A recent episode involving Social Security shows how difficult
real deficit reduction really is. The day before the State of the
Union address, liberal activists held a conference call to
inoculate America’s largest single program from inclusion in any
deficit reduction discussion. The left’s unilateral attempt to
remove the nation’s largest spending program from even a discussion
begs the question: What is there to discuss?
The reason liberals wanted to preemptively remove Social
Security from a deficit dialogue is that the President’s Deficit
Reduction Commission last year inserted the program into it.
Although the Commission’s final recommendation was not formally
adopted — although approved by a majority — it did include a
proposal to hike Social Security’s qualifying retirement
age.
Responding as though Caesar had crossed the Rubicon, the
left was not about to let its entitlement empire fall so easily.
The Economic Policy Institute’s Ross Eisenbrey stated: “We are
worried that the president will give encouragement [to Congress] to
tackle Social Security now in an atmosphere of deficit reduction.”
Shocking.
Of course, doing so would be the very audacity of
accuracy. Social Security is contributing to the federal
government’s deficit. That began last year when its tax revenues
fell short of its outlays by $69 billion. The nonpartisan
Congressional Budget Office spelled out its historic element: “In
2010, for the first time since the enactment of the Social Security
Amendments of 1983, Social Security’s annual outlays will exceed
its annual tax revenues…”
Until then, Social Security had produced surpluses, which
helped reduce the overall deficit and largely insulated Social
Security itself from budget scrutiny. Now Social Security has begun
to live on its trust fund… literally. Because it had run surpluses,
a trust fund was created on the federal books and credited with
surpluses, which then were credited with interest. Of course, these
“balances” never existed except on the federal ledger and never
“earned” anything — at least as “earning” is understood outside of
government.
Because the actual surpluses were simply spent and no
additional resources were actually created, someone now has to foot
the bill for the difference between the program’s annual tax
revenues (real resources) and its outlays (real spending). While
this may be offset on paper with IOUs, the result is still real
federal deficits. Hence, Social Security joined the ranks of
other hoi polloi programs last
year.
Social Security’s pauperization could well be taken as the
federal budget’s last shoe to fall… and keep falling and falling
and falling. According to CBO’s latest budget projections released
last week, Social Security’s outlays will exceed its tax revenue
each and every year from now through 2021. In doing so, it will add
$626 billion to the federal deficit from 2010 to 2016 and $1.361
trillion from 2010 to 2021.
The long-term shortfall is even worse — even including
the program’s IOU balances. CBO stated in its July 2010 Social
Security report: “[We estimate] the 75-year actuarial balance to be
-0.6 percent of gross domestic product.… In other words, to bring
the program into actuarial balance over the 75 years, payroll taxes
would have to be increased immediately by 0.6 percent of GDP and
kept at that higher rate…”
Yet despite the program’s true nature of simply using
today’s taxes to pay today’s obligations, its current tax revenue
shortfall, and its projected long-term deficits — even including
its IOUs — the Strengthen Social Security Campaign’s Nancy Altman
stated: “By sweeping Social Security into a discussion of the
deficit the President fails to recognize what most Americans know:
Social Security has not caused the deficit and should not be
cut.”
That so glaring a problem can not only be ignored but
disputed, shows how hard getting the federal government’s deficits
and debt under control will be with the far left at the table. As
enormous as the absolute problem is, the denial of it is even
greater.
Such positions speak volumes about the left’s proposed
solution to a problem that apparently only the rest of us see. At a
time when America is running record deficits and debt because of
excessive spending, what is needed is
more spending.
Social Security’s past situation was akin to a homeowner
claiming he would never need a new roof, merely because it was not
leaking at the time. Now with water pouring in, most people would
call a roofer. Yet apparently the left now would have us believe
the problem is not the roof, but the rain. And the solution is that
the rest of us not only call the roofers, but pay them as
well.
