I disagree with Hightower.

What you will find here is: a centrist's view of current events;
a collection of thoughts, arguments, and observations
that I have found appealing and/or amusing over the years;
and, if you choose, your civil contributions which will make it into a conversation.

He not busy bein' born, is busy dyin'. - Bob Dylan

Please refer to participants only by their designated identities.

suggestion for US citizens: When a form asks for your race, write in: -- American

Thursday, March 17, 2011

Factcheck should check facts

As someone who is very concerned by the fiscal situation I am especially distressed when someone overstates the problem and, thereby, undermines the credibility of the problem and the efforts of those who are trying to deal with it.

A primary question in the discussion below is whether the money paid into Social Security was borrowed by the Federal Government and is now in a trust fund or whether the money was simply "taken by the government and spent on something else." The answer to that question is determined by whether the SS trust fund is considered to be part of the national debt. If the SS money is part of the national debt then it was borrowed. If the SS money is not part of the national debt it was "taken." In fact, the SS money is part of the national debt.

The following is from an article in FactCheck by its director Brooks Jackson.

After opening with: "Some senior Democrats are claiming that Social Security does not contribute "one penny" to the federal deficit. That’s not true. The fact is, the federal government had to borrow $37 billion last year to finance Social Security, and will need to borrow more this year. The red ink is projected to total well over half a trillion dollars in the coming decade."

Much further down in the article the author admits:

"When Lew says (in another article)Social Security is "entirely self-financing," he refers to the trust funds that have built up assets of more than $2.5 trillion over the years. That’s what the rest of the government has borrowed and spent on other things. Those trust funds and the future interest payments will keep benefits funded at promised levels for years to come, it’s true."

But then he goes on to say: "But unless the government raises taxes or cuts other spending substantially, the government will need to borrow more from the public to finance its obligations to the trust funds."

This is a mindboggling distortion. It will not be a new obligation to pay those benefits. The US owes SS this money. When it pays those things it will be reducing its obligation to the SS trust fund. It will be borrowing from one source to pay a previous loan from another source. It does this every day when it sells some treasury bonds and retires (pays off) others. IT WILL NOT CHANGE THE BOTTOM LINE IN THE AMOUNT OF THE NATIONAL DEBT.

So Harry Reid is right when he says that these payments will not increase this year's deficit.

When Jackson says in the opening paragraph that the US borrowed 37 billion to finance SS it is flatly not true. They borrowed 37 billion to pay off 37 billion of what they owed to SS.

Now a couple of observations: Long term there are still some SS problems.
When the government shifts to borrowing from outside of SS it will put pressure on the bond market and perhaps serve to push interest rates up.

Finally, to those who think that the government shouldn't have borrowed the SS money in the first place, I would say, "What else would you have SS do with its money?"

Added 3-18-11 Charles Krauthammer disagrees.

No comments:

Post a Comment