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Letter to Sen. Coburn on Comments on Meet The Press Print
Written by Dean Baker   
Monday, 25 April 2011 13:52

The Honorable Tom Coburn
172 Russell Senate Office Building
Washington, DC 20510

Dear Senator Coburn,

In your April 24, 2011 interview on "Meet the Press," you are quoted as saying "… the 2.6 trillion we’ve stolen from Social Security..." in reference to the funds that the Social Security Trust Fund used to buy government bonds. As I have written to you in the past, this is inaccurate. This money has not been stolen. The law has been followed to the letter.

The government sold U.S. government bonds to the Trust Fund, just as it sells bonds to individuals and private corporations every day of the week. As with any funds used to purchase bonds, the money is borrowed by the government, but repaid at the end of the term of the bond. Saying that the government has stolen money from Social Security is a distortion of the facts. No serious discussion of Social Security would use such terminology. As long as the law is followed and the bonds are repaid on schedule, nothing will have been stolen from the Social Security Trust Fund.

As one of the Senators in the Gang of Six working on a bipartisan budget agreement, I hope that you will be careful to present the situation more accurately, both in your budget proposal and in future public statements. If you would like any additional background on Social Security, I would be happy to assist you.

 
Why Do Real Men Want to Cut Social Security? Print
Written by Dean Baker   
Thursday, 21 April 2011 11:13

It really speaks volumes about the nature of politics in Washington that in order to be accepted as a serious participant in the budget debates, it is now necessary to affirm a willingness to cut Social Security. This is bizarre from many different angles.

Of course number one on this list is our little secret -- WE STILL HAVE A HUGE UNEMPLOYMENT PROBLEM. Apparently the folks here in DC aren't on to this one, but close to 25 million people are unemployed, underemployed or out of the workforce altogether because of the downturn caused by the collapse of the housing bubble.

There is now a gentleman's agreement between President Obama and the Republican congressional leadership that we won't talk about the unemployed anymore. We will just have discussions about the best way to reduce the budget deficit. It's sort of like discussing the paint job on the Titanic as the ship sinks.

The second reason why the pledge to cut Social Security is bizarre is that it is not part of the deficit story. Under the law, Social Security can only spend the money in its trust fund and not a penny more. This means that every dollar spent by Social Security was came from dedicated taxes or the interest on bonds purchased with those designated taxes.

In years after 2037 the program is projected to face a shortfall, but even then this would not contribute to the deficit. If nothing is ever done then the program would pay out about 80 percent of scheduled benefits, an amount equal to its projected tax revenue at that point in time. It will not add to the deficit.

The third reason that it is bizarre that Social Security is on the table is that current benefits are not especially generous. The average monthly benefit is just over $1,100 and the maximum is just over $2,300. The benefits are progressive, so higher wage earners already get a low return on their contributions.

Finally, we know that most retirees and near retirees have very little money other than Social Security. One of the main reasons that near retirees have little money is that the Social Security bashers did such a horrible job managing the economy.

Because this crew let the housing bubble grow unchecked, tens of millions of older workers failed to save as much as necessary, thinking that they were accumulating wealth in their home. Now that the bubble has collapsed, the huge baby boom cohort is hitting retirement without defined benefit pensions, with little money in 401(k)s and little equity in their homes. How does it make sense to cut benefits for these people?

But the SS cutters are on the warpath, insisting that you have to support beating up the elderly if you want to take part in the budget debates. But the folks at Social Security Works, a coalition of groups set up to protect Social Security is fighting back. They produced a new video that deserves a wide audience.

 
Letter to Sen. Enzi on Social Security Comments Print
Written by Dean Baker   
Wednesday, 20 April 2011 10:40

The Honorable Mike Enzi
379a Russell Senate Office Building
Washington, DC 20510

Dear Senator Enzi,

You were quoted on the NPR news show Power Breakfast saying “Anybody who is saying that Social Security is in good shape is making a political statement that they don’t want to handle it during their term in office... It’s one of those amazing trust funds that the United States has that has no money in it, it has IOU’s in it and that should worry everybody” in reference to the bonds that make up the Social Security Trust Fund.

Thankfully, there is little cause for worry. The government sold U.S. government bonds to the Trust Fund, just as it sells bonds to individuals and private corporations every day of the week. Just as with any funds used to purchase bonds, the money is borrowed by the government, but repaid at the end of the term of the bond. As long as the law is followed and the bonds are repaid on schedule, there is no reason to worry about the Social Security Trust Fund. In fact the Social Security trustees report clearly shows that Social Security will remain fully solvent through 2037 and will be able to pay roughly 80 percent of scheduled benefits from then on even if no changes are ever made.

While it would be unacceptable to have benefits drop by more than 20 percent, Congress has more than a quarter century to prepare for this situation. The projected shortfall is substantial, but nonetheless considerably smaller than other budgetary changes we have seen in recent years. For example, it is more than 20 percent less, measured as a share of GDP, than the increase in annual defense spending than we have seen from 2000 to 2010.

I hope that you will be careful to present the situation more accurately in future public statements. If you would like any additional background on the program, I would be happy to assist you.

 
Letter to Sen. Durbin Over Social Security Comments on ABC News Print
Written by Dean Baker   
Tuesday, 19 April 2011 11:11

The Honorable Dick Durbin
459a Russell Senate Office Building
Washington, DC 20510

Dear Senator Durbin,

In a recent ABC News interview, you criticized a measure proposed by Senator Bernie Sanders that calls for excluding Social Security from any deficit deal. You were quoted as saying:

"In 2037, as we know it, Social Security falls off a cliff… There’s a 22 percent reduction in payments which is really not something we can tolerate."

As you know, the country has 26 years between now and 2037, so not acting in 2011 does not imply that the Congress will not do anything over the next quarter century to address the projected shortfall.

Furthermore, you should realize that the shortfall in 2037 does not necessitate any reduction in benefits. Even if Congress sat by and never did anything to fix the projected shortfall in the next 26 years, it would still have the option of raising additional revenue in 2037 if this shortfall materialized, rather than cutting benefits.

According to the Social Security trustees, the projected shortfall in revenue in 2037 would be less than 1.3 percent of GDP (SS trustees report TABLE V1.F4). By comparison, the increase in annual defense spending over the course of the last decade was more than 1.6 percentage points of GDP and in fact, there were several single years in the 40s and 50s when we increased defense spending by larger amounts.

While 1.3 percent of GDP is hardly a trivial amount, it is certainly a burden that the economy could bear if there were political will. In a context where the share of Social Security beneficiaries in the voting age population will be more than 50 percent larger than it is today (SS trustees report TABLE V.A2) it is certainly reasonable to believe that Congress would take steps to ensure that benefits are not cut by 22 percent.

In short, the prospect of a 22 percent benefit cut occurring in 2037 is highly unrealistic and is certainly not ensured by the decision to not include Social Security in any deficit package worked out by the current Congress. I hope that you will be more careful in describing this issue in the future. If I can be of any help in this matter, I would be happy to meet with you.

 
Letter to Sen. Warner on Face the Nation Comments Print
Written by Dean Baker   
Monday, 18 April 2011 13:30

The Honorable Mark Warner
459a Russell Senate Office Building
Washington, DC 20510

Dear Senator Warner,

On "Face the Nation" this weekend, you said "…You know, part of this is just math – 16 workers for every retiree 50 years ago, three workers for every retiree now." However, that arithmetic is incorrect.

Fifty years ago, there were actually just five workers for every retiree, TABLE IV.B2. In this same 50-year span, the tax rate for Social Security has more than doubled, from 3.0 percent for the employer and employee in 1960 to 6.2 for each at present. As well, the tax base has risen considerably from $4, 800 in 1961 (roughly $30,000 in today’s dollars) to $106,800 in 2010, TABLE VI.A1.

You're absolutely right that this is just math, but it is important to get the math right. As one of the key Senators involved with budget negotiations and the future of Social Security, I hope that you will be careful to present the situation more accurately in future public statements. If you would like any additional background on the program, I would be happy to assist you.

 
Letter to Rep. Huizenga on Social Security Comments Print
Written by Dean Baker   
Wednesday, 13 April 2011 15:45

The Honorable Bill Huizenga
1217 Longworth Office Building
Washington, DC 20515

Dear Representative Huizenga,

During a recent episode of NPR’s Morning Edition, you said that "…we have to change the system…" because Social Security won't be able to survive.

However, this is not the case. The Social Security trustees’ projections show that Social Security will maintain full solvency through the year 2037. Even if Congress never makes any changes to the program, Social Security will always be able to pay close to 80 percent of scheduled benefits from then on. This means that when you retire in 2036, you will receive $39,674 a year (in 2010 dollars). After 2037, you would still receive $29,755 a year in Social Security benefits for the rest of your life.

As the discussion over Social Security continues, I hope you and your staff will have the opportunity to further review the design and finances of Social Security. If you would like any additional background on the program, I would be happy to assist you.

 
Letter to Sen. Carper on Social Security Comments Print
Written by Dean Baker   
Wednesday, 13 April 2011 14:45

The Honorable Tom Carper
513 Hart Office Building
Washington, DC 20510

Dear Senator Carper,

In recent comments on reforming Social Security, you said, "My sons are 21 and 22; neither of them thinks Social Security will be around for them. I want to make sure that it is."

In fact, Social Security will be around for them. The Social Security trustees’ projections show that Social Security will maintain full solvency through the year 2037. Even if you and your colleagues in Congress never make any changes to the program, Social Security will always be able to pay close to 80 percent of scheduled benefits from then on. Assuming that they have several successful years in the workforce just as you have, when your sons retire in 2056 and 2057, they will each receive $37,044 a year (in 2010 dollars) for the rest of their lives.

As the discussion over Social Security continues, I hope you and your staff will have the opportunity to further review the design and finances of Social Security. If you would like any additional background on the program, I would be happy to assist you.

 
Samuelson Seeks Politicians with "Courage" to Cut Benefits Print
Written by CEPR   
Monday, 11 April 2011 11:45
Robert Samuelson believes people are too dependent on the government for benefits like Social Security and Medicare, which makes it hard to implement change. But as Dean notes on Beat the Press, beneficiaries paid taxes during their working lifetime to cover the cost of these benefits. Of course beneficiaries will oppose changes to a program they're already invested in. Maybe fixing our broken health care system would take care of those deficits Samuelson is so worried about.
 
Letter to Sen. Coburn on Comments in Washington Post Op-Ed Print
Written by Dean Baker   
Tuesday, 05 April 2011 11:00

The Honorable Tom Coburn
172 Russell Senate Office Building
Washington, DC 20510

Dear Senator Coburn,

In your April 4, 2011, Op-Ed in the Washington Post, you referred to "… money we've raided from Social Security..." in reference to the money that the Social Security Trust Fund used to buy government bonds. This is inaccurate. This money has not been raided. No money was stolen, and the law has been followed to the letter.

The government sold U.S. government bonds to the Trust Fund, just as it sells bonds to individuals and private corporations every day of the week. Just as with any funds used to purchase bonds, the money is borrowed by the government, but repaid at the end of the term of the bond. Saying that the government has raided money from Social Security is like saying the government raided the bank account of a grandparent who bought a $100 savings bond for their newborn grand-daughter. Few people would use such terminology. As long as the law is followed and the bonds are repaid on schedule, there will have been no raiding of the Social Security Trust Fund.

I hope that you will be careful to present the situation more accurately in future public statements. If you would like any additional background on the program, I would be happy to assist you.

 
Who Needs Attribution When We Have Blanket Statements Print
Written by CEPR   
Tuesday, 05 April 2011 09:00
The New York Times is claiming in its story about Representative Paul Ryan's budget proposals that "many House Republicans see a need to revamp Social Security." As Dean notes on Beat the Press, we have no idea what politicians actually believe, especially when it comes to issues identified as the "third rail" in politics.
 
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