What Happened to the $2.6 Trillion Social Security Trust Fund?

Image by DonkeyHotey via FlickrMerrill Matthews
Forbes

Here’s how President Barack Obama answered CBS’s Scott Pelley’s question about whether he could guarantee that Social Security checks would go out on August 3, the day after the government is supposed to reach its debt limit: “I cannot guarantee that those checks [he included veterans and the disabled, in addition to Social Security] go out on August 3rd if we haven’t resolved this issue. Because there may simply not be the money in the coffers to do it.”

And Treasury Secretary Timothy Geithner echoed the president on CBS’s Face the Nation Sunday implying that if a budget deal isn’t reached by August 2, seniors might not get their Social Security checks.

Well, either Obama and Geithner are lying to us now, or they and all defenders of the Social Security status quo have been lying to us for decades. It must be one or the other.

Here’s why: Social Security has a trust fund, and that trust fund is supposed to have $2.6 trillion in it, according to the Social Security trustees. If there are real assets in the trust fund, then Social Security can mail the checks, regardless of what Congress does about the debt limit.

President Obama’s budget director, Jack Lew, explained all this last February in USA Today:

“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. … 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.”

Notice that Lew said nothing about raising the debt ceiling, which was already looming, and it shouldn’t matter anyway because Social Security is “entirely self-financing” and off budget. What could be clearer?

Unconvinced, syndicated columnist Charles Krauthammer wrote a subsequent column questioning Lew’s assertions. “This [Lew’s] claim is a breathtaking fraud. The pretense is that a flush trust fund will pay retirees for the next 26 years. Lovely, except for one thing: The Social Security trust fund is a fiction. … In other words, the Social Security trust fund contains—nothing.”

Social Security status-quo defenders have assured us for the past 25 years that Social Security is fully funded—for the next 25 years, or 2036. So if there are real assets in the Social Security Trust Fund—$2.6 trillion allegedly—then how could failure to reach a debt-ceiling agreement possibly threaten seniors’ Social Security checks?

The answer is that the federal government has borrowed all of that trust fund money and spent it, exactly as Krauthammer asserted. And the only way the trust fund can get some cash to pay Social Security benefits is if the federal government draws it from general revenues or borrows the money—which, of course, it can’t do because of the debt ceiling.

Thus, the answer to my initial question is that the president is telling the truth now in the sense that he is conceding there’s no money in the trust fund to pay benefits; but he and other Social Security status-quo defenders have been deceiving the public for decades.

And here’s the real irony: Anytime someone has proposed personal Social Security retirement accounts as a way to ensure that people have real assets in their own account without bankrupting the government or future generations, defenders of the status quo would pounce, calling such a reform, in Al Gore’s words, a “risky scheme.” They have vociferously claimed that those trust fund assets are real and that only by having the government manage and control the accounts would seniors be guaranteed to get their retirement checks.

Well, we have the status quo and seniors may not get their checks. Had we shifted to a system of pre-funded, personal Social Security retirement accounts years ago, this wouldn’t even be an issue—because retirees would have their own money in their own accounts.

Yes, the accounts likely would have declined when the stock market went down, though not if the reform were structured like three Texas counties did 30 years ago (see here). But in case you haven’t noticed, Social Security revenues also declined during the economic downturn—because fewer people were working—so that the government is paying out more in benefits than it is taking in, and hence needing additional federal revenues, a fact admitted by Lew.

If the budget crisis has done nothing else, it has exposed the decades-long lie about the solvency of the Social Security trust fund. The trust fund may be backed by the “full faith and credit of the federal government,” as defenders constantly remind us, but if it had real assets the president wouldn’t be talking about seniors missing their checks.

Al Gore Caught Lying at Copenhagen Summit

Image by Steve Rhodes via CrunchBase

Andrew Thomas
Al Gore shoots self, climate summit in foot
Oh dear. Saint Al Gore, the man who invented both the internet and anthropogenic global warming and made himself obscenely rich in the process, has banged yet another nail into the rickety coffin of the global warming religious cult by coming out with what scientists describe as 'a complete load of bollocks' at the Copenhagen climate worryfest.

Gore, speaking at the Copenhagen climate change summit, claimed that the latest research showed that the Arctic could be completely ice-free in five years. One would think that in the light of the Climategate scandal, the Blessed Al would make sure that his data was accurate and pretty much bullet-proof, but sadly he merely added to the pantheon of completely fabricated climate stats.

In his speech, Gore said: “These figures are fresh. Some of the models suggest that there is a 75 percent chance that the entire north polar ice cap, during the summer months, could be completely ice-free within five to seven years.”

Unfortunately, the scientist whose research was quoted by Gore, Doctor Wieslav Maslowski, rather pissed on his chips by stating:

“It’s unclear to me how this figure was arrived at. I would never try to estimate likelihood at anything as exact as this.”

A Gore spokesman backpedalled furiously, saying that the figure quoted was merely a ballpark figure that was mentioned in a conversation between the two men a few years ago.

The Copenhagen conference was already looking pretty much dead in the water yesterday after the African delegation walked out in protest at Danish moves to ignore emissions targets agreed at the Kyoto conference in 2007. Gore’s gaffe makes it look very much as if no meaningful agreement will be reached before the conference ends.

Gore’s speech was slammed by climate scientists, one of which, Jim Overland from the US Oceanic and Atmospheric Administration, said: “This is an exaggeration that opens the science up to criticism from sceptics. You really don’t need to exaggerate the changes in the Arctic.”

Maslowki, who works at the US Naval Postgraduate School in California, said that he expects some ice to remain beyond 2020: “I was very explicit that we were talking about near-ice-free conditions and not completely ice-free conditions in the northern ocean. I would never try to estimate likelihood at anything as exact as this. It’s unclear to me how this figure was arrived at, based on the information I provided to Al Gore’s office.”

Global warming: 100% Exposed FRAUD!

Al Gore 100% exposed.