Sunday's New York Times, focused on national deficits, introduces its section on Social Security with the statement that, "Social Security is projected to run a deficit by 2015..." There follows a menu of Social Security proposed reductions to avert such a dreadful outcome. You'll be relieved to hear that the statement is incorrect. But, then you'll be concerned that the media, deciders and opinion makers and the public, used to depending upon the Times for solid information, will consider the budget debate with that major distortion in mind.
The facts: In 2015, the Social Security trustees' latest report projects program outlays will exceed Social Security payroll tax revenues slightly. But Social Security has two other dedicated income streams. In 2015 one source -- taxes on the benefits received by high earners -- just about cancels that difference. The third stream -- interest on money borrowed by the Treasury from the Social Security Trust fund -- would add $154 billion in revenues. So, official projections for 2015 show Social Security generating a surplus of $151 billion.
Some pooh-pooh that interest owed by Treasury as IOUs. But IOUs (more formally called "bonds" or "debt obligations") are what public and private trust funds hold. And among those securities, U.S. Treasury obligations are bought by other nations' central banks and private investment funds because U.S. Treasuries are so highly valued around the world. Those Treasury obligations came into the Social Security Trust Fund because, since 1983, Treasury borrowed the portion of Social Security income left over after the program paid all benefits when due. Those surpluses and the taxes from high earners were a purposeful part of the 1983 Social Security legislation, designed to provide a long-term cushion for the program and to assure the public that Social Security was socking away funds to supplement payroll tax revenues when needed.
Those surpluses now total some $2.5 trillion and will grow to about $4.2 trillion by 2024 enabling the payment of full benefits through 2037. .
Social Security participants have already paid for those benefits. So any Treasury borrowing is, not to pay for Social Security, but to repay the borrowing from the Social Security trust fund; that was used largely to pay for the unfunded Iraq and Afghanistan wars and offset the Bush tax cuts. But for that borrowing, income and corporate taxes would have been higher and/or U.S. payments for non-Social Security activities would have been smaller.
It would seem fair that the beneficiaries of those wars -- certainly not the men and women who waged them, nor their families -- but rather the contractors who made out like bandits (which some were) and the general public and corporations spared higher taxes -- should replace those funds. That's an entirely different allocation of future burdens than cutting Social Security as so widely proposed in discussions of deficit reduction.
The New York Times' error was not some minor or a technical glitch but a mistake that distorts the whole exercise the Times put before its readers to decide how to reduce projected deficits.
Polls repeatedly show popular support for modest increases in the payroll tax, proposals absent from the Times budget exercise. One very gradual change starting in 2015, after the recession is over, would increase the payroll tax by one-twentieth of one percent for both employees and employers for twenty years. That boost would banish more than two-thirds of Social Security's small long-term shortfall. In combination with raising the taxable amount of wages to its historic level, would make Social Security solvent for 75 years. Both poll very favorably.
Preserving, and indeed improving, Social Security should be a top domestic priority. Social Security, the nation's most effective anti-poverty program, is the mainstay of our retirees, providing the largest source of retirement income. The recession decimated private pensions and savings devices like 401(k)s and IRAs, making Social Security even more vital to seniors, the disabled and their families -- over 50 million people.
It makes no sense for Republicans to adamantly insist on extending the Bush tax breaks for the wealthiest Americans, at the cost of $4 trillion, while reducing the most important income support program for the rest of the population. And despite reassurances that current Social Security recipients would be unaffected, reducing cost-of-living adjustments, COLA, starting in 2012, is a central feature of such reductions We should not permit the specter of future deficits to further distract our attention and efforts from the most urgent problems millions of Americans already face -- the lack of jobs and work income, the loss of millions of homes to foreclosure, and the huge but avoidable non-benefit costs of our health care non-system.