Saturday, April 21, 2012

Misinformation: CNN and Social Security

Regarding CNN's, "Where do your taxes go?", posted 4/20/2012, and broadcast 4/21/2012 during the 1:00 pm ET news show. "$2.3T of the $3.6T federal budget comes from taxes. Christine Romans explains where your money goes."

The editorial and reporting staffs of CNN need to educate themselves when it comes to the financing of Social Security.

One of the claims was that "One-fifth of our tax dollars goes to Social Security". Really? Social Security has its own revenue stream (or at least did until the misguided tax holiday). Unless CNN also make clear that Social Security benefits are paid using payroll taxes (and the trust fund), and are not paid from general revenues, including federal taxes, then CNN is assisting in the perpetuation of some of the many lies and misinformation spread by those interested in dismantling one of the most successful federal programs ever.

Continually repeating claims that almost 50% of Americans pay no federal taxes while at the same time counting Social Security as part of the federal budget is to imply that Social Security is a budget buster in need of fixing. To continue this misinformation is to facilitate a partisan agenda. The radical conservative efforts to change Social Security are either a tactic to scare Social Security recipients, or an effort to privatize (think huge administrative fees) or eliminate Social Security.

A core part of the philosophy of the current GOP is advocating personal responsibility with no social responsibility, and Social Security is seen as a social program in conflict with that ideal. But Social Security is the reason (along with living wages) that we no longer have huge numbers of seniors and disabled people in poorhouses and in poverty.

Private retirement plans are subject to theft, personal bankruptcies, corporate bankruptcies, stock market crashes, bank closings, and incompetent or unscrupulous administration. In contrast, Social Security will always be there. Unless, of course, misguided or agenda-driven politicians take it from us.

"Reforming" Social Security by reducing benefits or raising the retirement age will do absolutely nothing to reduce the National Debt. Neither will increasing or decreasing payroll taxes. The only change which will occur is to change the length of time that full benefits can be paid, which is currently about 25 years (after which, assuming no changes, Social Security would be able to pay 80% of benefits through 2084).

The only change which should be made is to raise the cap at which payroll taxes are taken out (the cap should not be fixed, but should be indexed or removed), and that is only to insure full benefits past the next 25 years. It is also worth noting that very little of the income of the wealthy is subjected to payroll taxes, while most if not all of the income of middle and lower income workers is.

Social Security is not an "entitlement" in that it is not an unearned benefit (the new definition of entitlements). Social Security is retirement insurance, and premiums are paid in the form of payroll taxes.

Raise the retirement age? Social Security is fully funded for 25 years at current retirement ages. Will future retirees be penalized because of lies? The payroll tax holiday should also be eliminated to stop the mixing of our retirement insurance payments with general revenues.

Social Security is counted as an off-budget item. The trust fund holds special Treasury Bonds, bought whenever there is more collected in Social Security payroll taxes than is paid out in Social Security benefits. Those bonds fund part of the national debt, to the tune of $2.6 trillion. (Yes, those paper IOU's in the Trust Fund are actually U.S. Treasury Bonds, backed by the full faith and credit of the United States.)

When Social Security pays more in benefits than it collects in payroll taxes, it cashes in some of those treasury bonds. The Treasury Department is able to pay for those special Treasury Bonds by selling regular Treasury Bonds (say, to China).

Treasury Bonds are what fund the national debt (and have since the 1917 sale of Liberty Bonds). Since Social Security's special Treasury Bonds are only redeemed at the same time that new regular Treasury Bonds are sold, and money given to Social Security for redeeming the special bonds is offset by money from the sale of regular bonds, there is no change in the national debt. Thus, even if Social Security is running a deficit for the current year, there is no impact on the National Debt (and no change in how close or how far that actual debt is from the current debt ceiling).

The upcoming retirement of Baby Boomers was foreseen, and is the reason the Trust Fund was built up to such a large amount. So even though Social Security is projected to have deficits for the foreseeable future, the $2.6 trillion Trust Fund will insure that Social Security is able to pay out 100% in benefits for the next 25 years, and is able to do so with no changes in retirement ages and no changes to benefits.

Educate yourselves, and stop assisting the radical conservative assault on Social Security. Your future depends on it.

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