Political discussions can bring out the worst in people. The search for common ground is frequently forgotten in partisanship and wishful thinking.
In a nation of nearly 350 million with an ever-changing economy, debate over spending priorities should be constant. But politicians’ love of soundbite arguments has prevented America from having a substantive discussion about government debt and spending.
Social Security is the single largest federal program and will be the biggest contributor to federal deficits in the near future. Despite this being a mathematically indisputable fact, politicians and others frequently challenge the assertion that the trust fund will soon be insolvent and that it significantly increases our national debt. Rather than welcoming a national conversation about how we should set national priorities through spending, many are quick to shut down any discussion about the underlying problems and point to artificial reasons for its failure.
A woman walks past a sign for the Social Security Administration, Friday, July 29, 2011, in Los Angeles. (AP Photo/Matt Sayles)
One of the most pervasive misconceptions about the impending insolvency of the Social Security trust fund is that Congress caused it by “raiding” Social Security to pay for other programs. This argument is appealing because it’s simple and paints a clear villain. “If only we had the right people in Congress” – the logic goes – “instead of the ones who keep taking money from the Social Security trust fund, then everything would be fine.”
The fact is, during its 77-year existence the trust fund has never been “raided.”
The trust fund was established in 1939, four years after Social Security was implemented, and has never been part of the general fund of government. From the end of the 1960s until 1990, the trust fund was reported for accounting purposes on the same budget as the rest of the government, however it has never been available for Congress to reappropriate for other uses.
Before 2010, payroll tax revenues regularly outpaced the cost of Social Security benefits. These surpluses were held in the trust fund in the form of special Government Account Series bonds. These bonds are loans to the federal government, similar to those issued by the Treasury that anyone can get. Simply put, the trust fund loans tax surpluses to the United States government. The government then pays the money back, plus interest. That money is then used to fund Social Security.
Right now, these loans from the trust fund are being paid back with interest from the rest of our tax dollars – nearly $100 billion will be paid back this year alone. The redemption of these bonds are what covers current Social Security beneficiary payments and other expenses. In fact, without these debt repayments, the trust fund would likely already be insolvent today, instead of 2029, when it’s currently expected to run out of money.
While some might argue that these debts from these loans could simply be canceled by Congress, and are therefore illegitimate, that is an unlikely scenario given that these bonds are backed by the same “full faith and credit” as the dollar – an abrupt cancellation of U.S. debt could send the global economy into a tailspin, an outcome even Congress knows well enough to avoid.
The merits of loaning trust fund assets through Treasury bonds are up for debate and there are many who believe this practice to be dishonest. However, claiming that either major political party “raided” the trust fund distracts from the fact that the fundamental structure of this outdated program is to blame for its impending insolvency. It is politicians who benefit most from widespread belief in this fiction because it casts blame on their opponents and avoids any substantive discussion of the costs of Social Security.
Social Security is not financially sustainable on its current path. Retired beneficiaries in 2029 will lose nearly a third of their checks because of the fundamental flaws in the structure of the program. My generation—Millennials—is already expecting the worst. Three-fifths of Millennials are planning for a retirement without Social Security.
The real policy question facing young people is whether the cost of Social Security is worth the benefit of the program. Should other national priorities, like education, defense, or infrastructure, be squeezed out to maintain a universal retirement benefit? Should the payroll tax, which has been raised 20 times and disproportionately taxes the young and poor, be raised again to fund the program? Answers to these questions will vary, but we will be much closer to solving our nation’s debt crisis once the myths surrounding Social Security’s failures have been fully dispelled.
The problems with Social Security are not due to dishonest politicians using taxpayer money improperly, but rather to dishonest politicians who are more concerned with reelection than addressing the nation’s priorities. The trust fund has not been “raided” by anyone, period. Now, let’s focus on fixing this broken program with the facts as the foundation.
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