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Friday, May 10, 2013

What? Politifact Said Social Security Adds To The Deficit?

"Not one dime gets added to the deficit because of Social Security." -- Rep. Mark Pocan (2nd CD WI)

Keywords to remember - "because of."

Well, Politifact gave that statement a "Mostly False" rating. Here's the heart of their explanation...

JS Politifact Excerpt:
Although Social Security used to run surpluses, over the past few years it hasn’t collected enough in taxes to pay in benefits.

And the trust fund consists not of prior Social Security surplus funds, but of interest-bearing securities provided through federal government borrowing -- thus the link to the deficit.

Social Security is a pay-as-you-go system: Payroll taxes paid by current workers and their employers go to pay benefits to current retirees and other Social Security recipients.

From 1984 to 2009, Social Security collected more money in payroll taxes than it paid out in benefits. That surplus was transferred from the Social Security program to the federal government's general fund. In return, the Treasury gave Social Security bonds that it could redeem to pay future benefits.

The government, in turn, incurred obligations to repay the bonds, plus interest, to the Social Security trust fund.

In simpler language, Politifact and their sources said: Because you borrowed money from my stockpile, you will at some point have to pay it back to make me whole again. Assuming you will have to borrow from a different source (Treasury) to pay me back, the interest incurred resulting from your borrowing increased your debt load - so it's my fault.

In effect, according to Politifact and the American Enterprise Institute, because Social Security must begin drawing on its own surplus to meet its obligations, SS adds to the nation's current annual deficit and accumulating debt because congress borrowed it.

Fact is, the money coming into Social Security is real cash from payroll taxes. It's not SS's fault that the government borrows from it, and it's not SS's fault that government debt might grow in order to pay it back. It is totally absurd to misconstrue the loan transaction by implying Social Security adds to the deficit because of the borrower's obligation to pay it back.

The bottom line is, money the government borrowed will have to be paid back and those transaction events will have an effect on the government's balance sheet whether the lender is China, Saudi Arabia or Social Security OR whether the government has its own surplus or deficit to pay out from. By the way, Politifact assumes the government will have to borrow to buy back SS notes.

ProTip: Borrowing yet again to pay back loans will effect your debt. Don't blame the lender.

I give Politifact "Full Asshat" on this verdict.

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