A guest blog post from Sheila Weinberg in response to the following letter to the editor:
Letter to the Editor (Tampa Tribune) from Joe Green, Brooksville
Sheila Weinberg’s piece on Social Security appearing on your Other Views page Aug. 18 is grossly off base (“Social Security is adding trillions to our national debt”). If I have money in my savings account and decide to use it to pay off some of my debts, it has absolutely no impact on my net worth. It simply means that I have less savings and less debt. If I want to keep all of the money in my savings account and pay off my debt, I have to look for the funds elsewhere. One source I have for more money is less spending. Less spending is a concept the federal government has a difficult time grasping, so to help pay off its debt it takes money from one of its savings accounts, i.e. the Social Security Trust Fund. The government does not use the money to pay Social Security benefits; it uses the money to help pay for its spending outside of Social Security. The Social Security program is not contributing to our national debt — the culprit is government spending outside the Social Security program.
Wage earners have two notable deductions, among others, from their pay checks: federal income taxes and FICA taxes. Income taxes help pay for the expenses of the federal government, not including Social Security and Medicare. FICA taxes fund Social Security and Medicare. The Social Security program is self-funding. It does not run a deficit, and it has sufficient funds to pay benefits well into the future.
I suggest Ms. Weinberg’s Truth in Accounting group revisit this subject and explore ways in which federal government expenditures might become more efficient. At the same time, they may find it beneficial to review ways in which Social Security could become more solvent in the years ahead. On behalf of all the “old people” reading this, it is ludicrous for Ms. Weinberg to conclude that Social Security is damaging our nation’s fiscal health. It just ain’t so!
Sheila's Response:
In my article, I am not arguing that Social Security is damaging our nation's fiscal health. My point is the way Social Security is being handled makes it difficult for Congress to effectively manage this program and our government finances in general. What the public has been told about Social Security taxes and its trust fund is at odds with how the federal government accounts for and handles this money. The misleading perceptions compared to the reality of the Social Security is confusing the public and making it impossible for us to be knowledgeable participants in deciding how our taxes should be spent.
Mr. Green correctly points out, "Less spending is a concept the federal government has a difficult time grasping, so to pay off its debt is take money from one of its savings account, i.e. the Social Security Trust Fund." My point is they are able to use the Social Security money for other spending because, despite what we have been told, the Social Security Trust Fund is not handled like a savings account. The Treasury Department highlights, “In the Federal budget, the term ‘trust fund’ means only that the law requires a particular fund be accounted for separately, used only for a specified purpose, and designated as a trust fund. A change in law may change the future receipts and the terms under which the fund’s resources are spent. In the private sector, trust fund refers to funds of one party held and managed by a second party (the trustee) in a fiduciary capacity.”
Mr. Green also accurately states, "Wage earners have two notable deductions, among others, from their pay checks: federal income taxes and FICA taxes." By identifying these deductions as two separate taxes, the public is led to believe that the FICA tax is used for only Social Security and Medicare benefits. But as Mr. Green precisely assures, "The government does not use the money to pay Social Security benefits; it uses the money to help pay for its spending outside of Social Security." If FICA taxes were put into true savings accounts, then we would have more than $5 trillion set aside to spend on future Social Security and Medicare benefits. Despite the fact that many Americans believe the government has put their FICA taxes into a separate account to pay for their benefits, the money is long gone.
Mr. Green also points out that Social Security is "self-funding." While Social Security taxes have been more than the Social Security benefits paid out in the past, this will not be the case in the future. Current and past Congresses and presidents have promised more than $63 trillion in Social Security and Medicare benefits to our seniors, but they have no idea where they will get the money to pay for these benefits. Now that the baby boomer population is retiring it would be a good time to figure this out.
Through not reporting these promises as liabilities on the federal balance sheet, and instead pointing to fictitious surpluses and trust fund balances, Congress and the President can avoid making tough choices on how to deal with the government's financial problems. Government spending levels can be propped up by Social Security and Medicare taxes that should be put into real savings accounts. And as Mr. Green highlights, the concept of less government spending can be avoided.