By Cliff Montgomery – Jan. 27th, 2011
It is difficult to get a man to understand something when his job depends on not understanding it.
– Upton Sinclair
In August 2010, the Center on Budget and Policy Priorities (CBPP)–a think-tank which “conducts research and analysis to help shape public debates over proposed budget and tax policies”–released two fascinating reports on Social Security which all Americans should read.
Social Security in fact can pay all benefits until 2037 before any changes have to be made, and those would consist solely of minor policy adjustments which would give the program a sound financial basis for at least the next 75 years, according to the Center.
“Alarmists who claim that Social Security won’t be around when today’s young workers retire either misunderstand or misrepresent the projections,” one report forcefully added.
The conservative lie about Social Security hinges on discussing only the the amount of money the Social Security program takes in every year from workers–which, thanks primarily to a struggling economy, will in 2011 take in less than it pays out in benefits.
What’s left out of the argument is the massive Social Security trust fund, which since the mid-1980s has amassed a budget surplus of $2.6 trillion, according to CBPP.
More precisely, the pundits simply ignore the interest payments earned every year by the two Social Security trust funds–the Old-Age and Survivors Insurance (OASI) trust fund and the Disability Insurance (DI) trust fund.
Those interest payments provide an essential source of income for the two funds.
“Since the mid-1980s, the Social Security trust funds have steadily collected more in payroll taxes and other income than they have needed to pay benefits and administrative costs,” declares a CBPP report which exclusively deals with the program’s solvency.
Social Security trustees have “used that excess to purchase Treasury bonds — over $2.5 trillion worth at the end of fiscal 2009, bearing an average interest rate of 4.7 percent,” adds the study.
“The Congressional Budget Office (CBO) expects the funds to earn $120 billion in interest income in 2010 [alone],” the report continued.
“Excluding [this massive] interest, the Social Security surplus is indeed negative in 2010 through 2013 in CBO’s latest projections,” stated the study.
“Put another way, in those years Social Security will pay out more in benefits than it will collect in payroll and income taxes.
“Commentators who focus on Social Security’s cash flow [while] excluding interest are describing…an important issue, but it has little significance for Social Security’s ability to pay benefits in the years ahead,” declared the report.
