Social Security 101

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I am writing this after seeing young progressives I respect parrot conservative lies told about Social Security. It appears that the press has done a bang-up job of NOT reporting the truth about Social Security and allowing specious conservative lies to take deep root. So deep that intelligent young liberals even believe the spew, not to mention conservatives who have a vested interest in believing and spreading it.

My career, pre-blogging, was as third-party administrator of employer-provided retirement plans. For years I was a certified practitioner, and I watched as private pensions were systematically dismantled, underfunded, and ultiimately converted to 401k plans subject to the whims of the market and unsophisticated investors. While owners might -- MIGHT -- have retired with adequate funds, workers almost never did. The one single thing that every worker could always count on at retirement was (and is) Social Security.

Yet it seems that conservative lies have taken hold to the extent that the truth is called a lie, while lies are called the truth. Once upon a time, that only happened in fiction. Now it's real. So let's talk about Social Security, what it is, and why you shouldn't believe everything conservatives and their minions in the press tell you.

Lie #1: Baby Boomers Will Bankrupt Social Security

Baby Boomers were already planned for during the reforms undertaken under Ronald Reagan's administration. Here's a chart with the inflows and outflows of the trust fund since 1958. As you can see, there has been positive cash flow since adjustments were made to the assumptions, tax rates and SSRAs. Even in 2009, cash flow was positive, leaving a $2.5 trillion surplus in the fund.

Lie #2: There is no Social Security trust fund. It's all smoke and mirrors and accounting lies.

From the SSA.gov FAQ:

Far from being "worthless IOUs," the investments held by the trust funds are backed by the full faith and credit of the U. S. Government. The government has always repaid Social Security, with interest. The special-issue securities are, therefore, just as safe as U.S. Savings Bonds or other financial instruments of the Federal government.

Not only are they the safest investment, they're the only permissible investment under current law, because they are the safest investment.

Social Security is probably the best-functioning and most solvent government program there is. The fact-twisting that yields the idea that surpluses invested in Treasury bonds makes the fund insolvent or non-existent is an infuriating product of right-wing nonsense spin.

Think on this: The entire debate about raising the debt ceiling centers on the stability of the full faith and credit of the US Government. The fact that Social Security surpluses are invested in Treasury securities does not mean there are no surpluses. It means that excess dollars paid to Social Security are invested in the single available investment vehicle which carries a high level of security. China thinks they're a great investment. So did lots of parents who saved for their kids' college educations, until they discovered mutual funds and lost their shirts. If US Treasuries were a vapor investment, would they be sought after and bought by foreign investors? Do those investors think our treasury bonds are vapor? Of course they don't and neither should we. The trust fund and the Treasury are two separate entities. They happen to fall under the auspices of the federal government, but they are not two pockets on the same pair of pants and shouldn't be considered such.

But what about the interest on those bonds, you ask? Isn't that an obligation of the US Treasury and therefore contributory to our federal deficit? No. Because if they weren't purchased by Social Security, they'd be sold to someone else, and the interest would still be paid.

Lie #3: Means-testing benefits does no harm to Social Security

There's a movement afoot among Young Conservative Idiots to means-test Social Security benefits, which also appears to be embraced by some young progressives. Such a move would undermine the fundamentals of the program, because Social Security was established as an insurance program, not a welfare benefit. Because it is a contract between individual workers and the United States government, it cannot be contingent on need.

It is a straightforward quid pro quo: workers and employers contribute throughout their working lives and benefits are paid upon attainment of Social Security retirement age, death or disability. Because contributions and benefits are tied to the Social Security Wage Base (wages subject to the OASDI tax), it doesn't matter if a claimant is a billionaire or a pauper. Means-testing would remove that objectivity and open the door for the contract to be breached on a number of different levels.

Eligibility for benefits must be based upon covered quarters and earnings taxed in those quarters, regardless of whether there might be excess earnings. Means-testing moves it from an objective standard to a subjective standard, leaving the door open for further erosion.

For more factual information about Social Security, I highly recommend Nancy Altman's book "The Battle For Social Security". Altman is a tireless advocate for Social Security, was mentored by Robert Ball, and has a firm grasp on the history of the program as well as the law. It's a fascinating read, especially the part where she reviews what it took to get the program passed in the form we know today. If you're especially wonky, the 2010 Trustees' Report (PDF) is also worth reading.

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