Tuesday, March 22, 2011

FactCheck.org's Lies About Social Security

In Democrats Deny Social Security’s Red Ink on FactCheck.org, the author claims that Social Security is contributing to the deficit. The only reason it is apparently doing that is because the debt/deficit figures do not count the U.S. Treasury Bonds held by the Social Security Trust Fund as a liability, unlike the U.S. Treasury Bonds held by China.

U.S. Treasury bonds are purchased with surplus funds from payroll taxes collected from working Americans and their employers. There is a surplus when more payroll taxes are collected than the amount paid out in Social Security benefits. Those bonds are redeemed when more in benefits are paid out than is collected in Social Security (payroll) taxes. If those bonds are not counted as funding part of the national deficit when they are purchased, then the deficits end up being counted in future years when those bonds are redeemed. If the Trust Fund did not exist, bonds would have had to be sold publicly instead, and the deficit and the national debt figures would be higher accordingly. To blame Social Security for deficits is grossly misstating the facts.

Yes, the U.S. Treasury has to borrow by issuing new bonds in order to finance the redemption of old bonds by Social Security. The fact that those old bonds were not counted as a liability when they were purchased is not a problem with Social Security. If the U.S. did not have a debt, the purchasing of bonds by Social Security would result in a surplus under the accounting being used. Claiming that redeeming those bonds is a problem, and that Social Security is in the red, is akin to claiming that the payroll taxes collected under the pretense of funding worker's retirement was really just a massive tax hike. It is a default on the U.S. Treasury Bonds purchased by Social Security funds. That is tantamount to stealing Social Security's 2.6 trillion in assets, and is equivalent to claiming that Social Security is an entitlement program funded by general revenues rather than a retirement insurance program.

Social Security does not contribute to the deficit. Not counting U.S. Treasury Bonds which finance the national debt until they are redeemed is the problem. Pushing deficit figures onto future years is a choice made by Congress. Social Security is not insolvent, and should not be made to look as if it is.

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