But, starting in 2018, there’s nothing there but I.O.U.s.
We're going to be hearing a lot of information -- and misinformation -- about Social Security in the coming months as the Bush administration and allied groups apply political pressure for drastic changes. Any evidence that isn't an outright lie will be carefully framed to suggest that Social Security is the cause of -- and solution to -- a vast and pending budget crisis. An "iceberg" looming on the horizon.
Case in point: the Social Security Trust Fund.
Alan Greenspan chaired the 1982 Commission that proposed raising payroll taxes to help offset future growth in Social Security benefits, and later as chairman of the Federal Reserve Board he was able pressure the Clinton administration into implementing the changes. The idea was to generate more income in the last decades of the twentieth century to offset higher payments in the twenty-first. It worked. Social Security has been running a surplus, about 2 trillion dollars so far, which has been socked away in the Trust Fund of the same name. The dread date of 2018 is when the flow reverses, and Social Security starts to withdraw from the Trust Fund. The Trust Fund itself doesn't run out until the middle of the century.
But, the critics whine, there's no actual money in the Trust Fund. The government spent it. All that's in there is a bunch of I.O.U.s. So what gives? Is Alan Greenspan, the economic genius of the 1990's, actually a moron? Is he now smacking himself in the forehead with dawning realization? D'oh! They spent it all! What was I thinking!?
Of course not. Don't be silly.
The problem with this picture is the term "I.O.U." It deliberately evokes the worthless promises of a deadbeat, perhaps your stoner roommate who leeches off you until you manage to move out. You never really expected to get paid back, and trying would probably ruin your friendship so you don't bother. But these I.O.U.s are not from a known deadbeat -- they are from the Federal Government; and they are not insignificant -- they are our social safety net.
Rich Tucker's straw man is wrong in two critical aspects. One is that the person who is planing for retirement actually earns money which he puts aside while working. This is the high payroll taxes being currently collected. He also doesn't just write an I.O.U. to himself, nor does he just store his money in a mason jar. Instead he takes his current income and invests it in the safest instruments he can find: U.S. Treasury notes. This is the Trust Fund. When he retires he will cash out those investments and live off of them. Or so he hopes.
The coming crisis, to the extent that it's real, is not about cash-flow problems within the Social Security system itself. It's about the solvency of the U.S. Government. The 7 trillion dollar national debt is held by those who trust that it will be paid back, and to the extent that the U.S. can maintain an illusion of solvency the debt will not be called en masse. It's not clear that trust is something we should mess around with, even if it seems like being clever to move funny money around between different agencies. The fact is, the U.S. cannot make good on those loans, not even to pay retirement benefits which have already been promised.
Famous deadbeat George W. Bush is once again attempting to misdirect. Where the real problem is unsustainable deficits and an unbearable debt load, Bush points the finger at Social Security. Like Iraq, he tries to pin the blame for his own failures on the thing he wanted to destroy anyway.
- jack*
Correction: changes to the payroll taxes were made under Reagan, not Clinton.
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