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.