Fact-checkers Flop Explaining How Social Security Affects Deficit

[TampaYankee]

Fact-checkers Sputter And Flop Attempting To Explain How Social Security Works, Affects Deficit

Jason Linkins and Ryan Grimm -- The Huffington Post

A gaggle of fact-checkers recently attempted to bring clarity to the question of whether Social Security adds to the deficit. Much as they did during the campaign, the fact-checkers have instead confused what is in fact quite a simple issue.

Social Security, by law, does not add to the deficit. It is not a driver of long-term debt.We’ve been over this. The reason no one can get it right is because here in this season of the fiscal cliff, no one is getting anything right. It’s a full-on headless chicken panic. Everyone needs to calm down, about a lot of things, but especially about Social Security, which does not even have to come up during the “fiscal cliff talks” because it’s totally irrelevant to the situation and will only complicate everything needlessly.

Sweet nutty, here comes the Associated Press, relying on a familiar line of reasoning, arguing that the program does in fact add to the deficit because the government "spent that money on other programs, reducing the amount it had to borrow from the public, including foreign investors...In return, the Treasury Department issued special bonds to Social Security. The bonds are now valued at $2.7 trillion. They are accounted for in two Social Security trust funds, one for the retirement program and one for the disability program. The bonds pay interest like other Treasury notes and are backed by the full faith and credit of the U.S. government."

Social Security adds to the debt if it spends more money than it takes in, so let’s look at how that’s doing in the most recent fiscal year.

Okay, then!

To say that Social Security added to the deficit because it handed money to the federal government is the same as saying that foreign investors or grandmothers or pension funds who bought U.S. bonds added to the deficit. Besides, what did the AP think the U.S. government would do with the money? Invest it in tech stocks? Hide it in a mattress? Replenish its gold supply? Of course it spent the money.

Glenn Kessler relies on similarly silly logic. "This looks like surplus, worth about $36 billion after rounding," he says of Social Security's surplus. "But notice that fully $110 billion of the income was interest on Treasury securities. But that interest is simply paid with new Treasury bonds." By Kessler's logic, China is running a massive, major, breakneck deficit because it holds Treasury bonds, and the only way to pay those off is with new bonds. Why it's supposed to matter to China or to Social Security how its bonds are paid off isn't made clear by Kessler.

But more importantly, how does Kessler know that the only way to pay that interest is to borrow more? He doesn't know that. In fact, the Treasury has many means at its disposal to pay interest other than through borrowing -- such as, I don't know, taxing people?

Instead of confusing itself and its readers, the AP and the rest could simply have referred to a 2011 Senate hearing, chaired by Max Baucus (D-Mont.), during which two of the foremost Social Security experts -- one liberal, one conservative -- answered the question.

Nancy Altman, head of Social Security Works, which opposes cuts to the program, read the law to the lawmakers. "The law is unambiguous. So let me read it: Social Security ‘shall not be counted for purposes of the congressional budget,'" she read.

"Social Security is not part of the budget. So that $14.3 trillion debt that we are at, the limit that you are going to have to raise -- or at least have to vote on whether to raise in a few months -- if you cut Social Security, that $14.3 trillion does not change. It does not put any room into the debt limit."

Baucus turned to Charles Blahous, a Social Security trustee who is also with the conservative Hoover Institution. "Do you agree with that, Dr. Blahous?"

"I do agree with that," he said.

[The full exchange between Baucus, Blahous, and Altman is below.]

Let’s talk once again about Social Security solvency, shall we? The way the Social Security works is that current workers make contributions, from their paychecks, to current retirees. (This arrangement is often forgotten about -- too many people have been led to believe that they are “paying in” to their own Social Security savings, and they aren’t -- those contributions will be made by a younger generation.) The solvency of Social Security is at risk if the following two things happen: 1) the number of recipients overwhelmingly outnumber the number of contributors and 2) American lawmakers forget how to do math.

What we popularly refer to as the “Social Security solvency crisis” refers to a large population of Americans (the “Baby Boom Generation”) entering their retirement years at a time when the number of contributors is less than ideal. Hopefully, however, someone at some point is going to remember how to solve a simple arithmetic problem, raise or remove the income caps on contributions (right now, incomes that exceed $110,100 are not subject to contributions beyond that amount), and then we will never have to worry about Social Security solvency again.

And let's not forget that when Ronald Reagan and Tip O'Neill reformed Social Security -- as we're constantly reminded they did -- it's more than possible they were aware of the Baby Boom generation. If they were blessed with eyesight, they could look around and see them for themselves. They were older than 30 by then, after all. In fact, one of them, Nancy Altman, actually worked on the commission that reformed Social Security. So we asked Altman, a baby boomer, if she was aware in the 80s that she existed. She said that she was -- and that other people were aware, too. So they took the baby boom into consideration. That's why it's solvent late into the 2030s.

Knowing this makes all the hand-wringing from fact-checkers all the more dumb. Calm down and learn the subject guys, and do try to keep on task -- discussing matters that are actually germane to the fiscal cliff while we are having to talk about it every single day.

See the original article including the Baucus, Blahous, and Altman exchange at:

http://www.huffingto...hp_ref=politics

[TampaYankee]

This is not rocket science folks. There is no secret about the laws that set up Social Security and how it is funded. Yet all this gobbledygook that has been perpetuated on and on by supposed pros and experts is cloaked in ideology or worse plain stupidity. The above article points that out.

Just one more example of how the Press, including the fact checkers, are incompetent at informing the people about the facts relating to political issues. Is the Press full of incompetent boobs? There used to be a bar for competency for journalists. Not an official bar but a bar that separated professional news operations from the scandal sheet publications which were given no credence by either the main stream press or political, business, and legal professionals. Those days are gone!!