CEPR - Center for Economic and Policy Research


En Español

Em Português

Other Languages

Home Publications Blogs Beat the Press The Hill Has a Problem With Theory and Practice

The Hill Has a Problem With Theory and Practice

Tuesday, 15 March 2011 07:28

The Hill told readers today that:

"The [Social Security] trust fund itself has a theoretical $2.6 trillion surplus, but that money has been spent by the federal government like general revenues."

It is not clear what information the paper thinks is added by the word "theoretical." It is possible to add the word to almost any sentence (e.g. "Washington has a theoretical basketball team"). When something actually exists in the world, calling it "theoretical" is presumably intended to impugn it in some way.

Of course the trust fund does exist in the world, it is held in the form of U.S. government bonds. These bonds are referred to as "IOUs" in the Hill piece. It is highly unusual to refer to bonds of private corporations or government bonds as IOUs.

The article also makes the bizarre assertion that: "the payback [use of interest on the bonds held in the trust fund to pay Social Security benefits] has arrived at a very difficult time, when Washington is running a $1.6 trillion budget deficit." Actually, the interest rate on government debt is very low right now. This means that it is in fact a very good time for the government to be replacing the bonds held by Social Security with other bonds.

Readers can assume, based on these comments, that the Hill does not like Social Security and wants to see benefits cut. Usually this sort of editorializing is left to the opinion pages but apparently the Hill could not contain its animosity towards the program.

Comments (5)Add Comment
written by Ron Alley, March 15, 2011 9:24

You are far too kind in your comment. Referring to bonds held by the social security trust fund as IOUs is commonplace. Calling those bonds IOUs is at best hyperbole and at worst a deliberate deception.

The issue is the series of actions taken by the federal government since the Johnson administration to obfuscate the deficit by melding the accounting for social security revenues and tax revenues. Until the political establishment finds the courage to disentangle the accounting for social security and treat social security benefits as insurance benefits purchased by workers, this valuable program will be threatened by rhetoric designed to confuse social security with general government operations.
Journalists Report Facts, not Theory
written by izzatzo, March 15, 2011 12:03
When something actually exists in the world, calling it "theoretical" is presumably intended to impugn it in some way.

Exactly. For example when a driver fills up the tank at the gas pump there's a fuel surplus that's replaced by a deficit the moment the driver pulls away from the station since the vehicle is using more fuel than it's taking in.

But that's just a theory. When based in fact, everyone knows that repeated filling of gas tanks followed by crippling deficits from driving too much is unsustainable and eventually brings all traffic to a standstill since the deficits use up all the fuel.

Thanks to modern professional journalism that is now capable of separating theory from fact, deficits of all kinds can now be reported objectively along with confident predictions of exactly when the surplus is gone-gone and there ain't no more left for nobody and we're all gonna die of Zero Sum Arithmeticulus.
written by Calgacus, March 15, 2011 4:18
Nothing wrong with referring to bonds as IOUs. That's what they are. But that is what dollar bills are too - IOU's. The pile of IOUs/dollars/bonds in the SS Trust fund was taken from American workers by Greenspan/Reagan's plot to destroy Social Security. In the SS Trust Fund, they aren't doing anyone any good, and might as well not exist. The size of the Trust Fund is just a record of how much gross overtaxation and macroeconomic destabilization the government has engaged in. Distributing the SS Trust Fund dollars back immediately to their former owners would be just what the economy needs right now. And to continue the silly game of pretending that the Trust Fund pays for SS, Congress should then just print up some new bonds/dollars and put them in the Fund.

It's not "obfuscating the deficit" to count the SS taxes "destined for the Trust Fund" as lowering the deficit - it is the economically correct procedure. What pocket/account the gov pretends to put its dollars in has no meaning to the economy, what matters is taxing and spending.
written by urban legend, March 15, 2011 9:09
What is it about the law expressly mandating that Social Security is separate from the general fund that these people just don't understand. Social Security revenues may not as a matter of frickin' law be used to add to the general fund, and (excluding the recent allegedly temporary payroll tax cut) general fund revenues may not be used to supplement Social Security revenue. Oh, I know, its "law," wink, wink, It's just theoretical "law."

As someone said, people will refuse to understand something when their income depends on refusing to understand it.
An Inconvenient Truth
written by Jim Tarrant, March 17, 2011 10:24
It was Upton Sinclair in "An Inconvenient Truth" who first wrote the wonderful line that you have paraphrased. The original is: “It’s difficult to get a man to understand something if his salary depends upon his not understanding it.”

Write comment

(Only one link allowed per comment)

This content has been locked. You can no longer post any comments.


Support this blog, donate
Combined Federal Campaign #79613

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.