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by Don Azarias
May 2, 2011
While Congress has spent the past several weeks debating cuts in government spending through their contemptuous partisan battle over the federal budget, a growing number of lawmakers say they also want to act on long-term concerns about benefit programs like Social Security, Medicare and Medicaid.
In trying to find the solution to the budget crisis, Congressional lawmakers are debating whether Social Security’s inevitable deficit needs to be controlled like any other government programs. President Barack Obama is resisting calls from mostly GOP lawmakers to tackle Social Security’s growing financial shortfall. Of course, Obama, like his Democratic allies, couldn’t care less; they don’t need Social Security checks when they retire.
As most of us know, the massive retirement program is now starting to run a deficit and it is causing a major concern for political leaders in Washington, D.C. who don’t want to run afoul a formidable voting bloc like the seniors group.
For the elderly and the disabled, their concern about losing their benefits or seeing them cut is justified. It behooves the White House and Congress to act sooner rather than later because the crisis that the Social Security faces is getting closer and closer to reality and would only get worse the longer they wait.
For the readers’ information, starting this year and each year thereafter, Social Security is paying more in benefits than it collects in taxes. This could mark the beginning of the end for one of the greatest pieces of legislation ever enacted by Congress during President Franklin Delano Roosevelt administration.
House Republican leaders say their budget plan for next year will address entitlement programs, including Social Security. But the Obama administration feels that the current political climate in Washington. D.C. is not conducive yet for both, Democrats and Republicans, to sit down together and negotiate in good faith in order to formulate long-term solutions needed to resolve such difficult issues confounding the Social Security and the Medicare/Medicaid programs.
According to the nonpartisan Congressional Budget Office (CBO), last year’s $37 billion operating deficit——the first since the system was last overhauled in the 1980s——is expected to grow to $45 billion in 2011. Over the next decade, the program is projected to run up more than $500 billion in operating deficits if Congress doesn’t act.
I’m sure that majority of the 58.7 million recipients are not aware that Social Security has built up a $2.6 trillion surplus over the past 30 years and that Social Security benefits are entirely self-financing. I’m almost certain that there are some people who have no idea that the federal government is using Social Security funds, not currently being used to pay recipients’ benefits, to finance other government spending.
Unlike a typical private pension plan, the Social Security Trust Fund does not hold any marketable assets (very liquid securities that can be converted into cash quickly) to secure workers’ paid-in contributions. Instead, it holds non-negotiable United States Treasury Bonds and U.S. securities backed “by the full faith and credit of the government.” In short, the government owes the money, which is collateralized by non-negotiable U.S. Treasury Securities. The Trust Fund cannot resell these government bonds on the secondary bond market. These bonds can only be sold back to the government at face value, which is to its advantage when interest rates rise. The whole deal is so ridiculously one-sided in favor of the U.S. government that it’s almost unbelievable to say the least.
These are the facts that are being overlooked, intentionally or otherwise, by the White House and Congress. They seem to forget that the money in the trust funds has been spent over the years to help finance other government programs.
Advocates for Social Security say the program is being unfairly blamed for the budget deficit. The federal government had, for years, been using and abusing the Social Security’s assets as if there’s no tomorrow in funding those unaffordable and wasteful federal spending and those Congressional lawmakers’ pork barrels. The Social Security did not cause the nation’s fiscal problems. For the past 30 years, the Social Security has been generating big surpluses to finance the federal government’s spending spree. The program actually reduced the government’s borrowing on high-interest public debt markets.
The federal government has been running up big budget deficits, including a record $1.5 trillion deficit this year. The national debt now tops $14 trillion, including the $2.6 trillion owed to Social Security. The Social Security’s financial shortfall is being exacerbated by the economic downturn. Payroll taxes that finance the program are down and applications for benefits are rising because of the high rate of unemployment. The growing number of baby boomers are starting to retire and applying for benefits and, thus, putting further strain on the system’s precarious financial position.
According to the trustees who oversee the program, the Social Security trust funds are projected to be drained by 2037 if Congress does not act soon. At that point, payroll tax receipts would only be enough to pay about 78 percent of benefits. And, of course, we all know that if Congress, indeed, act, its only option of funding the Social Security program is through borrowing which, in the final analysis, would only add to more U.S. debts and deficits.
It should be crystal-clear to every American taxpayers who contribute to the Social Security that the responsiblity for preserving its very life and viability are lodged in our own hands. The benefits we receive from it are so miniscule compared to what those White House and Capitol Hill occupants will receive when they leave office. But still, our Social Security benefits are all we got and that’s our lifeblood, when we retire. We just have to take the cudgels for the Social Security ourselves and exercise our prerogative under the U.S. Constitution by voting those greedy, incompetent and irresponsible Washington, D.C. politicians out of office.