THE BLOG
03/15/2011 11:24 am ET | Updated May 25, 2011

The Problem With Social Security Is GOP Mendacity

With so many GOP illegal spitballs being thrown in the general direction of home plate, it's hard to know which one at which you should swing the bat. Maybe that's the plan. Heading the list of long term issues, though, is Social Security. Specifically Social Security's "problems" with solvency. This issue, like the "emergency" budget powers being enacted in a GOP governed states, is being leveraged by the Republican's unfounded rumor that "We're broke". The deficit is coming to get us in our beds!

We're not broke, not as a country and not unless you don't consider rich folks to be Americans anymore. Lately, the rich seem indifferent to the idea themselves, incredulously threatening to do a collective John Galt. But the GOP is just using the standard debt/deficit fear mongering that they always resort to when Democrats have control. They pulled the same crap during the Great Depression eighty years ago. The GOP is not a party of ideas, it's a party of tired old tactics. Trouble is the tactics seem to outlive the people who beat them in previous generations. To beat the GOP is only to know history, and their prayer is that you can't or won't.

The argument that Social Security adds to the deficit is being nicely deconstructed, but it takes time as the GOP keeps moving the goal posts. It started out as bald unsupported claim that since Social Security was a third of government outlays that it must be obvious it should be cut. No (sneer), an explanation is not necessary. Isn't it obvious? Now the conservative argument has come down to something closer to reality, but not quite there.

It seems the last ditch defense of cutting the vast Social Security "entitlement" because its adding to the deficit has become one of accounting. Tom Curry, of MSNBC, attempts to explain the rationale in his "If it's solvent until 2037, why pick on Social Security?". The last ditch argument goes like this: Social Security is just another government account. To borrow from it is meaningless because it's all the government's money anyway, collected through different avenues of taxation. To consider the Social Security Trust Fund a debt of government is nonsensical because one part of government can't reasonably owe money to another part of government. It's just all government in one big pile, like owing money to yourself. So for government to borrow money to fulfill the purpose of the Social Security Trust Fund is just ridiculous. The argument presumes contractual facts not in evidence though.

In other words, the current GOP argument to cut Social Security benefits is only valid in a pig's eye.

Social Security is not a debt owed to one part of government by the other. It's a debt owed to persons who paid into it on the expressed promise that it would secure their retirement in annuity. Let me rephrase that in case the language of that point is not clear. The government borrowed those dollars from the public through the auspices of the Social Security Administration to finance the operation of government, with the promise to pay it back exactly as if they had sold the public U.S. government Treasury Bonds. The debt owed to Social Security by government is debt owed to the public through the Social Security Administration as intermediary. That money borrowed by the government is owed to you, sooner or later.

The principal and interest owed to the Trust Fund is debt, no more or less than a U.S. Treasury Bond. Both Treasury Bonds and debt to the Social Security Trust Fund accumulate interest until settled, paid by the government from whatever resource they need to draw on to pay.

The debt owed Social Security as intermediary for the public and its retirees is $2.5 trillion. The interest accumulated by the Trust Fund approximates the interest on a 10 year Treasury Bond. The essential difference is that Treasuries are redeemable on maturity of 2-10 years. The "special" Bonds bought by the Social Security Trust Fund don't have a fixed maturity date. They ostensibly mature on demand.

Accounting matters. For thirty years, FICA taxes in excess of the outlays of Social Security were collected, to the sum of $2.5 trillion. The express purpose of those overpayments, paid by the Baby Boomers, was to fund the retirements of the Baby Boomers. They were to go to the Social Security Trust Fund, where they would be invested in the Social Security Trust Fund Bonds offered by the U.S. Government to the Social Security Trust Fund, exclusively. The U.S. Government would pay interest on them, just like a corporate or Muni bond does. The Trust Fund Bond maturity dates began in 2011 when the first Boomers hit 65 years of age.

Now the conservatives and GOP want to call that a deficit problem. The fact is, it was a deficit problem WHILE they were borrowing, under the budget satinized sheets, from the Trust Fund. Now it's debt, no more and no less than what we owe for U.S. Treasury Bonds issued domestically and internationally.

To now recast the Trust Fund as something other than a sovereign debt as something dismissible is exactly the same as default, ethically and contractually. The debt owed on Treasuries issued to voluntary buyers was borrowed under exactly the same assumptions as was the debt owed to Social Security for its involuntary purchase of U.S. debt, under the promise to pay it back. If Greenspan's plan to over collect to pay for the Baby Boomer socioeconomic blip were offered as just a tax on the poor and working class which would be swallowed up by government to cut the taxes of the rich in 1981, it would be different, but it wasn't. How your accounting of it works is only material in terms of accuracy. That money is owed to the people who involuntarily purchased those government bonds, otherwise every sense of contractual law has been abrogated. And yes, contractual law is binding on government.

The Social Security Trust Fund was set up with the explicit promise that the overpayments of the Baby Boomers would be used to fund the retirements of the Baby Boomers. Baby Boomer is not just a pejorative of irresponsibility, it's a real socioeconomic event. The soldiers coming back from WWII made an extraordinary number of babies per thousand people. It's a real, identifiable, baby bubble, that once worked through will not likely happen again, because it happened as the world was still adjusting to progressive social policies. Social Security and Medicare were designed to prevent just such overpopulation bubbles. When you don't have to make babies for your retirement support, you don't make as many, saving the world the depredation in the bargain.

The only possible reason for conservatives to pine away for defaulting on the Social Security Trust Fund debt is that the rich folks that carried away the balance of the Social Security loans, the people's loans to government, as income tax cuts, do not want to pay you back for the loan of their tax cuts, and it can't be characterized as anything but a loan.

Do the math. The wages subject to Social Security taxes were increased from $64,000 to $106,000 over a decade and have run at that level for twenty years. The collection window expanded from just over half of wages to 4/5ths of wage earners, equaling collections of $2.5 trillion in twenty years. The Reagan/Bush 43 tax cuts cost the government something like $275 billion a year for thirty years, or $8.25 Trillion. Tax cuts account for nearly all of the U.S. debt accumulated since 1980. The off books debt to the SSA and the pubic actually helped us all by offsetting the draconian effects of Reagan/Bush tax cuts.

Now the GOP wants to color the problem as Social Security. GOP, Social Security was your benefactor. The American people paid, and now we are here to collect. We are here to collect, deadbeats.