "earned" Social Security benefits. There is no contractual right to Social Security benefits that can be enforced. (Flemming v. Nestor 1960)
The benefit levels are entirely determined by current law, and the Federal government can use the proceeds of the Social Security tax (which is just another income tax) for whatever it wants to.

Posted by: jnc4p | February 15, 2011 5:29 PM | Report abuse

"Also, workers haven't "earned" Social Security benefits. There is no contractual right to Social Security benefits that can be enforced."

Which totally misses the point! The case you cite states only that Congress can change its mind at any time. There is currently a surplus and with few minor tweaks (like raising the eligible income) it can easily be fixed. The rest is just propaganda designed to hand social security money over to Wall Street.

For the real facts check out http://www.ssa.gov/OACT/

Posted by: Alex3 | February 15, 2011 5:50 PM | Report abuse

SS is fine for the foreseeable future. By 2030 things will be very different (maybe VERY different), and we may have shorter life expectancies than today's older retirees becauses of all sorts of life-shorteners that have become popular since the 1950's. It could be put on a foirmer footing by raising the wage cap a little each year until 2030.

The real problem is that politicians do not want to cut reimbursements to doctors and hospitals because they have well-funded lobbies, and dealing rationally with end-of-life care, when most of an individual's expenses come, has been rendered almost impossible by the GOP's "death panels" garbage.

So everyone wants to take a few dollars from millions of people now in their 20s and 30s and 40s and 50s, because it is a much weasier way to finance tax cuts for millionaires and billionaires.

Posted by: Mimikatz | February 15, 2011 5:55 PM | Report abuse

Weasier = weasel + easier.

Posted by: Mimikatz | February 15, 2011 5:57 PM | Report abuse

"Social Security does run a surplus. So in that sense it does not currently contribute to the deficit. However, that surplus is now used to fund the rest of the government. As more and more money is needed to pay Social Security benefits, there will be less and less money for everything else. So at some level, Social Security reform (whether that is benefit cuts, SS tax increases, or some combination of these) needs to be part of the fiscal solution."

Well, SS is kind of self-contained. The payments into the system aren't drawn from the general Federal funds, but from its own box. And while payments out of social security are on track to exceed inflow of money, it's not like the inflow completely vanishes as soon as that tipping point hits. If we do decide to use non SS funds to fill in that gap, it won't be much.

But definitely, M/M are huge contributors to the deficit. But one overlooked part of the PPACA is IPAB. Their job is to curb unchecked Medicare growth. What I like about IPAB is that unlike the deficit commission, their recommendations can't be ignored. They go into effect unless Congress explicitly passes legislation against it.

Posted by: DDAWD | February 15, 2011 5:58 PM | Report abuse

Frankly I am sick of Adam Green of the Progressive Change Campaign Committee.

He is waaaay too full of himself, waaaay too impressed with his ability to devine what is on the mind of the President, and waaaay too prone to pull the trigger on his "crying wolf" machine.

smd

Posted by: smd1234 | February 15, 2011 6:09 PM | Report abuse

The cost of health care is the 8-gazillion (not 800)pound gorilla in the room.

The "union" most in need of busting consists of the allied forces that retain the current model of delivering and paying for health care, consisting of the drug industry, the hospital/health delivery industry, especially the many "businessmen" who hold medical degrees and purport to be in the healing profession, and the insurance industry.

smd

Posted by: smd1234 | February 15, 2011 6:15 PM | Report abuse

A sampling of headlines from RCP:


President Kicks the Can One More Time

The President's Budget Is Disastrous

A Budget Utterly Detached From Reality

The Cynical & Unrealistic White House Budget

A Budget That Ducks Tough Choices

Obama's Budget: Dead on Arrival

Left Not Happy With Obama Budget Either


I must admit that I don't know much about the 'bama budget but it don't sound good.

Posted by: battleground51 | February 15, 2011 6:40 PM | Report abuse

All, Happy Hour Roundup posted:

http://voices.washingtonpost.com/plum-line/2011/02/happy_hour_roundup_187.html

Posted by: Greg Sargent | February 15, 2011 6:44 PM | Report abuse


"I'm confident we can get Social Security done in the same way that Ronald Reagan and Tip O'Neill were able to get it done,"

Just exactly what did Ronald Reagan and Tip O'Neill accomplish? We certainly don’t need a repeat of that!

The Social Security Amendments of 1983 laid the foundation for the greatest fraud ever perpetrated against the American people by their government. The 1983 Social Security "fix" was well-intentioned and, if the plan had been followed, Social Security would be in fine shape today. The hefty payroll tax hike was designed to generate large surpluses for the next three decades, which were supposed to be saved and invested to build up a large reserve in the trust fund with which to pay benefits to the baby boomers. That tax increase has generated $2.6 trillion in surplus revenue, which was supposed to be used to purchase pre-existing public-issue, marketable Treasury bonds in the open market. If that had been done, the Social Security trustees could now begin to resell these "good-as-gold" assets in the open market to raise cash with which to supplement the inadequate payroll tax revenue from now on, and full benefits could be paid until 2037 when the oldest of the baby boomers would be 91 years old and the youngest would be 73.

BUT THAT IS NOT WHAT HAPPENED!

When the first surplus Social Security revenue showed up in 1985, instead of saving the money and investing it, the government chose to put the money in the general fund. Since it would be 30 years before any of the money would be needed to actually pay benefits, the temptation to use the money for other things was just too tempting for the politicians to resist. When George H.W. Bush became president he followed the same practice of diverting the Social Security money into the general fund as Reagan had done. Senator Ernest Hollings of South Carolina, issued the following warning in a speech on the Senate floor on October 13, 1989:

“…the most reprehensible fraud in this great jambalaya of frauds is the systematic and total ransacking of the Social Security trust fund…in the next century…the American people will wake up to the reality that those IOUs in the trust fund vault are a 21st century version of Confederate bank notes.”

But nothing could stop Bush from continuing to spend the Social Security money on other things. Bill Clinton did the same thing, and so did George W. Bush. The practice has continued to this very day. So the 1983 cooperation between Reagan and Tip O'Neal did nothing to fix Social Security. Money from the payroll tax hike ended up in the pockets of the super rich in the form of unaffordable income tax cuts. It was used to pay for wars and other government programs. But, the way it turned out, it did not improve the financial status of Social Security.

Allen W. Smith, Ph.D.
Professor of Economics, Emeritus
Eastern Illinois University
www.thebiglie.net


Posted by: ironwoodas | February 15, 2011 11:08 PM | Report abuse

All of the $2.6 trillion in surplus Social Security revenue, generated by the 1983 “fix” has been “borrowed” by the government and spent on tax cuts, two wars, and other government programs. None of the money was saved, so there was no money to invest. The spent money was replaced with IOUs that represent a claim against future tax collections. But the IOUs are not marketable, and they cannot be converted to cash with which to pay benefits. The government owes the $2.6 trillion debt to Social Security, but no provisions for repayment have been made. The financial status of Social Security today is no better than it would have been if the 1983 “fix” had never been enacted into law. More and more observers, including some prominent journalists, are coming to realize this awful truth. Allan Sloan, senior editor at large for Fortune Magazine, is one of them. I featured the writings of Allan Sloan and four other journalists in my recent news release. That release is reproduced below.

Fortune Senior Editor Among Those Who Question Value of Social Security Trust Fund, Economist says
0 0 0
WINTER HAVEN, Fla., Feb 11, 2011 /PRNewswire-USNewswire/ -- Economist and author Allen W. Smith, Ph.D. has been saying for ten years that the so-called Social Security trust fund contains only non-marketable IOUs that cannot be converted to cash or used to pay benefits. According to Smith, the IOUs are nothing more than claims against future tax collections, which can be redeemed only by raising taxes, cutting other programs or borrowing more from the public. Smith says that all of the $2.6 trillion surplus revenue, generated by the 1983 payroll tax hike, has been spent by the government for other things.

Smith, who was dubbed, "a voice crying in the wilderness," by CNN anchor Lou Waters during a TV interview in 2000, is no longer alone in arguing that the trust fund has no real economic value.

Fortune Senior Editor at Large, Allan Sloan, wrote in a December 21 article, "The trust fund is nothing more than a trap and a fantasy for those who think it's a solid foundation for Social Security." http://fin­ance.fortu­ne.cnn.com­/2010/12/2­1/dont-tru­st-social-­securitys-­fund/ Sloan had previously expressed similar views in his August 10 Washington Post column entitled, "Social Security, the trust fund and funny money," http://www­.washingto­npost.com/­wp-dyn/con­tent/artic­le/2010/08­/09/AR2010­080905559.­html

Other journalists who have expressed the view that the trust fund is a myth include:

"The Social Security trust fund myth" by E. Thomas McClanahan, Kansas City Star, December 26, 2010

http://voi­ces.kansas­city.com/e­ntries/soc­ial-securi­ty-trust-f­und-myth/

"Social Security Turns 75, Starts Cadging From the Kids" by Eric Schurenberg, Editor in Chief, CBSMoneyWatch.com, August 24, 2010

http://mon­eywatch.bn­et.com/ret­i

Posted by: ironwoodas | February 16, 2011 12:22 AM | Report abuse

Social Security isn't a problem, excuse me Mr. President. That's like saying my pancreatic cancer isn't a problem, because the rest of my organs are functioning. Social Security has morphed into a cancer on middle class working Americans, their families and the communities they call home. When you turn 2.54 trillion dollars worth of retirement assets into 2.54 trillion dollars of retirement debt; that's a PROBLEM. Like any life threatening disease, before a treatment plan can be laid out, there must be an honest assessment of the issue; a pathology report in this case: http://sobreport.com/?p=66 - This report is the basis for a long term treatment plan, that begins to allow middle class working Americans to prosper again, those whose backs we all ride to our prosperity.
http://sobreport.com/?p=70

Mr. President, when it comes to Social Security, you and your ilk would have us believe that 2 + 2 = 5. BREAKING NEWS Mr. President, in our world 2 + 2 still equals 4, and we don't start with that math, we'll just continue chasing our tails, and end up with the wrong answers.

Posted by: pappyg | February 16, 2011 7:01 AM | Report abuse

Also, workers haven't "earned" Social Security benefits. There is no contractual right to Social Security benefits that can be enforced."

Which totally misses the point! The case you cite states only that Congress can change its mind at any time. There is currently a surplus and with few minor tweaks (like raising the eligible income) it can easily be fixed. The rest is just propaganda designed to hand social security money over to Wall Street.

For the real facts check out http://www.ssa.gov/OACT/

Posted by: Alex3 | February 15, 2011 5:50 PM | Report abuse

------------------------------------------
No surplus. In fact this year, Social Security payments have had to be supplemented with general revenues. According to the trustees of Social Security, this will be a permanent and increasing item.

No matter what you do with social security, raise the income level, raise the rates, anything, the sole effect is to reduce the current operating deficit and increase the long term social security deficit. All moneys dedicated to social security are dedicated either the current payments to beneficiaries or the current operating budget. What is in the Trust Fund are a marker of liabilities owed by the Treasury to the fund. There are no assets in the fund (I would trust President Clinton's OMB chief on this).

Let's talk about "handing over money to Wall Street". In the current way that the current trust fund is set up, anything over the amount needed to pay current beneficiaries is "handing over money to Washington (to pay current expenses)". Social Security is 3 trillion in the hole on a cash basis, 12 trillion on an accrual basis. Washington has an additional 42 trillion dollars of accrual liability. Of course they want to get every dollar of social security, they want to pay for their current programs, and give back cheapened money to beneficiaries later. May want to check to see how the market has done this year--you may be surprised.

A choice between a well rounded conservative investment program divided between various index funds across the free market (6% recovery), which belongs to me, and which I can pass on to my beneficiaries when I die, or giving the money to Washington at the point of a gun, and if I die before 65, my beneficiaries get nothing. And all at a 2% yield!

I'll take the 6%. If you want the 2%, it's your funeral.

Posted by: PALADIN7E | February 16, 2011 8:08 AM | Report abuse

"I'm confident we can get Social Security done in the same way that Ronald Reagan and Tip O'Neill were able to get it done,"

Just exactly what did Ronald Reagan and Tip O'Neill accomplish? We certainly don’t need a repeat of that!

The Social Security Amendments of 1983 laid the foundation for the greatest fraud ever perpetrated against the American people by their government. The 1983 Social Security "fix" was well-intentioned and, if the plan had been followed, Social Security would be in fine shape today. The hefty payroll tax hike was designed to generate large surpluses for the next three decades, which were supposed to be saved and invested to build up a large reserve in the trust fund with which to pay benefits to the baby boomers. That tax increase has generated $2.6 trillion in surplus revenue, which was supposed to be used to purchase pre-existing public-issue, marketable Treasury bonds in the open market. If that had been done, the Social Security trustees could now begin to resell these "good-as-gold" assets in the open market to raise cash with which to supplement the inadequate payroll tax revenue from now on, and full benefits could be paid until 2037 when the oldest of the baby boomers would be 91 years old and the youngest would be 73.

-------------------------------------
Except for the fact that there are no assets (indication of liability only) and that the "bonds" (sic) are non-negotiable and cannot be sold on the open market.

But a good idea. With an appropriately run system, it might work.

Posted by: PALADIN7E | February 16, 2011 9:56 AM | Report abuse

The comments by Obama are significant because the untruth that Social Security is a deficit driver--and axiomatically a political football--has been exposed on a national and officially believable platform. Untruths about national health care reform need to be taken through the same kind of high level rebuttal. Kudos to the Post and Greg Sargent. Maybe now legislators will be able to turn their attention to the real deficit drivers now that fewer people are misled.

Posted by: thomachuck | February 16, 2011 6:04 PM | Report abuse

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