Senate Democrats have been facing significant pressure from their base and from their colleagues in the House to exclude Social Security from any broader effort to reform entitlement programs. However, Sen. Kent Conrad (D., N.D.), a member of the bipartisan deficit commission, has argued that nothing should be off the table.
Not anymore, apparently. The Hill reports:
Senate Budget Committee Chairman Kent Conrad (D-N.D.), who is at the center of bipartisan talks, said he wants to prolong the solvency of Social Security to 75 years. Under its current setup, the program is projected to pay 100 percent of benefits for the next 26 years.
But Conrad does not want Social Security to be part of a broader proposal to reduce the $1.6 trillion federal deficit.
“It might be useful to have Social Security treated on a separate track because it is not part of the deficit reduction package,” Conrad told The Hill before the Presidents Day recess. “I think it should be separated.
“There are many who recognize we have a long-term challenge with Social Security, but that’s very separate from the deficit reduction,” Conrad said.
“When those two get put together, it creates huge problems to getting the deficit reduction done, because it confuses the issue.”
As Veronique de Rugy points out here, the notion that Social Security payments don’t contribute to the deficit is completely false — no matter how many times Democrats keep saying otherwise:
“Social Security isn’t contributing to the deficit now,” said Sen. Chris Coons (D-Del.). “We need to be working to ensure the long-term survivability of Social Security, but we’ve got a lot of other big budget challenges in the short term.
“What I think is important is for the broad public to realize that any changes to Social Security are going to stand on their own to ensure that Social Security is viable,” he said. “It’s not part of fixing the deficit.”
Sen. Carl Levin (D-Mich.) said Social Security reform should be handled separately “because it doesn’t affect the deficit.”
Conrad was always going to be the GOP’s most reasonable negotiating partner in any bipartisan compromise on entitlement reform. It’s not exactly a promising sign that he’s already starting to drift.
The article by deRugy is laughable -- comically innumerate.
Since the early '80's Social Security has run a surplus, which it invests in the safest and most prudent securities: Treasury securities.
Because these securities represent future obligations that must be repaid, the federal government includes these securities within the overall national debt.
Social Security will soon stop running a surplus, and therefore will stop buying Treasuries -- or maybe even sell some. de Rugy somehow concludes that this will "contribute to the deficit".
Anybody with arithmetic skills can quickly detect the error.
Reply to this commentLinkReport AbuseSomeone here has no math skills, but it is not the author of this article.
First, SS stopped running a surplus several years ago and is not expected to ever run a surplus again under the existing rules. That's why the so called surplus is expected, under best case scenarios to run out in just 26 years.
As to selling securities, just who does SS sell those securities to. The US govt of course. And how does the US govt raise the money to "buy" back those securities? It gets money from general revenues. IE, it increases it's deficit spending.
So easy, even a liberal should be able to figure it out. So sad that few liberals want to even try.
Reply to this commentLinkReport AbusePoor MarkW!
The securities issued by the Treasury and purchased by the Social Security Trust Fund are already included in the calculation of the national debt. The securities are issued to finance current deficit spending, not because Social Security wants them. The fact that the securities are eventually redeemed (or refinanced) has no further impact upon the deficit.
If the Social Security Trust fund had not purchased Treasury securities, it would have been necessary to sell them to another investor -- most likely, at a higher rate of interest. In this sense, Social Security actually contributes to a lower total deficit by helping to reduce Federal borrowing costs.
Reply to this commentLinkReport AbuseTreasury securities have interest that needs to be paid when SS "sells" the treasury back, right?
So it now costs debt and deficit say, $1.05 for the $1 they "borrowed" earlier. Sounds like that would add to the debt and deficit.
AndyS, I've read a lot of your comments here; you personify President Reagan's lament: “It isn't that liberals are ignorant; it's that they know so much that isn't so.”
Reply to this commentLinkReport Abuseweimerrj:
Thanks for the compliment, but I'm sorry to say that you'll need to go back for remedial accounting classes!
The securities in question are issued because the Treasury needs to finance government operations. The identity of the purchaser is irrelevant; the issuing of securities has NOTHING TO DO with Social Security. Similarly, finance costs (interest and discount) will be incurred regardless of the purchaser -- they have NOTHING TO DO with Social Security.
Reply to this commentLinkReport AbuseSocial Security should be separated and fixed by itself. It could be invested in something other than Treasuries, but - unless I can pick where my dollars are invested - then I prefer Treasuries.
Reply to this commentLinkReport AbusePoor AndyS,
Apparently he doesn't know the difference between the federal debt and the federal deficit.
Agreed, the treasuries are already counted in the debt, however that is not what we are talking about, we are talking about this years deficit.
Reply to this commentLinkReport AbuseAndyS, I don't know where you went to get your remedial accounting, but you should see if you can find a way to get your money back.
The federal govt is paying out money it doesn't have in order to fund social security payments. That's a fact. Whenever the govt pays money it doesn't have, that increases this years deficit.
Now there are various accounting gimmicks that can be used to apply this deficit to one accounting bucker or another, but anyone who doesn't want to be fooled, is not fooled by such tricks.
Reply to this commentLinkReport AbuseTo blazes with Social Security.
I was not there when it was implemented, but why the heck would they kick off the program and immediately cut checks instead of having people start paying into it and, later, receiving benefits based upon their contributions?
Yes, it bugs me to have a forced savings plan, but I think this might be one of those ideas you have to force on the population as a whole - if nothing else to keep them from whining later...from being the nimrod in the lifeboat that chugged all his water in the first hour of being adrift. Severely punish any politicians that put the funds at risk or pilfer them, too.
I have paid into it from my working day. If I manage to see a dime of it in my retirement, it will be after I've been told I'm too "white", "wealthy", and "conservative" to get the full amount.
I'm not counting on seeing a thing. I've been smart with my money (so far), though, so it will be nothing but top shelf dog food for this dude in his autumn days.
To blazes with everybody else. Burn down social security now. Boomers don't need to have their *entire* lives specifically catered to.
Reply to this commentLinkReport AbuseLet me see if I can explain this in a way that even a liberal can understand it.
When SS was running a surplus, it used this money to buy Treasuries from the US govt. This money was then put into the general fund and was used to make the deficit look smaller.
Now that SS is running a deficit, it has to sell those securities. In order to buy back the securities the Treasury has to take money from the general fund and give it to SS. This taking of money from the general fund makes this years deficit bigger.
As to the claim that buying treauries has saved SS money, nothing could be further from the truth. Had SS been free to invest their surplus funds anywhere, they would have been able to get a much higher return on them and they would have much more money to pass out to beneficiaries. But congress did not want them to do that. They wanted those funds to paper over the profligate spending of the last 40 years.
Reply to this commentLinkReport AbuseAndyS! When you get your ! key unstuck, maybe you could actually read that Mercatus paper! where it doesn't just "somehow conclude" anything - it goes into specific details that are not difficult to understand and which you flat-out slough off!
Reply to this commentLinkReport AbuseOne of the first roles of the surplus was to help finance the military buildup that eventually lead to the Soviet Communist crackup. Just sayin'.
Reply to this commentLinkReport AbuseRE: "One of the first roles of the surplus was to help finance the military buildup that eventually lead to the Soviet Communist crackup. Just sayin'."
It doesn't matter to me if the dirt is in Boss Kean's ditch or Boss Paul's yard.
It just as easily can be explained by social spending.
Reply to this commentLinkReport AbuseI hope that this time, the Dems are miscalculating. I can't say I'm confident that's the case. Reply to this commentLinkReport Abuse
One simple question, Barry: Do you object to the bonds now held by the SSA being dedicated to the purpose of paying recipients? That's the minimum threshold that Dems are insisting on.
Reply to this commentLinkReport AbuseThe SS surplus over the years has reduced the reported deficit by in essence allowing the Feds to borrow it off the books as far as publicly held debt is concerned. If SS had been allowed to purchase treasuries of whatever type on the open market, it would be both in better shape financially and the trust fund would truly be an actual trust fund. Plus the arc of federal spending might have been a bit flatter had the "deficits" not been "lowered" by SS and other trust fund borrowing. All of this is confusing to liberals?
I wonder why we can't just convert all SS treasuries to open market instruments? This would clear up the "confusion" and also make clear that the current SS trust fund deficit to the extent that the feds choose to fund it does most definitely add to the deficit.
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