Tuesday, July 30, 2013

Social Security “has never contributed one penny to the deficit.”

Ed Schultz took a dive off the deep end on Saturday’s The Ed Show, claiming that Social Security is a “cheap” program that “has never contributed one penny to the deficit.”according to MRC

Social Security Income (in billions of dollars)
Revenues      675
Interest           110
Other income   70
Total income   854
Outgo       
 Total outgo 819
 This looks like surplus, worth about $36 billion after rounding.
But notice that fully $110 billion of the income was interest on Treasury securities. But that interest is simply paid with new Treasury bonds.  So when that money is subtracted, the actual cash flow (what the CBO document calls “primary surplus/deficit”) is negative — and getting worse.
 In 2012, the cash flow deficit was $58 billion. In 2013, it will be negative $75 billion — and then negative $82 billion in 2014. By 2016, the trust fund for disability insurance will be exhausted, so in theory, full disability benefits could not be paid.

Politifact states....
 Although Social Security used to run surpluses, over the past few years it hasn’t collected enough in taxes to pay in benefits. And the trust fund consists not of prior Social Security surplus funds, but of interest-bearing securities provided through federal government borrowing -- thus the link to the deficit. Social Security is a pay-as-you-go system: Payroll taxes paid by current workers and their employers go to pay benefits to current retirees and other Social Security recipients. From 1984 to 2009, Social Security collected more money in payroll taxes than it paid out in benefits. That surplus was transferred from the Social Security program to the federal government's general fund. In return, the Treasury gave Social Security bonds that it could redeem to pay future benefits. The government, in turn, incurred obligations to repay the bonds, plus interest, to the Social Security trust fund. Since 2010, Social Security has been paying more in benefits than it has collected in payroll taxes. To meet its payments, Social Security began redeeming the bonds, plus interest, from the federal government. In other words, money was transferred from the government’s general fund to Social Security. That has an impact on the government’s deficit because the Treasury has had to borrow money in order to make such a transfer. 

Even the Congressional Budget Office disagrees with Ed