I guess it’s too much to hope that the Sunday morning news shows could ever rise above the typical blather from the guests and tepid interviewing by the host. The latest edition of Meet the Press certainly didn’t inspire much confidence in that outcome. Missouri senator Claire McCaskill, who is up for reelection next year, revealed very little, trying to position herself as all things to all people. Voting to convert Medicare to a voucher system “doesn’t compute for us,” she said, and yes, she was “one of the Democrats saying that we have to look at entitlement reform.” Gregory, for his part, wanted to talk about entitlements, even letting his own views creep into the discussion—and some misinformation as well.
He began his interrogation of McCaskill by noting that she had recently tweeted the sentiments of her constituents. The tweet said: “Just spent a couple of hours answering the phones in my office. Dominant message: Don’t cut Social Security or Medicare, and compromise.” Gregory didn’t want to talk about her constituents, but rather about the enforcement mechanism—the second stage—for cutting the deficit and the debt. “So how do you not put Social Security benefits or Medicare benefits into that potential enforcement mechanism when they’re what are driving the debt?” he asked.
Here was a chance to clarify the amount that Social Security and Medicare actually contribute to the debt and deficit—a figure that has been misreported for months—but he didn’t go there. Instead he let McCaskill answer in typical political speak. She had faith the American people are going to weigh in; Republicans voted to keep giving taxpayer checks to big oil while wanting to convert Medicare to a voucher system; and we can level the playing field by lowering tax rates for businesses and individuals. Sounds like the outlines of her campaign stump speech, doesn’t it?
Gregory continued on the entitlement front:
What’s really ludicrous to the American people, even when the American people don’t always speak with one voice on this matter, is that Washington is not really dealing with what drives the debt, that’s entitlement spending. It’s been going on this way and was a ticking time bomb since the ‘60s and Democrats like you were saying, ‘Hey you can’t deal with Social Security and Medicare.’ Republicans say, you know, sign tax pledges, that “I’m not going to raise taxes.”
That gave Gregory’s other guest, South Dakota senator John Thune, a chance to weigh in with the Republican message that Medicare, Medicaid, and Social Security are driving government spending. Then McCaskill got into more details, if you could call them that. “There are things we can do with both Social Security and Medicare that will preserve them, protect them, protect the beneficiaries, protect the benefits without gutting them,” she said.
If I were from Missouri and watching the program, geez, I might want to know more about these “things” that will protect me. But a Missourian would not have learned anything about that from Gregory’s questioning. After McCaskill said: “If we have a balanced approach, we will preserve those programs as we know them,” Gregory’s response was “right.” Her next remark was equally opaque. “ and will be able to get it on long-term debt structure. Both of them have to be on the table. We can’t keep going down a road where they want to keep pushing more public money to big oil but don’t want to address other issues.” It wasn’t clear who the “we” and the “they” she had in mind.
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Unfortunately your source, Dean Baker, has it wrong.
In 2010 Treasury paid SS 118 billion in interest. Every penny of that is an On Budget item.
Over the past decade SS has added more than $1 trillion to the deficit.
Speaking of deficits there is also the cash deficit at SS. In 2010 that came to $49b. Every penny of that shortfall had to be financed with more Debt to the Public. SS will have a cash deficit for the next 75 years.
Color me disappointed with due diligence at Columbia
#1 Posted by Bruce Krasting, CJR on Thu 4 Aug 2011 at 10:57 PM
Bruce beat me to the punch.
How can Trudy argue with a straight face that Social Security cannot contribute to the deficit, when the taxpayers just had to borrow to come up with $50 billion to redeem trust fund IOU's?
That $50 billion didn't "contribute to the deficit"?
Give us a break, Trudy..
Let's keep the Reality Train on the rails, here, OK?
#2 Posted by padikiller, CJR on Fri 5 Aug 2011 at 11:08 PM
Jesus h christ guys, keep your story straight. Is the social security trust fund real or not? Simple question.
If it's not, then the interest earned on a non existent trust fund doesn't contribute to the deficit. Sure you've collected payroll taxes - a people's loan - that should be transfered to the liability side of the balance sheet with interest, but you people aren't planning on paying that money back anyways; you certainly haven't saved any of it. In that scenario, social security hasn't contributed "1 trillion to the deficit" over the last decade because the program is a con. Money was paid into it, but good luck getting that money out.
In this scenario, Social security spent 584.9 billion and took in 566.9 billion.
A whole 18 billion dollar deficit during a period of economic collapse in which many private pension investments are wiped out.
However, if the trust fund is real, then have to look at the program's revenues versus its costs to see if it has contributed to deficits. The REALITY is the that the payroll taxes have funded social security and more until the great recession.
http://www.ssa.gov/oact/trsum/index.html#B
At which point payroll revenues fell and payroll tax holidays were offered as stimulus. So the program did not contribute to the deficit prior to the recession at all since the money collected exceeded the money spent. It has contributed to government liabilities by creating trust fund assets that will need to be redeemed, but it was administration choices which made that asset conversion dependent on debt. The government could easily collect the tax revenue necessary to draw down the trust. Using debt is a choice unrelated to the solvency of the program. The program was solvent and well designed, the stewards of government finances were less so. You don't blame a mother's trip to the beauty salon for the size of the father's gambling debts. Social security has been a responsible program, the system social security is embedded in has been less than responsible.
Which brings us back to the trust fund. If the trust fund is real, then Social Security has not contributed to the deficit (I should be using the term debt here, but I didn't set the conventions in today's thread. When in rome) because each time costs exceeded revenues, the government drew down liabilities from past contributions to cover the difference. Sure, it paid more in benefits, but that extra money paid down a real liability. They zero each other out.
Now if the government choses to borrow to pay down that liability, that's a government decision - the responsibility for belongs to the government, not the program.
So which is it? Is the trust fund real, in which case we should count its redemption as deficit neutral, or is it fake, in which case we can't count its liabilities as deficit boosting.
Pick one. Your answer can't be "either, depending on the point I'm trying to make"
#3 Posted by Thimbles, CJR on Sat 6 Aug 2011 at 01:19 PM
Thimbles...
600 words to come up this "heads I win, tails you lose" silliness?
Especially when you've conceded my point?
"In this scenario, Social security spent 584.9 billion and took in 566.9 billion.A whole 18 billion dollar deficit during a period of economic collapse in which many private pension investments are wiped out.
#4 Posted by padikiller, CJR on Sun 7 Aug 2011 at 12:16 PM
"Especially when you've conceded my point?"
Whuh? Social Security spent 584.9 billion and took in 566.9 billion only if you ignore the trust fund assets and the interests they accrue. If you don't, then social security took in 677.1 billion leaving a profit of 92.2 billion. If you do, then costs exceeded revenues by 18 billion. You and your friend Bruce have picked both so you can claim the trust fund doesn't fund present program costs AND the that the interest on the trust fund is responsible for past deficits.
Either the trust fund exists and has covered the costs of the program until now or the trust fund doesn't exist so you can't claim that interest on fund assets added to the deficit.
That's not a concession, that's a request for clarification.
And it's a pretty basic request for someone who's supposed to be a lawyer.
#5 Posted by Thimbles, CJR on Sun 7 Aug 2011 at 02:04 PM
Your argument is nonsense, Thimbles.
The Social Security Trust Fund continuously buys IOU's (daily, in fact) from the Treasury and continuously redeems these IOU's from the Treasury to pay benefits.
The money that the Fund pays to the Treasury goes into the general fund of the Treasury and is indistinguishable from other cash in the general fund. Money that comes out of the general fund of the Treasury to redeem the IOU's is indistinguishable from cash that goes to any other government spending (like subsidized Cowboy Poetry, subsidized jet flights for Murtha's airport, shotguns for the Department of Education, etc., etc, etc..)
The SS Trust Fund IOU's are nothing more than a mere promise to pay from the (newly downgraded) federal government. These "securities" cannot be sold or transferred (as true assets can). These "securities" do not confer any property right. They provide no remedy for default. They are not enforceable in any court. They are not "secured" by anything.
The money that comes from the general fund of the Treasury to redeem Trust Fund securities adds to the federal deficit in precisely the same manner as any other spending does. If more money comes out of the general fund of the Treasury to redeem these IOU's than goes into the Treasury (as revenue from payroll taxes) to buy them - then you have a net D E F I C I T PERIOD.
And THIS is what we have now, Thimbo!
Deal with this little Reality.. Or don't. Whatever. It isn't going anywhere, either way.
#6 Posted by padikiller, CJR on Sun 7 Aug 2011 at 02:58 PM
Good, you don't believe in the trust fund. Therefore, the program's payroll taxes over the years improved the national debt since you got to spend poor people''s money without having to pay it back.
#7 Posted by Thimbles, CJR on Sun 7 Aug 2011 at 03:30 PM
What in the Hell are you babbling about, Thimbles?
Are you saying that that Congress steals payroll taxes and plops them into the general fund? Everyone knows that.
Are you saying that in the past, the payroll taxes paid into the general fund reduced the deficit, because the taxes paid into the general fund in years gone by were greater than the funds paid out of the fund to redeem Trust Fund IOU's? Everyone knows that too. So what?
We're not talking about the past, buddy.. We're talking about NOW.
This year more money is coming out of the general fund of the Treasury to pay Social Security benefits than is going into the fund from payroll taxes.
Thus (keep up with me here, Thimbo) there is a thing called a D E F I C I T.
That's what we call it when the money going out is more than money coming in.
#8 Posted by padikiller, CJR on Sun 7 Aug 2011 at 04:01 PM
"We're not talking about the past, buddy.. We're talking about NOW."
You guys weren't here:
"In 2010 Treasury paid SS 118 billion in interest. Every penny of that is an On Budget item.
Over the past decade SS has added more than $1 trillion to the deficit."
All I'm asking for is a little consistency. I disagree with your claims about the trust fund because it represents a huge theft of the public of money that could easily be paid back by increases in marginal and unearned income tax rates, but that's neither here nor there.
You guys tried to make mutually exclusive claims. You tried to claim the trust fund was causing a deficit in the past AND cannot be funding benefits now. One or the other is possibly true, not both.
Is it too much to ask for simple logical consistency?
#9 Posted by Thimbles, CJR on Sun 7 Aug 2011 at 09:56 PM
Thimbles has us dancing the Liberal Two-Step.
Time to toll the Reality Bell and break this thing down into bit-sized Reality Chunks.
Irrefutable Reality #1: Payroll taxes are used to buy Social Security securities for the Trust Fund from the Treasury.
Irrefutable Reality #2: Money that goes into the general fund of the Treasury and is indistinguishable from other cash in the general fund.
Irrefutable Reality #3: In order to pay benefits, the securities are redeemed by the Trust Fund.
Irrefutable Reality #4: Securities are redeemed by payment of the Treasury from the general fund.
Irrefutable Reality #5: Money that comes out of the general fund of the Treasury to redeem the IOU's is indistinguishable from cash that goes to any other government spending.
Irrefutable Reality #6: If more money comes out of the general fund of the Treasury to redeem Trust Fund securities than goes into the general fund to buy securities, the national D E F I C I T increases.
Irrefutable Reality #7: Right now, more money is coming out of the general fund of the Treasury to redeem Trust Fund securities than is going into the general fund to buy securities.
IRREFUTABLE CONCLUSION: Right now, Social Security is contributing to the national deficit. PERIOD.
#10 Posted by padikiller, CJR on Mon 8 Aug 2011 at 10:19 AM
You see, this is why I mentioned we should be careful when we're talking about deficit vs debt.
Irrefutable Reality #9: Payroll taxes and taxes on benefits covered the cost of social security to general revenue from 1984 to 2010.
Irrefutable Reality #10: Had the program not existed, there would not have been a dedicated payroll tax to collect.
Irrefutable Reality #11: The effect of the program was that it reduced deficits from 1984 to 2010 and reduced the national debt as a whole.
For instance, if we analyze the data between 1998 and 2002 here:
http://www.socialsecurity.gov/OACT/TR/TR03/VI_SRfyproj.html
we see that revenues, excluding trust fund activities, reduced deficits on average by about 66.8 billion per year and reduced the debt by 333.8 billion.
The debt picture would have been much worse had the program not been collecting about half of federal tax revenue. Because this is a dedicated tax, that money saved on past debt belongs to the program and the retiring people who paid into it. That is money owed. If we are going to grouse about a program's effect on the deficit now, we should remember the program's effect on the debt in the past.
Because that was money borrowed from American laborers on the expectation that it would be returned to them according to the conditions agreed to in the program.
That is money owed. And if some jack asses are going to defend the claims of criminal banks based on the idea that "It's fudging the records to get money it is truly owed."
http://www.cjr.org/the_audit/propublica_catches_ally_financ.php#comment-49224
then they should be able to see that American retirees have an even more justified claim to demand the government repay the money they are truly owed. If your dad gave you money to buy a car, it's really bad form to turn around a month later and complain about the 20 bucks you gave him for gas. Social Security saved you between a trillion or two of national debt. Complaining about the deficit now is lame and ungrateful.
Especially since,
pt 2 in a bit
#11 Posted by Thimbles, CJR on Mon 8 Aug 2011 at 12:54 PM
Irrefutable Reality #12: The only reason you have deficits is because you are charging too little for taxes. Corporate and upper bracket marginal income is under taxed. You could eliminate the deficit in a year with a quick return to Clinton or Nixon tax rates. There would be no deficit, no debt within a decade or two, if government leadership chose to raise revenue instead of cut it.
http://www.youtube.com/watch?v=BEbWepXjVtc
Oh shoot. If the deficit is a choice based on tax policy then that kind of ruins irrefutable realities #6 and 7. Social security wouldn't have to contribute to any deficit if government chose to operate without deficits. However, when government chooses to operate with deficits, then every program - minus the ones with sufficient dedicated revenues, will contribute to the deficit. The entitlement is projected to cost net 200 billion dollars a year without adjustment once the surplus is worked off. America could afford that as easily as another war.
And with Social Security, at least you have some social benefit to show for it. War? Not so much.
#12 Posted by Thimbles, CJR on Mon 8 Aug 2011 at 01:16 PM
Thimbles actually wrote: "The effect of the program was that it reduced deficits from 1984 to 2010 and reduced the national debt as a whole"
padikiller responds: ????????????
A trust fund comprised solely of IOU's from Congress... A trust fund that has grown from holding $24,000,000,000 in IOU's in 1983 to holding $2,608,950,000,000 in these IOU's today (an average annual increase of more than 360%).... You're seriously trying to tell us that accumulating 2.6 TRILLION DOLLARS in IOU's from the Treasury somehow "reduces the national debt as a whole"?
Go peddle that nonsense somewhere else, Thimbles!
#13 Posted by padikiller, CJR on Mon 8 Aug 2011 at 01:17 PM
There is a great amount of confusion about the impact of Social Security on the deficit.
Consider the following example, which compresses the history of Social Security into three years: Year 1 when the Social Security Trust Fund (“SS Fund”) has a surplus and is able to lend the surplus cash to the U.S. Government; Year 2 when the SS Fund has a deficit and must redeem fully the amount lent to the U.S. Government in Year 1 in order to pay 100% of the promised benefits; and Year 3 when the SS Fund cannot fully meet its obligations.
Year 1
Social Security Surplus: $100
Government Budget Deficit: $500
Unified Budget Deficit: $400
Year 2:
Social Security Deficit: $100
Government Budget Deficit: $500
Unified Budget Deficit: $600
Year 3:
Social Security Deficit: $0
Government Budget Deficit: $500
Unified Budget Deficit: $500
In Year 3, assume that the SS Fund collects $300 in payroll taxes and is supposed to pay $400 in benefits. However, under current law, the SS Fund can only pay an amount equal to what is in the trust fund. In this case, because the SS Fund no longer holds any of the Special Treasury bonds, it can only pay the $300 in benefits. Accordingly, the collection of $300 in payroll taxes will equal the amount paid in benefits. Therefore, Social Security will have no impact on the Year 3 unified budget deficit.
How were the government’s $500 annual deficits financed?
Year 1
Borrowed $100 from Social Security by issuing Special Treasury bonds and borrowed another $400 from the markets by issuing U.S. Government debt securities.
Year 2
Because the SS Fund needed $100 to cover its $100 shortfall, the SS Fund redeemed the Special Treasury bonds it acquired in Year 1.
The U.S. Government needed to borrow $600: $100 to raise the money to pay the amount redeemed by the Social Security Trust Fund and $500 to cover its Year 2 deficit.
Year 3
The U.S. Government borrowed $500 by issuing U.S. Government bonds.
How much U.S. Government debt is outstanding at the end of Year 3?
$1,500 (Year 1 debt issuances of $100 and $400 plus Year 2 debt issuance of $600 less debt of $100 redeemed in Year 2 plus $500 in Year 3 debt issuance). The amount of debt outstanding equals the accumulated amounts of the non-Social Security deficits over the three years.
#14 Posted by Bob Canuck, CJR on Mon 8 Aug 2011 at 02:09 PM
"You're seriously trying to tell us that accumulating 2.6 TRILLION DOLLARS in IOU's from the Treasury somehow "reduces the national debt as a whole"?"
Oh neat, you've switched to counting the trust fund again. That whole 2 trillion dollar trust fund just flashes in and disappears, depending on the argument you're trying to make.
"Social Security has always added to the debt! Look at those IOUS!"
"Social Security cannot fund its benefits. Its accounts have nothing but IOUS."
"Social security money increased deficits! Every surplus was borrowed money exchanged for IOUS!"
"Social Security taxes did not cover expenses this year, but you're telling me they took money out of the trust fund?! That's just filled with worthless IOUS!"
Make up your mind.,
#15 Posted by Thimbles, CJR on Mon 8 Aug 2011 at 03:45 PM
They're all true, Thimbles...
It is not inconsistent to say that Social Security has added to the debt and that it contributes to the deficit! Indeed, deficits CREATE debt!
The Trust Fund contains no real assets. There are no gold bars in its vaults. No deeds to any real estate. No shares of any corporation. Just a bunch of IOU's from Congress.
Those IOU's are public debt. PERIOD. And when they are redeemed faster than they are purchased they add to the DEFICIT AND THE DEBT.
It's just the REALITY, Dude.
#16 Posted by padikiller, CJR on Mon 8 Aug 2011 at 03:59 PM
Dude, you use your definition of the social security trust fund to claim there is no trust and therefore there is no obligation to pay. Therefore the program has nothing supporting it.
Either the fund makes real claims upon the future income of the United States based on past contributions of its revenue, a) which means that the program is paying for itself by redeeming its real claims, or the trust fund is a fiction, which means the b) payroll money collected will not go back to the program and the US got to lower its debts and deficits for free,
a) and b) both can't be true. pick one.
#17 Posted by Thimbles, CJR on Mon 8 Aug 2011 at 04:28 PM
Thimbles... You're creating a false dichotomy and you're jumping to the past for refuge.
Both silly dodges.
The Trust Fund is "real" in the sense that it exists and holds paper. Just like a fake present under the office Christmas tree is "real". The paper in the Trust Fund, like the air in an empty gift-wrapped box, has no intrinsic worth. This paper does not confer title to anything. It is not enforceable in any court. That's just the reality here.
Here in the present... Right now.. The simple fact of the matter is that the IOU's from the Trust Fund are being redeemed from the Treasury faster than they are being purchased. And this little slice of Truth means that Social Security is currently contributing to both the deficit and debt.
You keep running off to the past for cover -- "the US got to lower its debts and deficits for free" - but we're not talking about the past, Thimbles... We're talking about the present.
And for Trudy to claim that "Social Security cannot contribute to the deficit" when the plain, irrefutable truth of the matter is that Social Security this year will contribute almost $50 billion to the deficit, is just absurd.
#18 Posted by padikiller, CJR on Tue 9 Aug 2011 at 10:31 AM
And once agin the mysterious trust fund vanishes.
If you admit that the revenues from the program actually improved the fiscal picture in the past, I'll drop the past.
Or if you admit that those revenues didn't improve the fiscal picture in the past, since they represent a debt that requires to be paid back to the American workers as much as debt to criminal banks do, I'll drop the past.
Hell, I don't want to talk about the past, I didn't bring it up. If you guys want to focus on the present, stop misstating the past, and I won't have to talk about it.
"And for Trudy to claim that "Social Security cannot contribute to the deficit" when the plain, irrefutable truth of the matter is that Social Security this year will contribute almost $50 billion to the deficit, is just absurd."
You wanna source that?
Never mind, I'll do it:
http://www.cbo.gov/ftpdocs/120xx/doc12039/01-26_FY2011Outlook.pdf
"When a trust fund receives payroll taxes or other income that is not needed immediately to pay benefits or cover other expenses, the Treasury credits the fund and uses the excess cash to reduce the amount of new federal borrowing that is needed to finance the governmentwide deficit. That is, if other tax and spending policies are unchanged, the government borrows less from the public than it would in the absence of those excess funds. The reverse is the case when revenues for a trust fund program fall short of expenses. The balances of trust funds at a given point in time are not a measure of resources available to pay future obligations for the respective programs; those resources will need to come from federal revenues or additional borrowing in the years those obligations are due."
"Such intragovernmental transfers, which are projected to total $644 billion in 2011, reallocate costs from one category of the budget to another but do not directly change the total deficit or the government’s borrowing needs.
Total trust fund surpluses are dominated by those for the Old-Age and Survivors Insurance portion of the Social Security program. Including interest and other intragovernmental payments, CBO estimates a surplus of $99 billion for that fund this year and a cumulative surplus of about $1.1 trillion from 2012 through 2021. For Social Security as a whole, the estimated surpluses peak at $94 billion in 2016 and decline to $45 billion in 2021 (see Figure C-1). Excluding interest, surpluses for Social Security become deficits of $45 billion in 2011 and $547 billion over the 2012–2021 period."
#19 Posted by Thimbles, CJR on Tue 9 Aug 2011 at 11:42 AM