The Washington Post Has Not Heard of the Social Security Trust Fund
|Friday, 25 March 2011 03:33|
This appears to be the case, since the Post featured an article, arguing that Social Security benefits should be cut, that made no reference to the the trust fund. The article tells readers:
"Social Security is the single largest federal program, dispensing about $700 billion last year to nearly 60 million people, the vast majority of them retirees. Since the program’s creation in 1935, the cost of Social Security benefits has been entirely covered by payroll taxes paid by current workers. This year, however, payroll tax revenues are projected to fall $45 billion short of covering benefits, and the problem is projected to grow as the number of retirees balloons compared with the number of working adults."
Actually, there have been prior years when current taxes did not cover benefits, but more importantly the program quite deliberately built up a surplus of more than $2.6 trillion, which is held in U.S. government bonds. It is drawing on the interest from these bonds in 2011. It will eventually rely on the principle on these bonds, which will be sufficient, together with current taxes, to cover all benefits through the year 2037.
To describe this as a problem would be like saying that retired billionaire investor banker Peter Peterson has a problem because he is no longer earning money as an investment banker and must rely on income from his accumulated wealth or even selling off some of his assets. This was part of the design of Social Security. Workers were taxed more than was necessary to pay current benefits. The surplus was used to buy bonds so that the cost of benefits when the baby boom cohort retired could be partially funded by the bonds instead of current tax revenue.
The Post is now describing the repayment of the bonds held by the Social Security trust fund as a "problem," implying that it wants to default on these bonds. This is a strong position for a newspaper to take, especially in a news story.
It is worth noting that the interest and principle on the bonds held by the trust fund come primarily from the individual and corporate income tax. These taxes are progressive. This means that defaulting on the bonds, which are owed to the country's workers, would be a massive upward redistribution of income, since the wealthy could then pay less in taxes.
The Post has a long history of supporting policies that lead to an upward redistribution of income such as the TARP bank bailout, trade agreements like NAFTA that put downward pressure on the wages of ordinary workers, and stronger patent monopolies for drug companies. The policy of defaulting on the bonds held by the Social Security trust fund is consistent with this policy of redistributing income to nation's wealthy.