KUFM / KGPR
T. M. Power
Is the Social Security Trust Fund a
Politically Crafted Mirage?
Ideologically-driven neo-conservatives claim that the Social Security system is in imminent crisis because it is built around a phony financial system of smoke and mirrors. Social Security, they tell us, is financially fatally flawed. As with all public programs in the neo-conservatives eyes, Social Security simply has to be abandoned and replaced with private savings accounts.
The neo-con financial sham argument focuses on the Social Security Trust Fund. This trust fund, it is claimed, is a joke that really contains no real assets. That is an important issue because although the trust fund will not be drawn down to zero for 40 or 50 years, the Social Security system will have to begin drawing on that trust fund in only a little over a decade. If that trust fund really does not exist, in just over a decade, the Social Security system will not be able to make all of its payments to retirees.
The Trust Fund exists because Social Security taxes have been generating revenues at a rate far in excess of what is needed to support existing retirees. That will continue through at least 2018. Then, if there is no change in the taxes supporting Social Security, the Trust Fund will reach a peak and begin to be drawn down, reaching a zero balance 40 or 50 years in the future, depending on who is doing the calculation. The issue of the Trust Fund is important because it determines whether the Social Security system faces a crisis in a dozen years or almost a half-century from now. A problem that we have 50 years to correct is unlikely to be called a current crisis by anyone. But a complex trillion dollar problem that will be upon us in a little over a decade might well deserve that crisis label.
Since the Trust Fund only holds US government securities, critics claim that it is a sham. The government merely holds IOUs written to itself, something critics claim are merely worthless pieces of paper. When Social Security begins to draw on the Trust Fund a dozen years from now, the government will either have to raise taxes or increase its borrowing in order to meet its Social Security obligations. It is for that reason that the neo-conservative critics claim that Social Security will begin to collapse in just 13 years.
This view of the
Trust Fund is incomprehensible in its confusion. While the rest of the world’s
governments and businesses hold US government securities as the most reliable
and liquid form of wealth available, the neo-conservatives are trying to tell
us that our government’s promise to pay is worthless. This is especially ironic
since it is these very neo-conservatives who are driving federal borrowing
higher and higher with the federal deficits created by their tax cuts and
spending on foreign military adventures. Why are people, businesses, and governments
around the world buying and holding all that
If the
neo-conservatives themselves had not borrowed from the Social Security Trust
Fund part of the money they needed to fund their various tax cuts and military
schemes, they would have had to borrow it from other sources across the country
and around the world. To pay interest on that external debt and to pay it off
when it came due, the US government would have had to either raise taxes or
borrow money again, just as it will have to do when the Social Security Trust
Fund or, say, any senior citizen for that matter, begins to be sell off the
government securities they own to fund retirement. It does not matter who owns
the debt; the
Of course the
spending frenzy and deficit madness of the neo-conservatives is imposing
a burden on future generations. That debt, including the obligations to Social
Security, will have to be paid. But the problem is not with the Social
Security Trust fund. It is the federal deficit spending being carried out by
the neo-conservatives.
Unless you believe that the US government, after 215 years of paying its debts, is about to become a deadbeat, this nation will be as capable of meeting its financial obligations to the Social Security Trust Fund as it has over the centuries in meeting its other financial obligations.
The question is not whether we can meet those obligations. We obviously can. It is a matter of whether the neo-conservatives will convince us to abandon the social security safety net we have successfully provided to our elderly, our widows, our orphans, and our disabled over the last 70 years. The federal government’s abandonment of those people in need may be a noble objective to the neo-cons, but it is really nothing short of public ethical backsliding that will tear at the nation’s social fabric upon which we all ultimately rely.