Peter Peterson Wants to Cut Social Security
|Tuesday, 11 May 2010 14:32|
That could have been the title of this CNNMoney.com piece that touted the idea of "fixing" Social Security. The peice begins by quoting Robert Bixby, the director of the Concord Coalition, an organization that was founded by Peter Peterson and is still partially funded by him. Mr. Bixby described fixing Social Security as "low-hanging fruit" when it comes to deficit reduction.
The piece then went on to Mr. Peterson himself:
"While a Social Security fix would cure only a small part of the country's long-term fiscal shortfall, it could pay big dividends in terms of the U.S. standing internationally, deficit hawks say. 'It would be a confidence builder with our foreign lenders,' said Pete Peterson at a recent fiscal summit organized by his foundation, the Peter G. Peterson Foundation.
That could lessen the risk of a big rise in interest rates and buy the country more time to handle other debt-related issues, such as tax and budget reform and further changes in Medicare."
Mr. Peterson's ability to assess what builds confidence with foreign investors or anyone else is somewhat questionable. He managed to somehow completely overlook an $8 trillion housing bubble, the collapse of which gave us the worst downturn in 70 years.
Mr. Peterson's logic is also somewhat confused. If foreign investors lose confidence in the United States then the value of the dollar would fall relative to other currencies. This will make U.S. exports cheaper to foreigners and make foreign imports more expensive to people in the United States. The result would be that we would export more and import less. This improvement in the trade balance would increase employment and reduce the deficit. If the reporter has spoken to someone other than Mr. Peterson and his employees, she may have caught Mr. Peterson's mistaken logic and pointed it out to readers.
The rest of the piece is devoted to misrepresenting Social Security's financial situation. It notes that the program is projected to pay out more in benefits than it takes in as SS taxes this year. It then tells readers:
"When the system takes in less than it has promised to pay out, the government will need to make up the difference by paying back the surplus revenue that has been paid into Social Security over the years, but which Uncle Sam spent on other things."
This is true in the same way that if Mr. Peterson spends the interest from government bonds that he owns or cashs in bonds that hit their expiration date -- rather than reinvesting the money in government bonds -- the government will need to make up the difference by paying back the money that Mr. Peterson has lent over the years, but which Uncle Sam spent on other things.
In other words, the article is implying that there is something sinister about a normal business practice. The Social Security trust fund bought government bonds with its surplus, just like private pension funds do, as well as wealthy individuals. Under the law, this money will be paid back to Social Security -- that is what governments do with their debts -- they pay them back -- unless they default.