As Congress proceeded in fits and starts to address the issues of taxation and spending, this Portland girl entered into a conversation with about 300 very smart women about whether Social Security was a legitimate part of that discussion. Opinions within this admittedly above-average group varied widely. Discussion was tabled prior to the holidays in order that I might gather data, and differing opinions be given an opportunity to respond.
As we begin this post-holiday discussion, I will make several promises.
- I will use the best data available. That means that I will collect information from sources that are accurate and honest.
- I will use the most relevant data available. That means it will pertain to the subject at hand, and address the issue discussed.
- I will follow where the data lead. I will not use only information that supports a particular point of view; rather, I will develop logical conclusions from the data under review.
This first part of the discussion will address a comment made by Susan B., who noted that Social Security "currently has over two TRILLION in surplus", and therefore contributes nothing to the deficit.
I agree that Social Security has over $2.6 trillion in Treasury bills. Let's see where Susan and I may differ.
First, though, a little vocabulary.
- The national debt, currently over $16 trillion, is the sum of the current year, and all prior years' deficits.
- A deficit is the amount that we spend every year that is in excess of the amount of taxes we collect.
- The way the U.S. borrows this money is through Treasury Bills, Notes and Bonds, that it repays with interest.
So, yes, the Treasury holds over $2.6 trillion in Treasury Bills that represent taxes collected for payment of Social Security benefits. But that is very different from the asset that would be represented if you or I owned a Treasury Bill. Why? Because when we own a Treasury Bill, the U.S. government owes us money. To us, that would be an asset, a "plus" on our balance sheet.
What happened to the money that was paid for Social Security (F.I.C.A.) taxes, was it was paid to the Treasury and put into the general pile of money that was spent for ongoing U.S. fiscal operations. The Treasury Bills that were set aside for Social Security are not an asset, like it is to you or I. It is debt that the U.S. government owes. The money that the U.S. government will use to repay that debt was not set aside in a separate account to pay for the Treasury Bills when they are due. That money has been spent. So, that $2.6 trillion is a debt of the U.S. government, a "liability" that is owed.
We need to collect taxes in order to repay that debt because we have already spent that money.
If you need further substantiation that this "fund" is a debt, note, that last August 3, when CBS news anchor Scott Pelley asked President Obama whether he could guarantee that Social Security checks would go out even if the debt ceiling were not raised, he answered,
“I cannot guarantee that those checks 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.”
Treasury Secretary Timothy Geithner also said that if a budget deal were not reached by August 2, seniors might not get their Social Security checks.
Clearly, if Social Security were not a part of the deficit, neither the President nor the Treasury Secretary would not have said this.
Hopefully, this discussion clears up the fact that the $2.6 trillion in Treasuries assigned to Social Security is a debt - not an asset.
In the next part of our discussion, we'll talk about the demographic aspect of Social Security, and why the picture becomes bleaker as the birth rate declines.
As always, I welcome your comments.