Obama’s Social Security Cover-Up, as the Media Snoozes

USA Today ran a sensible editorial a couple of weeks ago calling for the Obama administration to stop cravenly caving to groups like the AARP, Congressional Democrats, and increasingly, liberal/progressive commentators who claim that Social Security isn’t really a budgetary problem. The fiction: since Social Security has received more from taxpayers than it has had to pay out since 1983, the Social Security Trust Fund has built up a whopping $2.5 trillion, guaranteeing enough to meet the program’s obligations ( despite yearly deficits, now that the population is senior-heavy) until the money is scheduled to run out in 2037. The truth: the trust is empty. Congress had raided it regularly for non-Social Security spending, so now the yearly Social security deficits (37 billion dollars last year, a projected 45 to 57 billion in 2011, and a half trillion total in the decade underway) are putting a direct burden on the already reeling Federal budget.

Good for USA Today: this is responsible, public-spirited journalism. the public has heard so many lies from politicians and elected officials about Social Security that it is thoroughly misinformed and confused, and an informative, unbiased editorial from the nation’s most read newspaper is exactly what is needed. But the Obama administration couldn’t handle the truth, so it trotted out White House Budget Director Jacob Lew, who denied that there was a problem, writing in response…

“…Social Security benefits are entirely self-financing. They are paid for with payroll taxes collected from workers and their employers throughout their careers. These taxes are placed in a trust fund dedicated to paying benefits owed to current and future beneficiaries.
When more taxes are collected than are needed to pay benefits, funds are converted to Treasury bonds — backed with the full faith and credit of the U.S. government — and are held in reserve for when revenue collected is not enough to pay the benefits due. We have just as much obligation to pay back those bonds with interest as we do to any other bondholders. The trust fund is the backbone of an important compact: that a lifetime of work will ensure dignity in retirement. According to the most recent report of the independent Social Security Trustees, the trust fund is currently in surplus and growing. Even though Social Security began collecting less in taxes than it paid in benefits in 2010, the trust fund will continue to accrue interest and grow until 2025, and will have adequate resources to pay full benefits for the next 26 years.”

Well, that’s a relief. Whew! Boy, you can’t even trust USA Today! Luckily, since President Obama promised—pledged!absolute transparency when he was running for office, we know he wouldn’t let his staff intentionally mislead us with deceitful doubletalk. Why, that would be a complete betrayal of his guarantee that he would  make “transparency…a touchstone of this Presidency”! And throwing dust in the public’s eyes certainly isn’t consistent with that. So Lew must be telling the truth.

Except that he isn’t. Oh, he did tell the truth about this problem once upon a time, before he joined Barack Obama’s supposedly transparent administration, when he prepared a 1999 report as part of President Clinton’s budget team, explaining the real situation in Social security among other budget-related matters. The OMB report was not a PR document, but an end-of-term state of the budget assessment without apparent spin, smoke, or mirrors.Clinton’s administration had eliminated the deficit, so there was no motivation to lie about the problems ahead. And Lew wrote that the trust fund balances were just a bookkeeping  fiction:

“They do not consist of real economic assets that can be drawn down in the future to fund benefits….The existence of large trust fund balances, therefore, does not, by itself, have any impact on the government’s ability to pay benefits.”

So the Obama White House’s claim now, articulated by the same Jacob Lew, is an intentional deception. Think of Homer Simpson raiding the family’s “mortgage money”—a jar stuffed with dollars and coins—for some idiotic scheme of his, and replacing the money, as is his practice, with an I.O.U. Lew, the 2011 “transparency is our touchstone’ edition, is saying that those I.O.U.’s are as good as cash. But Homer, like the Federal government, is constantly broke. The only way that jar will be able to pay the mortgage is if he finds more money to pay back the debt. Arguing, as Lew does now, that a jar full of I.O.U.’s has actual assets that are “growing” is dishonest wrong—which is why he wrote exactly the opposite in 1999.

Now there are two critical news items here. One is that Social Security is not as solvent as the White House says it is, and the other is that Barack Obama’s White House is lying as matter of policy. The first is important as the public tries to make a decision about whose policies it should support in the budget battles to come, and the other is important as the public decides whether it can still trust Barack Obama. Both are vital to the national interest, and yet most of the news media is disclosing neither.

But is worse than that. The mainstream media is leaving the ethics side of the story to conservative columnists—the old trick it has used with increasing and disgraceful frequency during the Obama years. This pigeon-holes legitimate stories as partisan spin, you see, beacuse we all know that conservative are out to get Obama and that they warp the facts. So, for example, where does the Washington Post’s pages reveal Lew’s disgraceful flip-flop, and the fact that the Obama administration is trying to argue that Homer’s billions of I.O.U.’s are as good as money in the bank? On the op-ed pages, in the words of the arch-foe of progressives, the anti-Paul Krugman, the much-hated conservative columnist Charles Krauthammer, who wrote:

“…If Lew’s claim were just wrong, that would be one thing. But it provides the intellectual justification for precisely the kind of debt denial and entitlement complacency that his boss is now engaged in….Lew acknowledges that the Social Security surpluses of the last decades were siphoned off to the Treasury Department and spent. He also agrees that Treasury then deposited corresponding IOUs — called “special issue” bonds — in the Social Security trust fund. These have real value, claims Lew. After all, “these Treasury bonds are backed by the full faith and credit of the U.S. government in the same way that all other U.S. Treasury bonds are.”

Really? If these trust fund bonds represent anything real, why is it that in calculating national indebtedness they are not even included? We measure national solvency by debt/GDP ratio. As calculated by everyone from the OMB to the CIA, from the Simpson-Bowles to the Domenici-Rivlin commissions, the debt/GDP ratio counts only publicly held debt….Why? Because the intragovernmental bond is nothing more than a bookkeeping device that records how much one part of the U.S. government (Treasury) owes another part of the same government (the Social Security Administration). …Invoking the “full faith and credit” mantra for those IOUs in the trust fund is empty bluster. It does not change the fact that, as the OMB itself acknowledged, those IOUs “do not consist of real economic assets that can be drawn down in the future to fund benefits.” Yet Lew continues to insist that these “special issue” trinkets will pay off seniors for the next 26 years.
“…Nonsense. That money is gone with the wind….Consider: If Treasury had borrowed twice as much from Social Security in the past — producing twice as many IOUs sitting in the lockbox — would this mean the trust fund is today twice as strong? Solvent for 50-some years instead of just 26? Of course not. The trust fund “balances” are mere historical record-keeping. As the OMB itself admitted, future payouts will have to be met by future taxes and future borrowings — or by Social Security reform that, by reducing benefits, makes such taxing and borrowing unnecessary…”

There is no third alternative. There is no free lunch. And there is nothing in the lockbox.

Krauthammer is easy for partisans and Democratic legislators to dismiss, but Lew’s candor in 1999 is a smoking gun. Social Security does contribute to the deficit and is facing insolvency. The Obama administration is lying to the public about it, as blatantly as any previous administration, and in complete defiance of the transparency pledge. And much of the news media is either asleep at the switch, or assisting in the deception.

 

2 thoughts on “Obama’s Social Security Cover-Up, as the Media Snoozes

  1. That’s about as good a summation of the Social Security conundrum as I’ve seen, Jack. Like many, I wasn’t aware of Jacob Lew’s remarks. If I read them before, I probably just dismissed them as “more of the same”. Most people are aware of at least some of the facts you presented. People who keep track should know most or all.

    But that this is not a burning topic today on the front page of every newspaper in the country is unconscionable. Another major budgetary crisis- be it due to the deficit overruns, the threat of inflation, lost revenue through economic stagnation or a combination of these- could be the factor that tips the economy right back into a major recession. As you and many have said over time, a “trust fund” box stuffed with IOU’s is not a viable situation.

    Any further taxation at this point would likely result in REDUCED revenues, as it would further hamper economic confidence… which has already declined dramatically over the past month. One little “nudge” in the wrong direction could collapse the rickety props on which the economy now rests. Will Social Security’s insolvency prove to be this? This also adds further credibility to those on the Right who claim that the press has sold its leftist soul to Obama and now cannot help but cover for him for the sake of their OWN viability.

    • Any further taxation at this point would likely result in REDUCED revenues, as it would further hamper economic confidence… which has already declined dramatically over the past month. One little “nudge” in the wrong direction could collapse the rickety props on which the economy now rests.

      Citation needed.

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