The Washington Post's big Sunday piece on Social Security solvency starts from the premise that the program has crossed a dangerous line. Since 2009, the program has paid out more in annual benefits than it is raising each year in taxes, effectively meaning that the program's benefits are relying partly the $2.6 trillion in bonds in the program's "trust funds" to cover checks to senior citizens.
Here's the lead of the report by Lori Montgomery:
Last year, as a debate over the runaway national debt gathered steam in Washington, Social Security passed a treacherous milestone. It went “cash negative.”
For most of its 75-year history, the program had paid its own way through a dedicated stream of payroll taxes, even generating huge surpluses for the past two decades. But in 2010, under the strain of a recession that caused tax revenue to plummet, the cost of benefits outstripped tax collections for the first time since the early 1980s.
Now, Social Security is sucking money out of the Treasury. This year, it will add a projected $46 billion to the nation’s budget problems, according to projections by system trustees. Replacing cash lost to a one-year payroll tax holiday will require an additional $105 billion. If the payroll tax break is expanded next year, as President Obama has proposed, Social Security will need an extra $267 billion to pay promised benefits.
The article makes great efforts to confuse readers about the status of the trust fund. It tells readers:
"The $2.6 trillion Social Security trust fund will provide little relief. The government has borrowed every cent and now must raise taxes, cut spending or borrow more heavily from outside investors to keep benefit checks flowing."
This is the same situation the the government faces when Wall Street investment banker Peter Peterson or any other holder of government bonds decides to cash in their bonds when they become due. In such cases it "must raise taxes, cut spending or borrow more heavily from outside investors." The Post's reporters and editors should understand this fact.
The New York Times' Paul Krugman, like Baker, sees not inaccuracy in this formulation of Social Security's finances, but intent to "kill the program."
In legal terms, the program is funded not just by today’s payroll taxes, but by accumulated past surpluses — the trust fund. If there’s a year when payroll receipts fall short of benefits, but there are still trillions of dollars in the trust fund, what happens is, precisely, nothing — the program has the funds it needs to operate, without need for any Congressional action.
Alternatively, you can think about Social Security as just part of the federal budget. But in that case, it’s just part of the federal budget; it doesn’t have either surpluses or deficits, no more than the defense budget.
Both views are valid, depending on what questions you’re trying to answer.
What you can’t do is insist that the trust fund is meaningless, because SS is just part of the budget, then claim that some crisis arises when receipts fall short of payments, because SS is a standalone program. Yet that’s exactly what the WaPo claims.
Both The Post story and Baker's piece are worth a read. The case that the paper deliberately misconstrues the facts is an incomplete one — and can't be going over well with The Post. But the overall lack of clarity and understanding about one of the nation's most cherished social programs is alarmingly persistent, especially in what is supposed to be an era of budget and deficit hawks.
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