The media are slowly beginning to admit that Social Security is running a deficit. I first announced this in early 2010 in my video, Retirement Armageddon. It’s posted here. This information was ignored. Not now.
A recent story in the Washington Post began with this:
WASHINGTON — Now that Social Security is paying more in benefits than it collects in taxes, there is a fierce debate among politicians, academics and advocates about whether those shortfalls are adding to the federal budget deficit.
This means red ink. It means that FICA taxes, called “contributions,” no longer provide a nice official sur0plus to the admitted on-budget budget. This accounting deception has gone on for over 40 years. Deficits in the off-budget deficit are ignored, while the money from Social Security’s “surplus” was counted as black ink in making the assessments of the size of the official deficit.
The Social Secutity Administration must now hand over non-marketable IOUs from the Treasury to make up the difference. Congress must borrow this money. This adds to the official on-budget deficit.
Congressman Xavaier Becerra (D-CA) repeats the accounting deception. “Over 77 years and now through 13 recessions, Social Security has not added one penny to our deficit or our debt.” It has added trillion of dollars to our debt, but the debt is hidden off budget. It is part of the $222 trillion in unfunded liabilities reported by Prof. Lawrence Kotlikoff of Boston University. I have written about this here.
Rep. Becerra’s deception was reinforced by Senator Bernie Sanders of Vermont. “I believe that Social Security has not contributed one nickel to the deficit because it is funded by the payroll tax.”
The Post now admits what we critics of the system have been saying for 40 years.
Here’s how it works: For nearly three decades Social Security produced big surpluses, collecting more in taxes than it paid in benefits. The government, however, spent that money on other programs, reducing the amount it had to borrow from the public, including foreign investors. That’s why some advocates complain that Congress has “raided” Social Security.
In return, the Treasury Department issued special bonds to Social Security. The bonds are now valued at $2.7 trillion. They are accounted for in two Social Security trust funds, one for the retirement program and one for the disability program.
The bonds pay interest. This was one of my points in my video. This has added to the official debt. The government must borrow the funds to pay this interest.
What is the projected on-budget deficit for this year? $166 billion.
Becerra denies all this. Social Security is just spending money generated by its “investments.”
What were these “investments”? IOUs from the government.
The voters don’t know what is going to hit them.