Letter to Rep. Hensarling: Paying Social Security Benefits Does Not Mean We're Spending Money We Don't Have
|Written by Dean Baker|
|Monday, 07 November 2011 10:45|
The Honorable Jeb Hensarling
Dear Representative Hensarling,
In an interview with Newsmax.TV you said that the problem with Social Security is its rate of growth, adding, “You cannot spend money you do not have. Otherwise you are borrowing from future generations.”
This is not an issue of spending money on Social Security that we do not have. Social Security is funded by a dedicated source of revenue, namely the Social Security payroll tax. As long as new workers continue to enter the workforce as projected, the program will continue to be funded.
You also mention the solvency of Social Security. There is relatively little cause for concern here, either. The recommendations of the Greenspan Commission in 1983 led to the growth of a large surplus in the Social Security trust fund that has since been used to buy U.S. government bonds. The government sold these bonds to the Social Security trust fund, just as it sells bonds to individuals and private corporations. Just as with any funds that come from the purchase of bonds, the money is borrowed by the government, but repaid at the end of the term of the bond. Along with payroll taxes, the proceeds from these bonds are used to pay Social Security benefits.
In fact, the projections of the Congressional Budget Office (CBO) show that Social Security will be fully solvent for the next 27 years (through 2038) and will continue to pay a substantial benefit from 2039 onward even if no changes are ever made. This means that when your 8- and 9-year-old children retire at the normal retirement age and assuming they have been as successful in their working lives as you have, they will receive benefits of $47,567 and $47,048 (in 2011 dollars) each year for the rest of their lives. According to CBO, the amount of revenue necessary to allow the program to pay full benefits over its 75-year planning horizon is less than one-tenth the size of the upward redistribution to the richest 1 percent over the last three decades.As the Republican co-chair of the Congressional “super committee” on the deficit, it is vital that your statements about Social Security are accurate and factual. If you still are unsure on this issue, I would be happy to discuss the background further with you and your staff.