Letter 2 America for September 24, 2013

Dear America,

I have been hearing some chatter about the relationship between Social Security and the national debt again lately, even though Social Security has never added a cent to the debt.  The discussion always starts from the proposition that it isn't so, though no one ever says it, and the consequence is spurious conclusions based on convenient and abiding conservative fiction.  For that reason, it seems to me that we should talk about what should be the starting point of every debate over retirement age, benefit reduction and the long term future of the program in terms of its funding.  Let's start with that.

The Social Security Trust Fund contains about $2.5 trillion.  That is a fact, not an opinion, so when we discuss funding for the program, we should start from the fact that our government has borrowed that money from us--the people who contributed it to The Fund and will one day draw from it--rather than borrowing it from the Chinese.  But it is still our money, so when conservatives try to claim that the Social Security Trust Fund really doesn't exist, all they have to do to legitimate that claim is pay us back what the treasury has borrowed from our fund and then close it down.  But don't worry, they can't do that because when the Roosevelt government created the program, they created it with a trust fund to prevent conservatives from claiming that the program couldn't be funded by the government, which is what they now say.  And Roosevelt made his reason for creating the fund clear in speeches he gave during the depression, which Social Security was designed to prevent from leaving the elderly, widows and orphans homeless and hungry in future depressions as that depression had done.  Roosevelt saw the Tea Party coming eighty years away...and he planned for it so that we wouldn't have to feel threatened by them.

Then there's this issue of how many workers it takes to fund the program relative to how many it took when the program started.  The fact is that two contributors now support every beneficiary, but even so, they can sustain payments at the rate of 75% of current rates even after the surplus in the Trust Fund is gone.  The conservatives always complain about that fact as if it were a sign that Social Security is in decline because there used to be fifteen or so contributors--actually it was 42 when the program began--for each recipient, but that decline in numbers really just demonstrates how little must be done by 2042 when the trust fund runs dry at current rates in order to make the fund solvent longer term.  The fact that it used to be 15 workers who contributed for every recipient only demonstrates that the various fixes over the years have sufficed and that another fix is not only possible, it's been done before, and nobody died.  Nobody lost his benefits and the fund didn't dry up.  But if we go in the direction advocated by conservatives and make everyone retire later and take less rather than amending the contribution schedule, bad things will happen.  For example, if I hold my job for another year, that's another year that it isn't available to someone who just graduated from college or law school, and someone has to support him or her, usually the parents.  And while that is going on, that young, dependent person isn't creating demand with his own labor, and it is demand, not supply, that makes our economy run.

Then there is the notion that retirees get more than they pay into the Social Security system.  And until now, that has been the case, though as time has passed the surfeit of return has continuously diminished.  Now however, as Time magazine reported in August 2012, the average married couple gets slightly less than it puts in, and that diminishing return will continue to diminish given even the extended life spans that we now enjoy.  And finally, there is the issue of the national debt.

The Social Security program has never added a single penny to the national debt.  But more importantly, no change to the Social Security program will reduce the national debt because by law, benefits can only be paid out of the Social Security Trust Fund, and the only source of funding for The Trust is contributions from potential recipients.  The Social Security program has nothing to do with the federal budget, and in fact it reduces the demand of the federal government for credit from foreign countries because if we didn't lend the money we contribute to The Fund to the U.S. Treasury until we need it to pay benefits, that $2 trillion owned by The Fund would have to have been borrowed from China or the United Arab Emirates or some other cash rich country.  Further, measures like the proposed chain CPI--which will reduce benefits by reducing the cost of living allowance of every recipient--will reduce the federal budgetary deficit by reducing the amount that the government has to repay the fund in any given year in order for benefits to be paid, but in so doing will have only the effect of deferring repayment of the federal government's obligations, not diminishing them.  It is a way of passing debt on to later generations of tax payers, which conservatives complain about when they advocate budgetary austerity in the name of debt reduction.

So, the next time you hear someone complain about "entitlements" as the problem in our system of fiscal policies, consider the facts before accepting such complaints as well founded.  Social Security is entirely our program, and unlike all of the conservative favorites like defense and business oriented tax policy, Social Security pays for itself and even reduces governmental dependency on foreign capital.  The benefits paid generate jobs and even tax revenue, which primes our economic pump rather than slowing it down.  It is the largess of the American people from which the federal government only benefits.  So why on earth would we want to make it smaller.

Your friend,

Mike