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Home Publications Blogs Beat the Press The Wall Street Journal Raided My Bank Account

The Wall Street Journal Raided My Bank Account

Tuesday, 17 August 2010 06:21

Yep, I paid for the paper this morning. Okay, most people would not call that "raiding." But where on earth does the WSJ get off saying that the government has been "raiding" Social Security for decades? Was this article a paid political advertisement? (It reads that way.)

Of course, it makes as much sense to say that WSJ raided my bank account as to say the government raided Social Security. (Perhaps more, I thought I was buying a newspaper.) There was absolutely nothing improper done with Social Security money. It was used to buy government bonds. Readers of a business paper like the WSJ may have thought that its reporters understood how U.S. government bonds work.

The Social Security trust fund will redeem the bonds when they are needed to pay benefits, just as private citizens and corporations often buy bonds and then sell them off when they need the money for some other purpose. In the meantime, the government used the money it borrowed for other purposes. That is the way government bonds and other bonds work. It is also exactly how the law was been written, and it has been followed.

It also would have been helpful to point out that there is no obvious problem with the deficit and debt levels discussed in the article. The text seems to have been written by a hyperventilating reporter, when the numbers should raise about as much concern as a 4-2 baseball score.

The economy of course does face a crisis. The collapse of the housing bubble has left 15 million people unemployed and is costing us $1.5 trillion a year in lost output. Remarkably, these basic facts are largely absent from the article as the WSJ seeks to get readers and voters to focus on the deficit and its goal of cutting programs like Social Security and Medicare.


Comments (13)Add Comment
written by izzatzo, August 17, 2010 7:24
While the Bush tax cuts raided the government budget to create $2.34T more in debt, they also enriched rich individuals with a half million each of more in annual net income for the upper 1%, who received 23% of the tax cut, so anyone who calls that a raid is a goddamn commie because the money is actually there, just in different hands.

It's not like SS that's like robbing Peter to pay Paul, one part of government to fund another part of government.

Stupid liberals.
"raiding" put back into context, and an inconsistency.
written by AndrewDover, August 17, 2010 7:31
The WSJ wrote:
"The accumulated debt held by the public will exceed 77% of the economy within a decade, not including the debt the government owes itself for raiding Social Security taxes for decades."

A neutral editor might have changed that to:
", not including the debt the government owes the Social Security trust fund."

But then a more neutral editor would have also rewritten Dean's July 9th quote:
"This would mean describing the payroll tax as a "Social Security" tax even though the money was being used to finance the war in Afghanistan or other expenditures. ... If people realized that their representatives in Congress wanted to use taxes designated for Social Security for other purposes -- in effect defaulting on the government bonds held by the Social Security trust fund -- it is likely that many would be voted out of office."

You can't complain about the use of "raiding" instead of "borrowing", if you are going to use "defaulting" when you also say the "Social Security trust fund will redeem the bonds when they are needed to pay benefits."
No inconsistency
written by Tom, August 17, 2010 7:54
The qualified phrase 'in effect defaulting' is accurate, not an exaggeration, and not inflammatory. He is describing a hypothetical situation, but one being advocated by people in responsibility, that the government should cut Social Security benefits rather than use income and principal from the trust fund to pay the scheduled benefits.

Using 'raiding' as a synonym for 'borrowing' is in an entirely different class, that of disreputable rhetoric.
Take a Closer Look at the Housing Bubble
written by Ron Alley, August 17, 2010 7:54

The housing bubble was a bubble - an economic frenzy that created distortions in the allocation of capital and labor. Do you really suggest that the best solution to our ongoing economic crisis is to direct additional billions of capital and deploy additional millions of the American workers in the construction of additional homes? Do you really think that the bubble was a housing bubble rather than a long-lived financial bubble?

To me it seems that the financial bubble we have experienced was tolerated by the federal government because it ameliorated the economic effects of long-running government policies that have favored corporate interests over labor, favored offshore manufacturing over domestic manufacturing, favored "free trade" over responsible trade management and eviscerated the middle class. The usual suspects in Congress and the White House are unwilling to review and analyze the effects of over thirty years of mismanagement of the economy and trade. Unless and until they do so and take bold actions to correct over thirty years of errors, the economic malaise we are experiencing will continue.
written by skeptonomist, August 17, 2010 8:13
There has certainly been dishonesty and even illegality in the treatment of SS. Despite the fact that by law SS tax income is separate from general income, deficits have been reported as if the money going into the Trust Fund were general income. One group of beneficiaries of this has been incumbent politicians. The other is generally the readers and advertisers of the WSJ, those high-income people (and the finance industry which relies on them) who benefitted from the tax cuts whose costs were partly concealed by the falsely minimized deficits.

SS bashers try to push the idea that "the government" has been taking money from the people and causing it to disappear (or something) and this will be fixed if SS is eliminated or cut back. The counter to this is to identify who has benefitted from government actions and who will be paying or not paying taxes in the future to make up for past deficits.
written by John, August 17, 2010 8:18
Perhaps the Atlantic is little read, but it should be added to the list of anti-SS media.

The latest, for Sept, has a doozy from Megan McCardle, the business and economics editor. It's not on the internet yet so I can't provide a pointer. Anyway, the article is "The Great Stock Myth" with the summary "Why the market's rate of return-and your nest egg-may never recover."

But towards the end, she drags in Social Security as failing due to the stock market's influence on it.

The story is really an editorial, not an article. She provides no argument for her assertions, which are presented as gospel truth.

Good grief.
written by Dejuan, August 17, 2010 8:26

if you are so confident in this system, I challenge you to put every last dime you have into 30 year US treasuries.
written by bobbyp, August 17, 2010 9:01

If you believe the US government is going to default on it debt sometime in the next 30 years, you are presented with a real problem. What are YOU going to invest in? Gold? it's nominal return over the last 100 years is a little over 4%. I'd bet treasuries with reinvested interest beat that handily. But you just go into your snarky little hole and try to find something to tide you over in the coming collapse.

I suggest canned goods.
written by dejuan, August 17, 2010 10:21
Well, it's a good thing that I don't plan on living to 100. The US government is not going to default, but you fail to realize that the value of bonds can drop below face value the second rates go higher. If Mr. Baker is so confident that this won't happen, he should pony up and put his money where his mouth is. Btw, I do own gold, and have been earning much more than whatever yield you get on treasuries since 2007.
where does reform come from?
written by scott, August 18, 2010 4:21
The Dollar's role as reserve currency is in jeopardy as systemic deficits show no sign of being corrected. I have little faith in legislators, or the media to produce good policy or to inform us. When do we cut military spending? We could defend this country with gang bangers and rednecks alone. We literally need no Pentagon for national defense. The only thing that will end the influence of the MIC is economic calamity.

Where are the middle class jobs, manufacturing, hope or opportunity. You are fat and old Dr. Baker. The streets in Dallas are empty. Our economic policy is giving money to banks to invest in speculation. This taxes us twice, when they give the money out and when we pay for inflated goods. Gas, insurance, tuition, food, energy are all over priced relative to supply and demand.

Politicians have no interest in trust busting, or earnestly confronting our challenges. We are asking them to do what's right and good and to forgo literally millions in personal lucre. So, where do the good ideas come from? You provide justification for some of our policies but few ideas of reform.

Those ideas you do have, like patent law reform ain't gonna happen--you do know how politics works, right? We have in evidence a reductio ad absurdum only not everyone gets it yet. Further, this is a big ship of state, steaming towards the rocky bank. But, are we gonna turn this thing right or left? You won't admit it, but those who have the means should flee this doomed state.

Look at the ugly vilification of Muslims, Mexicans and Gays. We ain't all that far from Nazi Germany. We have the scapegoats identified, we have the disastrous policies of belligerence entrenched. We have an economy that is beyond the point of return.

Those of us 40 and younger have little opportunity, few prospects while our parents are complacent and seeking to run out the clock before any reforms come to pass. They are the voters, and they are the most deceived, and they don't want to discuss these matters. So, Dr. Baker again where does "reform" come from? Obama is far from a rock of idealism. He's argued steadfastly only to defend himself. Where, where do we get reform? Structurally, we're designed to remain unbending, uncompromising, incurious and utterly selfish.
Social Security Trust Fund, Bonds, Etc.
written by Professor Coldheart, August 18, 2010 12:57
Help me out, because I grew up hearing "the trust fund is empty! waaaaagh!" and have only recently started hearing contrary viewpoints.

There was absolutely nothing improper done with Social Security money. It was used to buy government bonds. [...]

Used by whom? Which agencies / departments?

The Social Security trust fund will redeem the bonds when they are needed to pay benefits

Redeem them with what money? The trustees present the bonds to the Treasury Department for $X billion in cash. The Treasury Department pays the $X billion out of ... what?
written by coberly, August 18, 2010 8:00
prof coldheart asks..

"Redeem them with what money? The trustees present the bonds to the Treasury Department for $X billion in cash. The Treasury Department pays the $X billion out of ... what?"

taxes, dear professor. the bonds were issued in order to borrow money in order to cut taxes. now it is time to raise taxes to pay back the money. presumably the people who got the tax cuts put the money to good use, invested it wisely, and can now afford to repay it.
Rebut Tom
written by AndrewDover, August 24, 2010 7:18
The trust fund will run out around 2040 even when "use income and principal from the trust fund to pay the scheduled benefits." So there is no issue at all of "defaulting" except in the confused minds of someone who thinks that the trust fund will last forever.

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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.