Social Security and the Deficit: More Basics
When the New York Times or the Wall Street Journal reports on THE federal budget deficit what number do they use? When OMB gives a top line number for THE deficit what is included or not? In particular is Social Security included? Now some will immediately jump in and say, and perfectly correctly, that Social Security is “off budget”. That is current law. But does it mean that Social Security is NOT included in the numbers used by government officials and political and economic reporting when talking about THE deficit? Well no.
When I typed the simple question into my browser of ‘what is the federal deficit’ an early result was this one:
http://www.usgovernmentspending.com/federal_deficit_chart.html
And in the accompanying chart we see the number as usually cited, one that shows that THE deficit topped out at $1.413 trillion in FY 2009 and was at the point of chart compilation projected at $973 billion for 2013 (a number that has been revised downward since).
Now where does this number come from and what exactly is it referring to? To get an answer to that question I would refer you to the Historical Tables of the Budget for Fiscal Year 2014 as published by OMB.
http://www.whitehouse.gov/sites/default/files/omb/budget/fy2014/assets/hist.pdf (2.2 MB)
If you scroll down the Table 1.1-Summary of Receipts, Outlays, and Surpluses or Deficits (-): 1789 to 2018 starting on page 23 you will see a column of fiscal years and then nine columns of dollar figures grouped into threes. The first group of three has the heading ‘Totals’ with sub-headings ‘Receipts’ ‘outlays’ and ‘Surplus or Deficit (-)’. I suggest the most natural reading here is that the column labeled simply ‘Surplus or Deficit (-)’ under the heading ‘Totals’ is representing THE budget deficit as normally cited. And indeed if you scroll down through the table to FYs 2009 and 2013 you do find that same $1.413 trillion for 2009 and $973 billion estimated for 2013. And I challenge anyone to find a mainstream or even lamestream media outlet that actually uses any other number.
Now is this the whole story? Why no, there are still two groups of three columns in Table 1.1 with the respective headings of ‘On-Budget’ and ‘Off-Budget’ with the same three sub-headings ‘Receipts’ ‘Outlays’ and ‘Surplus or Deficit (-)’. And if we scroll down and inspect the row for that peak year of 2009 we would see that the ‘On Budget’ ‘Surplus or Deficit’ was actually $-1.549 trillion which was offset by the ‘Off Budget’ ‘Surplus or Deficit’ of $137 billion to yield our familiar total DEFICIT of $1.412 trillion.
Let me spell this out slowly. The word ‘DEFICIT’ as normally used in government and media reporting is the SUM of ‘Off Budget’ and ‘On Budget’ ‘Surplus or Deficit’. It just is.
Now what all in included in ‘Off Budget’ numbers. Well we find the answer on page 13 in ‘Notes on Section 1’ where we are told “Off-budget transactions, which consist of the Social Security Trust Funds and the Postal Service fund”. Okay simple enough. But let me make three observations.
One: off-budget and on-budget do NOT correspond to ‘Trust Fund’ or ‘General Fund’. Because all parts of Medicare, including Part A which is funded out of payroll taxes allocated to the HI (Hospital Insurance) Trust Fund are actually included in ‘On Budget’.
Two: an inspection of the ‘Off Budget’ ‘Totals’ shows that this category has been in Surplus since 1985 and projects to remain in surplus until 2016.
Three: all of the surplus in the ‘Off Budget’ category is due to Social Security, because we don’t even have to dig into the subsidiary tables to know the Post Office isn’t and hasn’t been running surpluses.
Which leads to the grand finale. Does Social Security ‘contribute’ to THE federal deficit? Well not if you take ‘contribute’ to mean ‘add to’. Because for nearly 30 years Social Security has been in surplus and so actually has subtracted from the larger ‘on budget’ deficit to give THE deficit. By that same token if we take ‘contribute’ to mean ‘is calculated as part of’ then the answer is clearly yes. Social Security contributes to the deficit – by REDUCING IT. Will it alTays serve to reduce the deficit? Well no. Per Table 1.1 the total ‘Off Budget’ ‘Surplus or Deficit’ turns negative as soon as 2016. Unless we take the relatively minor steps needed to put it back into actuarial balance. Which would make the answer ‘yes Social Security will continue to be a net positive for deficit calculations’. And a nice start would be to implement Dale’s Northwest Plan of tiny increases in FICA rates. Or there are other possibilities. But in any case anyone who tells you that Social Security has been a major driver of TODAY’s deficit is flat out lying, either to you or to themselves. Because the numbers show that Social Security has actually been a BRAKE and not an ACCELERATOR in this process. But yes indeed it CONTRIBUTES to the process. Just not in the way the so-called ‘Reformers’ would have you believe.
(P.S. a lot of Social Security defenders resist this argument preferring to rely on the “Off Budget” status to argue that “Social Security CAN’t contribute to the deficit”. But to my mind this is a simple distortion of the facts and an attempt to translate “HASN’T” into “CAN’T”. And good intentions only carry us so far, at some point we have to use the numbers and definitions that are actually in play.)
And just to throw in another wrinkle.
Critics of Social Security argue that is is ‘really’ in deficit because it is cash flow negative, that is taking in less in dedicated tax revenues than it spends on benefits. Which leads to us having a shouting match between those who insist ‘Social Security CAN’T contribute to the deficit because it is Off Budget’ and the equally insistent ‘Social Security is ALREADY contributing to the deficit because it is cash flow negative’.
Well yes Social Security is ‘off budget’
And yes Social Security is cash flow negative
But neither of those directly translates into ‘not in deficit’ or ‘in deficit’. They just don’t. Not when we uses the same numbers that are ALWAYS reported in the media and taken from top line CBO and OMB tables. Maybe Social Security’s ‘off budget’ status SHOULD take it right out of deficit discussions. Maybe it makes some sense to use a definition of ‘deficit’ that reflects cash flow. But whether either suggestion makes sense that is just not how the term is actually deployed.
It is what it is.
It’s not a distortion of fact. It’s a confusion of words. Which, I am afraid, we have not resolved here.
As long as “deficit” is understood to refer to a particular document, or bit of bookkeeping, used by Congress to keep track of it’s yearly authorization and allocation activities, SS enters the picture by REDUCING the “deficit” when Treasury borrows money from the Social Security Trust Fund. This INCREASES the DEBT… which does not show up on “the budget” accounting.
Putting iou’s (Government Bonds) into the Trust Fund to “pay” interest does not show up on “the budget” (no cash changes hands). But when Congress must allocate actual cash to redeem some of those bonds (or pay current interest), then Social Security will show up in “the budget” as an INCREASE in the deficit. But this DECREASES THE DEBT, which does not show up in “the budget.”
That should be a great deal less confusing than it sounds.
People get confused because it is almost a simple reflex to think that “deficits” lead to “debt.” Well they do, but not when you are using one of those words in a special way to refer to a specific process, document, or PART of the government’s financial picture, while crossing your fingers behind your back and pretending you don’t know the money was borrowed in the first place and paying it back REDUCES your DEBT, even while it shows up on the “expense” side of the daily ledger.
I don’t know if any of this would change if SS was “on budget.” The facts would remain the same. The way people talk about it… the words they use… would probably be different. But you may be sure the politicians would try to obscure the reality.
and here is where the problem lies:
“we would see that the ‘On Budget’ ‘Surplus or Deficit’ was actually $-1.549 trillion which was offset by the ‘Off Budget’ ‘Surplus or Deficit’ of $137 billion to yield our familiar total DEFICIT of $1.412 trillion.”
Note that the “off budget surplus” is used to REDUCE the “deficit.” Nowhere do you read that the “off budget surplus” is borrowed and INCREASES THE DEBT.
But that is the reality.
and please, please note that I am NOT disagreeing with Bruce. At least I hope not. I just don’t think his explanation is very clear. I hope mine helps.
Well l hope so too.
But I deliberately confined this post to the Deficit having discussed Debt (or at least Debt Limit) in the last.
Things are confusing enough without ringing in every possible change, jot, tittle, variation, and term. That is why the word ‘Basics’ is in the post title.
Hmm, For some reason my comments are getting swallowed. Maybe I will try from a different account.
Bruce
you CANNOT leave “the debt” out of a discussion of “the deficit.” It is NOT a “jot or tittle.” It is the confusing of debt with deficit which is endemic to all discussions about Social Security that allows the LIars to pretend that SS is increasing the debt (false) by saying it is increasing the “deficit” (technically true at some times within the very restricted meaning of “deficit” as it applies to “the budget”… but very misleading.
It is not clear to me that you are not overlooking your own use of “deficit” to talk about “the Social Security deficit” by which you mean, I hope, the “actuarial deficit,” which is NOT the “budget deficit”, and not the “national debt.” It is not a debt of any kind, and it does not contribute to the budget deficit in any way.
Words can lead you astray unless you are very careful, or very willing to clear up the confusion that often results.
I am sorry to “go on and on” but I can’t just make an assertion and walk away without explaining “the truth” behind the assertion.
The actuarial deficit is a projection or prediction that at some time in the future the CURRENT tax rate will not be sufficient to pay for the CURRENT benefit schedule. This has no effect on the CURRENT federal budget deficit, and it has no effect on current or even future federal debt. The actuarial deficit will be fixed either by an increase in the payroll tax or a decrease in benefits.
The (sometimes) current “cash flow negative” of Social Security is NOT a condition of deficit, let alone debt, in Social Security finances. It is just a way of saying that SS is drawing from its savings to meet current expenses… which is what the savings were created for. Only an idiot or a liar would suppose that SS (or you) can never withdraw money from your savings account without being “bankrupt” or “broke, flat busted”.
However SS being “cash flow negative” does mean that Treasury (or Congress) has to come up with actual dollars as opposed to “iou’s” to pay SS BACK the money it borrowed FROM SS. This does show up on “the budget” as an “expense” which does in that sense “contribute to the deficit”. But again, only an idiot or a liar, would claim that paying your bills… paying back a loan… is the “fault” of the person you lent the money to.
And I need to possibly correct myself. It may be that the SS money borrowed from SS or the money paid back to SS does not actually show on “the (on budget) document.” It may be that it only appears in the mysterious On Budget deficit plus Off budget surplus equals “the” Deficit. This is a matter of how the budget accountants (including the “off budget” accountants) want to present their work. It is, like many, many “balance sheets” not exactly “the truth, the whole truth, and nothing but the truth. At best, it is somebody’s honest attempt to report the information in a way that is useful to the people who need it. But it is also open to distortion by the Liars, and to confusion by even those who think that “it is what it is” is an adequate explanation.
Which is what I was trying to avoid in my own case by going on and on here.
That debt and deficit interact and even interlock doesn’t mean it is useless to discussion each in isolation. In fact I suggest that is what makes it even more important to do so.
It is tempting to think that ‘debt’ is simply the accumulation of ‘deficits’ plus compounded interest. It isn’t, mostly because we are talking about two kinds of debt: ‘debt held by the Public’ and ‘intragovernmental Holdings’ that work in different ways and have different roles to play and yet for a variety of purposes are summed together in a category confusingly known as ‘Public Debt’ which summed debt is essentially identical to ‘Debt Subject to the Limit’.
Currently we have two different discussions going on, one around the CR to fund the operations of the government over the next weeks, months or ideally year, and the other around raising the Debt Limit. The first discussion is defined and scored in terms of ‘deficit’, the latter in terms of ‘debt’. And before we bring Social Security into either discussion it is important to understand who it is related to both. Because it doesn’t react or get scored in the same way or direction.
CBO uses as a primary metric for establishing the financial impact of legislation the effect on the 10 year deficit number. And if we are discussing 10 year deficits and Social Security in the same debate it is I think important to realized one) that Social Security was not the cause of that ‘out of control’ $1.4 trillion deficit in 2009 but actually reduced it by $130 billion; two) that Social Security projects to run such scored surpluses for the next few years and will contribute only small deficits beyond that; and three) that when you are dealing with a 10 year window it makes no sense at all to be discussing policy changes that won’t go into effect until year 11. Because you are going to get a score of ZERO from CBO.
The Republican position on Social Security is that we have to do something and that ‘immediately if not sooner’ is the right time frame. On the other hand a key part of their position since 1983 has been that any changes not affect folks ‘in or approaching retirement’ which they generally define as 55 and older. But this means that any ‘benefit bsed fix’ installed on this combined basis will have literally no effect on your 10 year budget deficit score. This doesn’t necessarily invalidate your concerns about Social Security but does show that attacks on it in the context of current year deficits or even 10 year deficit numbers is basiclly a False Flag attack.
On the other hand Social Security Trust Funds do score as Debt Subject to the Limit and so are at least arguably relevant to a debate over the Debt Limit. On the other hand the relation of Social Security cuts to Debt is a little counterintuitive because depending on your formulation any such benefit cuts either add to Public Debt or net out to zero by reducing the other component of that combined measure. So once again bringing it into a discussion of THIS year’s Debt Limit is another False Flag attack. But a different one.
Understanding why these are each False Flag attacks and yet are different requires some detailed understanding of how the CBO and Treasury and OMB variously handle ‘deficit’ vs ‘debt’ and those two vs something called ‘unfunded liability’ which is in reality neither.
Yes ultimately it is one Social Security program and the fundamental argument for preserving it doesn’t revolve around either ‘deficit’ or ‘debt’. But as a Defender I have to address the various False Flag attacks that are going on, and their strategy and tactics even as I keep an eye on the actual enemy whose motivations may not really have to do with either.
Other Defenders might see all this as just hyper-technical word and number play that detracts from the bigger picture. Well maybe. But they might be a little upset if the Deficit Hawk Flag is flying over the broken Fort Social Security because wiser heads know that is really not the key issue. Hmm well, tell that to the Pirate Fleet that is currently on the horizon. If in this duel their weapon of choice is Deficits then Deficits it shall be. Or if Debt, then Debt. Because the defenders don’t always get the free choice of weapons here.
Bruce
what does any of that have to do with people claiming that Social Security increases the deficit, or the Debt?
It does neither.
If you borrow money from me and then claim that I have increased your debt, or deficit, you are either insane or a liar.
All of the pleadings to “technical language” depend on not fully understanding the technical language.
Social Security does not borrow money. It therefore does not contribute to (increase, or cause) either deficit or debt.
The debt is created when the Congress borrows money FROM Social Security, and “the deficit’ would be created in the budget when the Congress has to pay BACK the money to Social Security that it borrowed FROM Social Security. This “increases the deficit” only in the sense that “the deficit” is defined as “the on budget deficit (the difference between what congress taxes and what congress spends) minus the Social Security surplus borrowed by the government.”
This is a bizarre, counterintuitive, and misleading way to talk about deficits… justified only by assuming that “the budget” is ONLY about cash in versus cash out, and what that implies about necessary “borrowing from the public.”
That might be perfectly understandable and legitimate, but it is NOT the way to understand the relation between Social Security and “the debt” or “the deficit.”
The confusion referred to above by both Bruce and Dale occurs only if one insists on the extra-legal concept of a unified budget. I would rather use the term illegal, but I’m not sure an act is illegal if it only obscures a legal concept.
There is no legally defined unified budget. Once that issue is put to rest the confusion regarding Social Security, and any other program with a dedicated tax source of revenue and a Trust Fund, is put to rest. It then becomes clear that Social Security is a financial program that has its own source of revenue, its own means of saving excess revenue for later use and using that savings to earn additional revenue. The legislation that is currently in place defines the program in that manner.
FICA revenue is not available for use other than to provide benefits to properly identified recipients of the program. That is mostly retirees and some disabled persons.
That there are excess FICA revenues in some years is no basis for confusion. That excess revenue becomes an asset of the Trust Fund because the same legislation requires that such excess revenues be denominated as Special (ie not publicly tradeable) Treasury notes. Those are the assets of the Trust Fund. Those Treasuries, again in accordance with US Congressional legislation, earn interest and that interest adds to the value of the Trust Fund assets.
This ain’t rocket science or nuclear physics. It is clearly spelled out in existing legislation. Trust Fund assets are a legal debt of the US government. Those assets represent the extent to which the Treasury did not have to raise funds by selling Treasury notes to private investors and other sovereign wealth funds. The Social Security program did not increase the debt. It only provided an additional source of credit to the US government. To suggest that use of the Trust Fund assets has some how reduced or increased the deficit is grossly misleading, as I think Coberly has made clear. The Trust Fund is an alternate lender, maybe a lender of choice for the Treasury Dept. because of the legislation. Lenders do not add to or reduce deficits. They allow the borrower to cover its deficits, as in deficiency in cash flow, by lending funds whereby the deficit becomes a debt. Any other explanation is extra-legal, having no basis in current law. Any alternate explanation would, therefore, be bullshit. And yes, Paul Ryan and his cohorts are the liars, but too many Democrats seems to not know shit from Shinola when it comes to current, and historical, Social Security legislation.
“Bruce
what does any of that have to do with people claiming that Social Security increases the deficit, or the Debt?”
Dale that wasn’t the topic of my post. You may have wanted that to be the topic, you may think that was so much more important a topic that you should just start complaining that neither my post nor my comments addressed your preference, and that is your prerogative I suppose.
But it wasn’t my issue here today on this post. Do you see anything in my original post explicitly about people claiming Social Security increases the deficit? Well no. Now is that claim somewhere in the motivation of my having posted a piece on how Social Security is treated in federal deficit reporting? Probably. But I chose to choose the slice of the topic I chose. And you can respect that choice or not. Which doesn’t make it my problem.
I think it interesting to get down in the weeds of federal budget reporting. You think it a distraction from the crusade. I guess we will have to disagree on who gets to choose my post topics. I am picking me.
Jack there is nothing ‘extra-legal’ about the unified budget concept. It is not current law but there are very good reasons for Treasury to use a version of it in its historical tables. Because as historical tables you would want them to compare apples to apples as much as possible.
Now it is not like OMB is just going rogue here. If you read carefully through the explanatory materials and the footnotes you can reconstruct the precise history of programs going off and on budget over the years. With the emphasis on ‘careful reading’.
But rightly or wrongly nearly everyone who uses this particular set of historical tables and related ones in OMB and CBO reporting uses a ‘Total’ number that is the sum of ‘On Budget’ and ‘Off Budget’. Now it is true that the ‘Total’ numbers track the old ‘Unified Budget’ numbers for the years that the Unified Budget was in effect. Well from a comparative perspective this is a feature and not a bug. But it does make it important (to me) to point out the details here when Congressmen and others propose you use faulty descriptions of what the numbers mean to advance legislation with the intent of gutting Social Security. Including some of the claims that so concern Dale.
But understanding the ins and outs of this stuff is hard. And just jumping ahead has led a lot of people on both sides of the issue to make claims about Social Security that just are not true. Like the one defenders do in claiming ‘Social Security does not and cannot effect the deficit’. Well maybe that is true in some fuzzy abstract equity sense but in the cold light of day in the data tables it just misrepresents the numbers.
And I equally don’t find claims that the standard deployment of budget numbers that has held for decades is somehow ‘extra-legal’ just because Congress keeps screwing around with Budget rules.
There was a time that Medicare was in the unified budget, then off budget and now on budget. But where is the real world significance of any of that? is there a reason why Social Security is treated differently than Medicare Part A for this purpose even though their financing systems are almost identical (dedicated payroll tax, Trust Fund)? Well yes. Is it really important? No, not if you are able to keep your numbers straight. Which might need the aid of a map. Which I am trying to provide.
As to your substantive point. Well you are making much the same mistake as Coberly by ringing in issues relating to ‘debt’ to dismiss discussions about ‘deficits’ as ‘grossly misleading’. They only are misleading to those who let themselves get mislead by confusing ‘debt’ and ‘deficit’ to start with.
Maybe ‘deficit’ is not the best category to approach Social Security finance. But that does not mean its deployment is some criminal conspiracy to subvert current budget law. It is useful enough in the right hands.
Even if it has a whiff of bullshit to you.
Bruce
This is what you posted:
“The word ‘DEFICIT’ as normally used in government and media reporting is the SUM of ‘Off Budget’ and ‘On Budget’ ‘Surplus or Deficit’”
This is confusing. And why i responded and what i responded to. I have no doubt that you know “the facts” as well as the “terminology.”
But your explanation is confusing.
“The” deficit may well be “the sum of” the on budget deficit and the off budget deficit, but since the off budget deficit is a negative number (because it is a surplus), then your formulation results in “The” deficit being less than the “on budget defict”… by virtue of borrowing that surplus.
It is the fact that the Social Security surplus is being BORROWED by the Congress that gets lost in the recitation of the “correct terminology.”
Nor is it clear what an “off budget deficit” would look like, or where it would come from. Since SS cannot borrow, or spend more than it has coming in from payroll taxes and interest on money saved from previous payroll taxes.
I guarantee you the budget experts know this. But they are just fine with the confusion. I am not.
Trying to make sense out of what you are saying is not “changing the topic.”
And I am not arguing that we don’t “use the numbers and definitions that are actually in play.”
I am arguing that we need to understand the numbers and definitions that are actually in play, and try to explain them to people so they won’t be fooled by claims that SS “increases the deficit.”
“They only are misleading to those who let themselves get mislead by confusing ‘debt’ and ‘deficit’ to start with” would be a pretty silly copout on the part of those who have chosen to defend Social Security from the people who are lying about it.
“But your explanation is confusing.
“The” deficit may well be “the sum of” the on budget deficit and the off budget deficit, but since the off budget deficit is a negative number (because it is a surplus), then your formulation results in “The” deficit being less than the “on budget defict”… by virtue of borrowing that surplus.”
And you say MY explanation was confusing. First after quoting me correctly (“the SUM of ‘Off Budget’ and ‘On Budget’ ‘Surplus or Deficit’”) you then chide m eby paraphrasing that as (““The” deficit may well be “the sum of” the on budget deficit and the off budget deficit “) but THEN complain that I ignored the fact that ‘On Budget’ might be a surplus when you twist yourself into a pretzel with (but since the off budget deficit is a negative number”)
But I never actually said the middle term, and instead explicitly used the phrasing “deficit or surplus” to cover exactly the case you complain that I am ignoring “deficit is a negative number”. Well yeah that is why I say sum of on budget and off budget “deficit or surplus”.
And then you confuse the whole issue by throwing in the word “borrowing” into a context where it doesn’t apply at all. For example the whole concept of Total Deficit being a Sum of On Budget and Off Budget Deficit/Surplus would still be valid even if Social Security had the Trust Fund invested in Kruggrerands rather than Special Treasuries.
I’ll agree that the whole matter is complex, but frankly you introduced most of the confusion by mistating my words and injecting extraneous concepts into a simple arithmetic formula.
In FY 1999 the On Budget component was in Surplus and the Off Budget compoenent was in Surplus and when you added On Budget to Off Budget you got a combined Surplus number. A + B = C. Well that equation still holds. Except that A currently is a negative number and that greater in magnitude than postive B and so making C a smaller negative number. Somehow this piece of 5th grade arithmetic has you flummoxed. And leaving readers of my post probably wondering what the heck anyone is arguing about here.
“I am arguing that we need to understand the numbers and definitions that are actually in play, and try to explain them to people so they won’t be fooled by claims that SS “increases the deficit.”
Fine Dale and I am all for that. In a follow up post authored by you. Because only you have introduced the meme of ‘claims SS increases the deficit’.
Of course there are people advancing that claim. And yes they need to be confronted. But is it too much to ask that we get the basics of ‘deficit’ down first? Say with a post entitled: “Social Security and the Deficit: More Basics” ?
Yeah I know you are an advanced student wanting to get right to the next lesson or four. But not everyone has been exposed to all this and maybe you should let things get slowed down to the pace of the whole class. I mean nobody forced you to take the Freshman Seminar here.
Bruce
I was not simply addressing currently misleading use of the concept of the unified budget. And misleading it certainly is and the legislation to sanctify FICA revenue and Trust fund assets was done with that in mind. That the use of a misleading concept could very easily evolve into the misuse of the funds in the two budgets. Are you suggesting that there is a legal basis for using FICA revenues to pay for any expense other than Social Security benefits? Same question would apply to the Trust Fund assets. Is Treasury to simply dip into those T notes and assign their value to some other government budget account? Where does it stop, Bruce? Accept one wrong headed concept, even one that has been bandied about for a few decades by Executives trying hard to make it look as though their budget deficits were less than they actually were, and any such concept becomes the next acceptable action.
Focus on the real problems. We spend too much on war and military hardware. We provide corporate America with far too much financial support at the expense of the working hard tax payer. We don’t collect sufficient income tax revenues, all forms of income, to meet reasonable government expenses. Accept a misleading idea and the entire debate moves in a misleading direction. Such as Social Security benefits are draining the budget. That is bull shit.
“Are you suggesting that there is a legal basis for using FICA revenues to pay for any expense other than Social Security benefits?”
No.
Next strawman please.
“Focus on the real problems. We spend too much on war and military hardware”
Absolutely correct. But commenter/poster ILSM has been saying that better and more consistantly than I could for years now. I was invited to Angry Bear to comment on Social Security finance. Not to fix the problems of the world in the order in which Jack and Dale would sequence them.
Look I didn’t ENDORSE unified budget accounting or its simulcrum ‘Total Deficit/Surplus’. Just pointed out that almost universally the number cited in media and by politicians as being THE budget deficit is in fact that combined ‘Total’ number. And that in regards to that ‘Total’ number that Social Security has been and will for the near future be running a Surplus. And so that bringing Social Security into discussions focused on 10 year deficit numbers is a recipe for confusion.
Which seems to be kind of your point as well. But somehow my pointing out some established budget arithmetic has made me an advocate for that arithmetic. When instead my message was and remains ‘It is what it is’.
Frankly I am baffled at the idea that introducing clarity and precision into the discussion will “easily evolve into the misuse of the funds”. Well I suppose if people let it. Me I think sunlight remains the ideal disinfectant.
And I will never endorse the suggestion of “Don’t confuse the peasants, it only detracts from the messaging”. Because I come from a long line of peasants. And I’ll take the risk of exposing them to what we all call ‘edication’. And sorry to say there is more than a whiff of that “Don’t confuse the peasants” in your “Focus on the real problems”.
Plus somebody has to train the bean counters on our side of the barricades. Because God knows the Bad Guys have expert ones in Biggs and Blahous. And they will pick apart any definitional and numeric errors we might make. Especially lazy ones like “Social Security doesn’t effect the deficit”.
I’m with Jack on this. There is no such thing as a “unified budget” if the law says it doesn’t exist. By law, the funds are not interchangeable or fungible and the funds in neither may be used to support the other. You can’t say the law doesn’t matter because so many people ignore it. Using a “unified budget” is simply a misleading practice. It was equally misleading when Clinton used it to exaggerate the extent of his surpluses (although he did, in fact, show a surplus in the general fund anyway).
For some kinds of high level economic analysis, combining the funds into aggregates probably makes sense. But for public policy purposes, it does not for the simple reason that by law they are not unified. It’s the law that matters here, not common parlance.
Did Bill Clinton have have a deficit or a surplus?
Most people would say there was a surplus. But if it were not for the excess contributions of SS during those years, it would have been a deficit.
In 2016 SS will be in full deficit (all revenue sources will be less than outlays).
Does this mean that SS will be adding to the deficit then?
Bruce
no. if the surplus was invested in Krugerands, it would not be lent to “the treasury” and then it would not be subtracted from the on budget deficit because the congress would then have to go out and borrow the money from somewhere else. and the reason the SS surplus is subtracted from the on budget deficit is to arrive at “the deficit” which must be made up by borrowing…. less than would have to be borrowed if the SS surplus were not being counted as “income” to the budget.
and if that is still confusing…. that’s the whole point.
i did not complain that you “ignored” this. I complained that your “explanation” was confusing.
Krasting
I think you are wrong about 2016. What do you mean by “full deficit”?
If you mean SS will be paying out more in benefits than it takes in in payroll taxes, it will still have its reserve to draw from. Of course drawing from its reserve means that Congress has to pay back the money it borrowed from SS.
That would, the way “they” talk about it, mean that SS would be “adding to the deficit.” But that is misleading, and that is what I am trying to clear up here. “Adding to the deficit” in this context means that after Congress has layed out what it wants to spend and how much It brings in real taxes, the “free money” it has been getting from Social Security will no longer be there to reduce its deficit. In fact, since it has to start paying back that “free money” (it was never free except in the minds of the people writing the budget) the payment on its debt will add to its deficit.
Now that is confusing to most people, and I am getting a little tired of trying to explain it. But the fact is SS will only “add” to the deficit under the very peculiar ways “the budget” thinks about borrowed money. Paying back the money it owes to Social Security will in fact be REDUCING its DEBT.
But if you are Saying that SS will be “spending more than it is taking in from all sources including its reserve (and interest on that reserve)”, you are wrong. Social Security can’t do that. IT would instead have to stop paying “scheduled” benefits and pay something less, or raise its own payroll tax, but it WON’T be adding to anyone’s debt.
Of course congress could decide to borrow money from “the market” and backfill Social Security… but it won’t. In that case SS “would” add to the debt (and the deficit), but that is not current law, and it is very very unlikely to ever become law. Unless of course the radical left is in power by then, in which case they will “tax the rich” and SS will become just another welfare program, and will then be part of the budget, and of course the budget deficit, and the national debt.
But that is NOT what’s going to happen.
Bruce
you are taking this too personally. I am on your side. But your idea that “it is what it is” is a sufficient “eddication” for one lesson is not something i can accept.
as you ought to be able to see even in the few comments here, “confusion is rife.”
and “social security affects the deficit” is a completely misleading statement, however “technically” true in the minds of the technocrats who are either deliberately misleading the people, or just smug academics so pleases with themselves being “in the know” that they can’t bring themselves to deconstruct the “technical language” for the rest of us.
Social Security has no effect on the deficit or the debt whatsoever. Congress BORROWING Social Security money DOES affect “the deficit” the way they do their accounting, and DOES affect the Debt… because the Debt includes money OWED TO Social Security.
I have no idea if that is clear enough to people, or even if I have overlooked some critical fact, but at least that much is short enough to be included in a discussion of “the deficit and Social Security” without “changing the subject.”
And I probably should remind you that I used to teach Algebra, and negative numbers are confusing enough to most people without sneaking them into language with your fingers crossed “The” Deficit is the SUM of the “on budget deficit” and the “off budget deficit”, without making very clear that the off budget “deficit” is a negative number because it is actually a surplus, AND that the money is BORROWED money which you can’t just add to the “on budget deficit” and walk away smiling as if you have solved the “deficit/debt” problem.
“It is what itis,” is certainly an odd way to characterize the duplicity of the “unified budgbet” concept as it is being used by too many political operatives. And by operative I include those economists and other former government agency practitioners who serve now at the pleasure of the wealthy. Many ideas and activities injurious to the common people are favored by large numbers of people and that’s been the story of man throughout history. Many ideas that are self injurious have been favored by a great many people. Those ideas need to be criticized for what they are, wrong for what ever reason they may be so.
I wonder if Lincoln had ever thought “It is what it is,” regarding maitaining the Union and ending slavery. The unified budget may be less dramatically important one way or another, but it is still a misused concept used for the purpose of confounding an debate.
Jack
glad you made it past the page shift.
I think you are essentially right about the “unified budget,” though even I lose track of exactly what that means… because people don’t use it consistently.
SS is “off budget,” but then they drag its “surplus” in and use it to “reduce” the “on budget” deficit… which is exactly what would happen if SS were “on budget” in the first place.
Except that doing it either way loses track of the fact that the SS “surplus” is being BORROWED by the government and has to be paid back. And of course, though it is of far less importance, that the “true” deficit is being masked… “reduced”… by pretending that the money borrowed from Social Security is “income” to the budget.
Why Bruce thinks he can overlook all this by saying “we have to use the numbers and definitions in play” is beyond me. If I… and he… were using the numbers in play we’d have to talk about the 8.6 Trillion without ever saying… “that turns out to be an eighty cent per week raise in the payroll tax each year for some, not all, years, while wages are projected by the same Trustees to rise more than eight dollars per week every year.”
Half an explanation is no explanation at all. In some hands it is a lie.
In countering this lie i, even i, have made some unfortunate choices of words. But I keep trying to make the real facts of the situation clear.
The importance of maintaining the distinction between off-budget and on-budget is that the law, which keeps them separate, reflects the understanding of the people that Social Security with its dedicated tax is separate and inviolate. they have been told that they are paying for it, and they are entitled to have that commitment honored.
As soon as you start blending them into one big pot, Social Security becomes just as susceptible to budget-saving cuts as any other expenditure. FDR and Frances Perkins understood that. I’m surprised that it is being treated as a kind of quaint logic here.
Correction for BKrasting: 1999 and 2000 were still on-budget surpluses. Yes, they were a lot smaller, but they still happened
Urban
exactly.
so whent “The” Deficit is reported as “The Sum of the on budget deficit and the off budget deficit (which is a negative number because it is a surplus), this is just a cute way of getting around the law… that is counting the SS surplus against the budget deficit in order to make the budget deficit look smaller.
And has the added advantage to those who want to confuse the public, of their being able to say that Social Security will increase the deficit, when it comes time to repay the money borrowed FROM SS.
[I think if I keep on saying this in different ways, people will start to catch on to how they are being fooled.]