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All this Super Congress, deficit reduction talk obscures the simple fact that Social Security does not contribute to the deficit.

Did I mention, Social Security does not contribute to the deficit?  Well it is true, Social Security does not contribute to the deficit.

I will repeat:  Social Security does not contribute to the deficit.

Below the fold, some other interesting things about Social Security

First, Social Security is wildly popular.  Even with Republicans.

Second, Social Security saves lives.

Third, in case I forgot to mention,

SOCIAL SECURITY DOES NOT CONTRIBUTE TO THE DEFICIT.

Lastly from Bruce Webb

 

Social Security has three sources of income And two main cost sectors.

Social Security income is comprised of payroll contributions (FICA), a credit for taxes on higher income beneficiaries' benefits, and interest on accumulated Trust Fund assets. Almost all of its cost is in benefits paid with Admin making up just under 1% of cost.

Under current rules Social Security is officially "off budget" even as OMB and CBO report a combined number that the MSM refers to as THE budget deficit or surplus.

For this calculation the budgeteers take ALL Social Security cost and subtract it from ALL income to generate the "off budget" surplus number which is then combined with the "on budget" (basically everything else) deficit to get the top line number used by the media.

By this measure Social Security ran and is running surpluses and will continue to for at least a dozen years. And as a result Trust Fund balances will continue to increase. On the other hand some $120 billion of that annual income is represented by interest, a portion of which started being taken in cash in 2010. Not all by a long shot, Social Security is still racking up surpluses. On the other hand income excluding interest, something which CBO confusingly calls 'primary surplus/deficit', fell some $46 billion behind cost.

Which launched a battle of words. But if you look up 'deficit' as defined by OMB Social Security is not only not contributing to it but running a $60 billion plus surplus score.

And yes it is confusing as hell, I have been working this for 14 years now and still learning stuff each year.

That just about says it all.  

So remember, when talk of deficit reduction comes up, never forget to drive home the point.  

Originally posted to Plubius on Tue Nov 22, 2011 at 11:16 AM PST.

Also republished by Social Security Defenders.

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Comment Preferences

  •  The Social Security Trust Fund represents $2.5T (0+ / 0-)

    of the federal deficit.    However, Republicans are doing their best to default on that debt obligation, so that they can keep the long-term capital gains tax rate at 15%.

    The GOP has become the "Jerry Springer" party.

    by ConcernedCitizenYouBet on Tue Nov 22, 2011 at 11:41:26 AM PST

    •  Debt and deficit not the same thing (5+ / 0-)
      Recommended by:
      vcmvo2, Plubius, nextstep, BradyB, denise b

      Nor is debt just a sum of deficits.

      Under federal budgeting rules Social Security scores as a surplus for 'unified budget' purposes (the top level number always reported as THE deficit in the MSM anytime it's income from all sources including interest on the Trust Fund exceeds total cost. Which happened last year to the tune of more than $60 bn even as the system was cash flow negative (that is taking $46 billion in interest and principal. Redemptions in the form of cash).

      Moreover while Social Security has a 'scheduled benefit' going forward and the Trustees do produce a number for what is called 'unfunded liability',or the gap between projected income and projected cost under the schedule, this is not under the law a 'liability' Social Security having no legal obligation to preserve the schedule if it doesn't have assets to do so. Nor does it have any ability to borrow money, under current law the effect of Trust Fund exhaustion would be a reduction of benefits to the level allowed by then current income, a level currently projected to be 77% of the Schedule come 2036.

      But that 23% gap is not a 'deficit', not legally, something that was nailed down in a Supreme Court case Flemming v Nestor more than 50 years ago.

      Social Security does not contribute to the deficit. It can't.

      Now Trust Fund assets are carried on the books as a big component of Public Debt and Debt Subject to the Limit (slightly different measures). But as mentioned debt and deficits are not related in the one to one way many people would think.

      •  Well things get a little murky after 2023 (1+ / 0-)
        Recommended by:
        Plubius

        Under current projections Trust Fund assets will peak and then start to contract in 2023. On my reading of the Federal Budget Process and Concepts section of the Analytical Perspectives on the Budget (the companion document to the President's Budget) this might still not score as a deficit.

        On the other hand two of the most high powered budget economists in DC, at least one name you would recognize, tell me I got that piece fatally wrong. Then again those guys sometimes seem to be using a different language and logic from mere mortals, what look like accounting fictions to me have an odd reality in their world. Of course by training I am a medieval Celticist while those guys give advice to Presidents, if push comes to shove they are probably your best bet.

        But at a minimum Social Security has not contributed to the deficit and even under those guys formulation won't until at least 2023.

        •  What assumptions (0+ / 0-)

          does that projection make? What does it assume about the unemployment rate? What does it assume about wages.

          If we lower unemployment and see a rise in average wages SSTF will be taking in more money.

          They say a little knowledge is a dangerous thing, but it's not one half so bad as a lot of ignorance. Terry Pratchett

          by Toon on Tue Nov 22, 2011 at 07:06:56 PM PST

          [ Parent ]

          •  5.5% unemployment, 1.2% real wage (0+ / 0-)

            The Trustees provide three projections one of which 'Low Cost' shows a fully funded system with no programmatic changes in retirement age or the benefit formulae. Shorthand numbers for solvency are 4.5% unemployment and 1.5% real wage though there are any number of demographic variables particularly around immigration.

            And forgive me for being une fleur sensitif but there was the faintest eau de 'just making shit up' about your challenge, asif I wouldn't have answers to your questions.

            But trying to keep this on a friendly basis yes the long term solution for Social Security is more jobs at better wages, the resulting bigger retirement checks not offsetting the overall increased revenue and subsequent progressive distribution downwards.

      •  I meant to say "debt," not "deficit." (1+ / 0-)
        Recommended by:
        Bruce Webb

        However, with that said, Republicans want to default on the $2.5T of public debt that is owed to the SSTF.  That debt obligation means that general revenues will have to rise when benefit outlays exceed FICA receipts (or deep cuts in non-Social Security benefit spending are going to have occur).  If general revenues are too low to cover the debt obligation without borrowing, then we get into a situation were we exchange one debt for another, which, as you said, is not deficit spending.   However, that fact will not keep Republicans from spinning it that way.   In their eyes, the public debt held by the SSTF is not real.

        The GOP has become the "Jerry Springer" party.

        by ConcernedCitizenYouBet on Tue Nov 22, 2011 at 03:32:49 PM PST

        [ Parent ]

        •  Cool. (0+ / 0-)

          In Fiscal Year 2000 the General Fund was in surplus, Social Security was in surplus and yet the combined effect of those two accounts in isolation was to increase Public Debt. Not by a lot but there you go.

          The Social Security Trustees present three models for Social Security going forward. The most positive one, the one that would have Social Security wildly OVER funded, leaves the US $110 TRILLION in debt in year 75. The numbers just don't move in the way you would expect them to. Any rational person would think you just total top line deficit numbers year over year and come up with increases in Public Debt. But NOOOOO!

          And that only begins to touch the weirdness of Federal budget accounting. Those who suggest they only need to treat it like a family or corporation budget don't understand what the eff they are talking about. Oddly the ability to tax AND pay debts in your own paper throw some curveballs. Or maybe better screwballs.

          If your head doesn't hurt after reading Federal Budget documentation you just are not paying attention.

  •  Yes, but.... (1+ / 0-)
    Recommended by:
    Plubius
    Social Security does not contribute to the deficit
    Yes, absolutely correct, but....

    But the purpose of the Social Security Trust Fund as set up in the '80's by the Greenspan Commission was to set aside money for the baby boom retirement surge starting about now.  So far, so good.

    The problem is taxes.  Cash is needed to redeem the bonds and pay their money back to the new retirees.  The cash must come from either increased taxes or more borrowing.  And we know how the Republicans feel about both taxes (against taxing themselves) and their hypocrisy about borrowing (Reagan tripled the debt, GWB doubled it).

    If Social Security benefits can be cut for any mendacious reason whatsoever, the bonds don't have to be redeemed.  And the rich get richer.

  •  Annoying Diary (0+ / 0-)

    Here I thought finally someone was going to explain the slogan "Social Security does not contribute to the deficit" and all this diary does is repeat it. Just because a diarist often has something worthwhile to say doesn't mean he or she should always be recommended (as this diary is as I write this). The first comment was more substantive, though I confess I found it hard to understand.

    This diary is just sucking oxygen from the air.

    •  You got me (1+ / 0-)
      Recommended by:
      Chi

      I just repeat a slogan.  One that is not being said enough.

    •  Social Security has three sources of income (4+ / 0-)
      Recommended by:
      Plubius, Chi, BradyB, Native Light

      And two main cost sectors.

      Social Security income is comprised of payroll contributions (FICA), a credit for taxes on higher income beneficiaries' benefits, and interest on accumulated Trust Fund assets. Almost all of its cost is in benefits paid with Admin making up just under 1% of cost.

      Under current rules Social Security is officially "off budget" even as OMB and CBO report a combined number that the MSM refers to as THE budget deficit or surplus.

      For this calculation the budgeteers take ALL Social Security cost and subtract it from ALL income to generate the "off budget" surplus number which is then combined with the "on budget" (basically everything else) deficit to get the top line number used by the media.

      By this measure Social Security ran and is running surpluses and will continue to for at least a dozen years. And as a result Trust Fund balances will continue to increase. On the other hand some $120 billion of that annual income is represented by interest, a portion of which started being taken in cash in 2010. Not all by a long shot, Social Security is still racking up surpluses. On the other hand income excluding interest, something which CBO confusingly calls 'primary surplus/deficit', fell some $46 billion behind cost.

      Which launched a battle of words. But if you look up 'deficit' as defined by OMB Social Security is not only not contributing to it but running a $60 billion plus surplus score.

      And yes it is confusing as hell, I have been working this for 14 years now and still learning stuff each year.

      •  Thank you for your explanation (0+ / 0-)

        This is my simplistic understanding:

        1. Each working person contributes a percentage of their of salary as insurance against disability and as means of supporting ourselves in old age.

        2. Currently Americans are paying more into the system than we are being paid benefits. There is interest accruing on this surplus. The federal government has been raiding social security for decades to pay for other things.

        Therefore:

        A. We are not being "given" something paid for by others.

        B. Social Security is solvent for a great many more years than we are told.

        C. This is just one more lie the moneyed class tells us so that we will vote against our own interests.

        •  Social Security is generationally fair (0+ / 0-)

          Though you wouldn't know it listening to the liars.

          The benefit formula is set in a way that each generation of retirees shares in overall wealth growth via productivity improvements. To the degree that you can measure well being in terms of basket of goods it is true that we have it better than our parents (as a child I had to share a bedroom! and we only had one car! and didn't own a TV until I was six!!!-okay not Rwanda or Haiti, we ate good) and those improvements are or were reflected in the benefit formula. Numerically this means that retirees share of GDP per capita remains relatively steady both in good times and bad. For example right now we devote just under 5% of GDP to pay benefits to 17% of the population including the disabled and orphaned children. Over the next few decades this percentage of GDP is projected to go to 5.8% even as the beneficiary population under Social Security Gore's to 25%. Though this works out to about the same share of national wealth per capita it would serve to squeeze billionaires' abilities to buy a helicopter for their mega yacht and so an argument for putting Grandma on a Friskies diet. Shared sacrifice you know.

          But snark aside millenials project to get a bigger basket of goods in retirement than my Mom gets today, unlike Reaganomics, FDRs Social Security does share the wealth and is not in that sense strictly pay as you go. People of a religious bent might even suggest it meets that whole "honor your father and your mother" test laid out in some Book or another.

          And on another topic there has been no "raid". That is more propaganda from the billionaires. Since the Social Security Amendments of 1939 all surpluses in Social Security have been required to be invested in financial instruments guaranteed as to principle and interest by the Federal government. Which in practice means Treasuries. When anyone buys a Treasury Bond or Note the government takes the money and spends it giving you 'only' a promise to repay the loan with interest. This isn't a 'raid' or 'theft', it is called 'buying a bond'.

          Social Security was cash flow negative more years from 1956 to 1982 than not and there was never a question that Trust Fund Assets would be honored. Similarly the Disability Insurance Trust Fund, one of the two we call THE Trust Fund has been taking interest in cash since 2005 and cashing in principal since 2008. And nobody noticed because those were non-events, just the safest investment in the world being exchanged for cash to pay benefits.

          Suggestions to the contrary just being the liars doubling down on their lies.

          Social Security Works. In fact I am loosely affiliated with an organization of that name run by Nancy Altman and Eric Kingson of DC and Syracuse U respectively. Their people do good work on this,let Mr Google be your guide.

  •  This year has reduced Social Security Taxes (1+ / 0-)
    Recommended by:
    Plubius

    In 2011 the employee and employer Social Security tax rates have been cut, while the benefit formulas and payments have stayed the same. The general fund is making up the difference for this year - so this is adding to the deficit this year.

    In addition, the earned income tax credit - which is meant to all or partiality offset the employees security tax increases the deficit through this refundable Income Tax Credit.

    The most important way to protect the environment is not to have more than one child.

    by nextstep on Tue Nov 22, 2011 at 12:55:38 PM PST

    •  Employer share wasn't cut (3+ / 0-)
      Recommended by:
      hubcap, Plubius, Toon

      Though Obama is proposing it.

      He should have just left the whole fucking thing alone. Harvard trained Neo-Libs are a positive menace and not just Yglesias. Sometimes our President is just too clever for our own good, why people think they are fundamentally smarter than FDR was mystifies me.

      Leave Social Security ALOOOONE! Even if or especially if you think you are the smartest guy in the room

  •  Wrong. Social security DIDN'T contribute to the (0+ / 0-)

    deficit until the payroll tax "holiday" bill was passed by CONgress and signed by Obama.  After that, the missing funds were made up from the general fund and therefore contributes to the deficit.

    There is no saving throw against stupid.

    by Throw The Bums Out on Tue Nov 22, 2011 at 01:29:01 PM PST

    •  Maybe (2+ / 0-)
      Recommended by:
      denise b, Throw The Bums Out

      The actual treatment of that $120 billion or so backfill from the General Fund is pretty murky.

      But the payroll holiday was an incredibly stupid move by Team Obama. I belong to a list serv with all the heavy hitters on the Good Guy side of Social Security policy (I think they invited me for amusement purposes, on the principle it is not how well the Dancing Bear dances but that he dances at all) and basically NOBODY thought this a good idea.

      FDR set up a Chinese Wall, Obama breached it. And in the process scrapped a perfectly good anti-poverty program ('Making Work Pay') in favor of a flat out pander to the 50-99%ers. Not bad people mind you, hell I used to be one of them, but Christ almighty a little focus on the 9.2% unemployed might be a nice gesture. AND not playing footsie with Peter G Peterson.

      I don't like to go all FirePup but it is hard to not conclude that first Rahm and now Daley were and are  spawn of the South Side of Chicago Devil. And I don't even now who that is but suspect he had a passing acquaintance with Milton Friedman and Mayor Daley Pere.

      Maybe Chicago deserves the White Sox, kind of a collective penance.

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