As an extension to my post on the history and structure of Social Security, Walter Williams is out with an excellent article about how the scare tactics being used in the debt ceiling debate actually expose the massive budgetary problems with Social Security.
Let’s expose presidential prevarication. Earlier this year, President Barack Obama warned that Social Security checks will be delayed if Congress fails to increase the government’s borrowing authority by raising the debt ceiling. However, there’s an issue with this warning. According to the 2012 Social Security trustees report, assets in Social Security’s trust funds totaled $2.7 trillion, and Social Security expenditures totaled $773 billion. Therefore, regardless of what Congress does about the debt limit, Social Security recipients are guaranteed their checks. Just take the money from the $2.7 trillion assets held in trust.
Which is the lie, Social Security checks must be delayed if the debt ceiling is not raised or there’s $2.7 trillion in the Social Security trust funds? The fact of the matter is that they are both lies. The Social Security trust funds contain nothing more than IOUs, bonds that have absolutely no market value. In other words, they are worthless bookkeeping entries. Social Security is a pay-as-you-go system, meaning that the taxes paid by today’s workers are immediately sent out as payment to today’s retirees. Social Security is just another federal program funded out of general revenues.
Williams is absolutely correct to point out the inconsistencies at the heart of this claim. Since current Social Security payments are paid directly from the taxes of current employees (and because it was explicitly argued by the government that there is no inherent link between the benefits and taxes of Social Security) there is, in fact, no meaningful trust fund or “lockbox” (remember this 2000 SNL gem?).
In 2012, monthly federal tax revenue was about $200 billion. Monthly Social Security expenditures were about $65 billion per month, and the monthly interest payment on our $16 trillion national debt was about $30 billion. The House could simply enact a bill prioritizing how federal tax revenues will be spent. It could mandate that Social Security recipients and interest payments on the national debt be the first priorities and then send the measure to the Senate and the president for concurrence. It might not be a matter of brains as to why the Republican House wouldn’t enact such a measure; it likes spending just as the Democrats.
That the government continues to ignore the issue of prioritizing spending is an important one as media pundits continue to scream of default and cutting granny’s Social Security check. It indicates that the government has already set its priorities, and that our lenders and our elderly will be the first ones to lose out if the government cannot go deeper in to debt.