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Home Publications Blogs Beat the Press Boehner Wants CUTS to Social Security and Medicare, not "Changes"

Boehner Wants CUTS to Social Security and Medicare, not "Changes"

Monday, 17 December 2012 05:32

For some reason the Washington Post has a hard time accurately reporting the nature of the budget discussions between President Obama and Speaker Boehner. It told readers today:

"In exchange for the higher rates for millionaires, Boehner is demanding changes to federal health and retirement programs, which are projected to be the biggest drivers of future federal borrowing."

Of course Boehner is not looking for random "changes" to these programs, he is looking for "cuts" in the programs. While the next sentence points out that Boehner is seeking "savings" from these programs, there is no reason to obscure what is at issue by using "changes."

It is also worth noting that under the law, Social Security cannot contribute to the deficit. It was set up by Congress as a stand alone program that can only spend money from its designated revenue stream. All official budget documents show the "on-budget" deficit which excludes revenue and spending from Social Security.

Comments (6)Add Comment
written by Eric377, December 17, 2012 9:16
By law it cannot contribute to the deficit. I always thought that the proper construction of this was that it could not contribute to net debt, not deficit. In years that the trust fund will be in a net redemption mode, for any given amount of general revenues, cutting benefits will decrease the net borrowing requirements of the government (or expand the available spend on other programs). Debt remains the same since an obligation comes off the books, but probably at the expense of other, equal borrowings. But those other borrowings contribute to a deficit in real terms. Of course, this was the arrangement that all parties agreed to in the 1980s. It would be refreshing for some prominent Republican to point out loudly that Ronald Reagan signed off on this deal and it should be left intact on that basis. Of course Reagan is dead, but Kochs etc. are living.
written by skeptonomist, December 17, 2012 10:02
But the deficit which is reported in the media is that of the "unified" budget, which lumps SS and the general fund. So in addition to the other sins of the media, they are breaking the law on this - but so does Dean when he uses the "unified" deficit instead of the separate general-fund budget, which has often been over $200B larger. As long as the "unified" number is used to represent deficits, then it is correct to say that SS is part of "the deficit". Of course these deficits do not add up to the national debt - they are short by the amount of the trust funds.

How about this argument. The national debt currently includes the amount in the SS Trust Fund which is owed to near-future retirees, mostly baby boomers. As this is paid out - which was always the plan - the national debt will be reduced. That is, the income taxes which will go to paying the SS obligations will be used to reduce the national debt. Anyone who is in favor of reducing the national debt should be in favor of collecting these income taxes; they are in effect obligations which were agreed upon in the Reagan administration, as Eric277 says.

Of course part of the debt could be wiped out by default on US bonds, but why choose a part of it which is owed to US citizens (the Trust Fund), instead of foreigners? Krugman has recently argued that reducing international confidence in US bonds could be beneficial to trade and I think Dean goes along with this at least partially. An interesting practical question, as we anticipate regular annual crises over increasing the debt ceiling, is whether either Trust Fund obligations or foreign-held bonds as opposed to other debt obligations could be preferentially dishonored without special legislation.
Cuts not changes
written by Jennifer, December 17, 2012 11:26
Just once, for fun, I would like to see Boehner pushed to detail what "changes" he would like to see. If his side is so sure of themselves and support for their position why can't they tell us all? Because of course they know there is not support for "changes" so the trick is to whine and moan and hope that Obama will voluntarily makes these changes so they can blame him later. As has been detailed just to the left of the mainstream media the "negotiations" going on are not typical negotiations where you have two groups with two plans haggling over the details. Instead one side has a detailed plan and other side has a lot of toddlers stamping their feet.
Raising Keynes
written by RW Roark, December 18, 2012 9:41
Dear Dean,

In light of this post on SS and the deficit, and the current comments, I hope you could also comment on Kenvin Drum's take on the issue: the SS Trust Fund is real--and SS contributes to the deficit:


written by urban legend, December 19, 2012 9:28
Kevin Drum does not understand that paying off treasury bonds to the Trust Fund also extinguishes a debt owed by the government to the Trust Fund. There is no net change whatsoever in the deficit or national debt.

I believe behind it all is lack of recognition that, as a matter of law, there is no such thing as a "unified budget." People who want to say the Trust Fund is a fiction have it backwards. It's the "unified budget" that is a fiction. Many Democrats have gotten that wrong, too, including Clinton claiming bigger surpluses that he actually achieved.

And no, you cannot "look at it two different ways" when one of those ways is directly contrary to law. Of course, if you have no respect for law, you can say whatever you want.
written by RW Roark, December 19, 2012 9:49
Dear Urban Legend,

Thank you much for the feedback--and for a very salient point. Appreciate the effort.

RW Roark

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.