There is a level of crazy in the Social Security debate that is simply not healthy for the nation. We have reached the point in this policy debate where the sound of the sound bite is more important than the facts underneath it.
Every candidate is entitled to his own opinion, but today candidates can simply make up facts to fit their sound bite. In the first GOP debate, Governor Christie, in an effort to shutdown Mike Huckabee said, “The lying and stealing has already occurred. The Trust Fund is filled with IOUs.”
Christie isn’t lying. He is just wrong. The problems of Social Security have nothing to do with what is in the Trust Fund, and everything to do with the sums that were never collected by the system. Social Security is financed, and today we are not even collecting enough to cover the financing burden of the system.
The reasoning of Governor Christie reduced the Republican’s debate to a level of childhood fairytales. His statement reflects conspiracy theories that are classified by the Social Administration as urban legend. This once-upon-a-time sound bite ends reasoned discussion, and pulls us into Crazytown, USA.
The problem for America is of course that Crazytown has a lot of voters. Consider that the following quote has drawn 50,000 likes and nearly 500,000 shares.
“Next time a Republican tells you that ‘Social Security is broke,’ remind them that Pres. Bush ‘borrowed’ $1.37 trillion of Social Security surplus revenue to pay for his tax cuts for the rich and his war in Iraq and never paid it back.” ~ Occupy Democrats
PolitiFact considered this quote, and rated it as “Mostly False.” That is of course a polite way to say “Stir Crazy.” Yet, nearly 500,000 people took time out of their day to share this lunacy. We will never resolve the challenges of Social Security with politicians continually trolling Crazytown for votes.
Crazy or mostly false, the myth is pervasive. Every president since Kennedy has been accused of stealing money from Social Security. Some even claim that Ford and Carter stole money from the system, and their budgets actually subsidized the program. There isn’t a shred of evidence to suggest that any program money has been misused.
While the name of the accused varies, the underlying story is all the same. LBJ draws the ire of conservatives. Bush or Reagan serve as the lightning rod for liberals. Whoever is named, the story is entirely noise.
The PolitiFact article largely understates the case against this myth. By law, the excess cash of Social Security is converted into government securities at market rates. The only change in the system since the 1930s is the amounts that we are borrowing.
This process is really no different from a private pension that buys Treasury obligations. Just as in the case of Social Security, the cash of private pensions is used by the Treasury to pay for government expenses. The most visible difference is that no one at these institutions complains about the theft, questions the IOUs, or worries about the repayment of the bonds. Why? Because these investment professionals aren’t crazy.
PolitiFact is specifically incorrect about the repayment of bonds. It says: “As for not ‘paying back’, the bonds won’t need to be repaid until 2020.” This is nutty. The bonds held by the Social Security Trust Fund have specific maturity dates. On those dates, the Treasury refinances the maturing bonds with new loans under new terms from the Social Security Trust Fund.
To be clear, it is factually wrong to say that the money borrowed by the Bush administration hasn’t been repaid with interest. Much of that money has been refinanced with loans made from Social Security to the Obama administration at market rates.
It is accurate to caution voters that we will need to find a new source of refinancing in the next few years. CBO says that it is 2017. SSA projects it is likely to be 2019. This is a serious problem – one that gets no attention in Crazytown.
The Trust Fund holds roughly $2.8 trillion in government securities. This sum is held against $29 trillion in promises for which the system does not expect to generate cash. That is a dime of solution for every dollar of problem.
Candidate Christie is telling you that the problem isn’t the dollar. He is telling you that the real problem in Social Security is what we call the dime.