by Dale Coberly




A group that calls itself “Committee For A Responsible Federal Budget” wrote what it claims to be “Setting the Record Straight on Social Security.”  The article needs to be responded to at some length, both to correct its errors and to show how it goes about its business of lying to people.

A lie is a statement or statements intended to deceive another person. Professional liars can usually manage to lie to their victims and lead them to harm by carefully selecting “facts” so as to lead to a false conclusion without ever actually saying anything that is “technically not true.”

CRFB statements follow in italics.  My replies in plain text.

This post recently appeared in CRFB’s Bottom Line Blog.

Recently, many policymakers and commentators have called for expanding Social Security benefits rather than slowing the program’s costs, suggesting that the program’s current shortfalls are modest and easily addressed. Below, we answer some questions about Social Security to help explain why many of these calls are misguided.

Is Social Security’s Financing Problem Real?

Unfortunately, suggestions that Social Security does not face a financing problem are not based in fact. Already, the costs of  benefits are well in excess of revenue from payroll taxes. Social Security’s cash-flow deficit will add $75 billion to the deficit in 2014, $1.0 trillion over the next decade, and $3.8 trillion in the decade following. As  we’ve explained, the program’s past surpluses do nothing to change its very real current cash deficits. Regardless of whether past surpluses were saved in an economic sense or not, the federal government will have to borrow more to make up for the Social Security system’s cash flow deficit.

I am not sure that anyone has suggested Social Security does not face a financing problem. The question is, or should be, what is the best way to address this problem… and how big is it anyway?

CRFB would like you to believe the only solution is to cut benefits and turn Social Security into a welfare program by means testing.  Social Security works because it is NOT a welfare program. Instead it is a way for workers to save their own money, protected from inflation and market losses, and insured against personal misfortune.  That is, it is protected by the government, but not paid for by the government.  CRFB would tax you  to pay for benefits that only “the deserving poor” would receive after careful examination to be sure they were poor enough to “deserve” welfare.  Then the politicians could squeeze benefits to the level of real misery, preserving only the name “Social Security” but turning it into something ugly that they control themselves, and can always cut by using the politics of “welfare” which they know how to manipulate very well.

The costs of benefits are well in excess of revenue from payroll taxes…”   This is a lie.  But it is a clever lie because it turns on “revenue from payroll taxes,”  completely ignoring the revenue from previous payroll taxes that were saved exactly in anticipation of the higher costs that Social Security is facing today.  It’s as if you saved up money in advance to pay for your Christmas shopping, and then, when December comes, the CRFB runs around telling your neighbors you are bankrupt because you are “spending more than you are taking in.”  Social Security saved up the money in order to meet the costs of recessions and the extra costs of the Baby Boomer retirement.

The CRFB would have you believe the United States of America cannot pay back the money it borrowed because it “did not save” that money “in an economic sense.”  Well, the borrower generally does not “save” the money he borrows.  He spends it.  That’s why he borrowed it.  To pay it back he has to get other money, from work or from other borrowing.  That’s what even the United States of America has to do to pay back money it borrowed… get other money.  CRFB wants you to believe there is something unnatural or wrong about this.

Another reason CRFB can say the cost of benefits are “well in excess of revenue from payroll taxes” is that recently the friends of CRFB persuaded the politicians to “cut payroll taxes” to provide a stimulus to the economy.  They could have provided the stimulus without cutting the payroll tax, but by cutting the payroll tax they can now say with a straight face that Social Security benefits are “well in excess of revenue from payroll taxes.  They knew what they were doing… and yes they are politically powerful enough to do that… because their ultimate goal is to destroy Social Security.

Social Security’s “cash flow deficit” is not a deficit at all.  SS is spending down the savings it created for exactly the purpose it did the saving in the first place.  Nor does Social Security add to “the deficit”  —  here they mean the Federal Budget Deficit, though they don’t mind confusing you by using the word “deficit” to mean different things from one line to the next.   The Federal Budget has been borrowing money FROM Social Security for years….   DECREASING what they call “the deficit.”   Now that they are beginning to REPAY THE MONEY THEY BORROWED they call that “increasing the deficit.”   They can get away with saying this because they never mention that they are repaying money they borrowed..DECREASING  the debt.  This is a backward and deliberately misleading use of language.  Anyone can write up a “budget” and if they do not bother to note the difference between “revenue”  and “money borrowed”, they can call their “deficit” the difference between “money in”  and “money out”… without noting that some of the money in is “debt”… then they can go on to the time when they have to repay some of that debt, and they can say the “money out” to repay their debt is “increasing the deficit.”   It’s a lie, but  they can claim, if anyone thinks to ask, that it is “technically true”  because in their secret language “deficit” just means “money out” without distinguishing between “spending”  and “repaying money we owe.”

Saving “in an economic sense” is another clever lie.   Social Security saved the money. The government borrowed it.  Of course the money Social Security saved is not money “the government saved in an economic sense.”  It’s money the government BORROWED in an economic sense and now has to repay…. unless the CRFB can fool you into cutting SS benefits instead, so the Congress will not have to repay the money it borrowed.

As a matter of fact, if Congress simply raised the payroll tax one tenth of one percent per year… about eighty cents per week per year…. the debt that “the government” owes TO Social Security would never have to be repaid… it would just lie there on paper as a “reserve” never requiring actual cash to change hands.  But CRFB doesn’t want you to know this because their real purpose is to destroy Social Security.  They don’t really give a damn about “the deficit.”  They understand perfectly well that the deficit is not a serious problem, but they have ginned it up as a way of stampeding an ignorant public into destroying Social Security.

The federal government will NOT “have to borrow more” to make up for the SS cash flow deficit.”   The government might have to borrow more, or tax more, or spend less, to PAY BACK THE MONEY IT HAS BORROWED FROM SS. There is NOTHING  wrong with SS finances… SS has money in the bank to pay for their “excess costs” for another twenty years.  After that a very modest raise in the “tax” will enable workers to continue to pay for their own retirements. That is, SS can continue forever, raising the tax a tiny amount from time to time when the costs of retirement go up,  if CRFB doesn’t fool you into cutting your own savings for your own retirement.  They don’t want you to retire, because they know how to make money out of your working for them until you drop. Even if they won’t give you a job, your very poverty will, they think, inspire other workers to work for less money.

Social Security is also in trouble in its own right. The program faces a 75-year shortfall of 2.7 percent of payroll, with annual shortfalls reaching 3.9 percent in 25 years and 4.8 percent in 75 years. According to official estimates, the program’s trust fund will run out of money either in 2031 or 2033. Although these estimates are subject to some uncertainty, the CBO is 95 percent certain the trust fund will run out within a quarter century. At that point, all beneficiaries will face an immediate 23 percent across-the-board benefit cut regardless of age, income or status.

A 2.7% of payroll increase in costs over 75 years is NOT “in trouble.”  It is an increase in the amount of money you will need to save to pay for your own longer retirement. You are going to need the money to be able to retire.  Only a fool… or someone who has been fooled… would refuse to save an extra 2.7% of their wages at the risk of never being able to retire. And you don’t have to come up with that extra 2.7% at once.  You can raise the tax gradually, one tenth of a percent at a time…. something you would never feel.

The day the Trust Fund “runs out of money” DOES NOT MATTER.  The Trust Fund is only a bridge… to bridge over times when payroll taxes fall short of expenses.  This allows the program to run smoothly during the normal ups and downs of the economy… or give us time to phase in what looks like a needed tax raise to pay for a changing demographic situation or permanent downturn in wage growth.  The expected increased tax is not high, and can be phased in at a rate no one would feel or notice.

There is no question that this abrupt benefit reduction needs to be avoided, but doing so will require tough choices. As we’ve explained before, the longer we wait to act, the tougher those choices will be. The actions of those who are downplaying the magnitude of the problem and the need for action to address the shortfalls now will actually lead to deeper cuts in benefits for all beneficiaries or greater increases in payroll taxes for all workers than would otherwise be the case.

This is a lie.  waiting will not lead to increased costs or deeper cuts.  It would lead to a steeper rate of increase.  But even a sudden 2% increase in the tax in 2030 or so would hardly be felt… beyond the screaming for a few week while people got used to the idea. But they would NOT notice it in their lifestyles. What they WOULD notice is that if they did NOT increase the tax, when they came to retire, their benefits would not be sufficient to buy their groceries or pay their rent. Losing 2% of your income while working is something you would not notice. Losing 25% of your income if you are living on Social Security would be the difference between “enough” and “not enough.”  The difference between living indoors buying your groceries at  the store, and living in a doorway getting your groceries out of a dumpster.

Should We Expand Social Security Benefits?

In recent weeks, some have called for expanding Social Security benefits. Although there is a strong case for targeted benefit enhancements, it would be imprudent and irresponsible to enact broad-based benefit enhancements before the program’s finances are under control.

The programs finances ARE under control.   Increasing benefits at this time may not be politically expedient, and would not be wise if it meant “taxing the rich.”  But if the workers are willing to pay for increased benefits… another dollar a week (over the eighty cents required to maintain benefits) would increase benefits about 25%, and that would make a difference in the comfort level of most retirees.

Raising that much revenue to fund Social Security (including higher benefits for wealthy seniors) would suggest that spending more money on retirement benefits for seniors is a higher priority than other options including new investments or spending on children.

They couldn’t leave out the teary eyed “think of the children” ruse.  They are claiming that we can’t pay for our own retirement and still “include new investments or spending on children”  Yes, grandparents, it’s time to quietly leave the igloo and go out into the blizzard “for the children.”  Look around… these are the people cutting food stamps (for children) in order to fund investments… in the next bubble or housing finance fraud?


There is no question that the United States could benefit from improvements to its retirement system, including regulatory, tax, and spending changes across multiple programs.

But one of the major threats to retirement security is the looming insolvency of the Social Security program. The program’s finances must be fixed in order to fully fund benefits and give workers the ability to plan and prepare. Such a fix could increase revenue coming into the system, slow the growth of benefits being paid out, and even offer some targeted benefit enhancements to those who truly need them. (Try to improve the program by using our Social Security Reformer).

The “Social Security Reformer” is rigged so you can’t give the correct answer:  raise the payroll tax by about 1% on each the worker and the employer, phased in at the rate of one tenth of one percent per year. But note that here they are being oh so reasonable: “of course we need to improve the retirement system”, but then watch the axe fall: by “spending changes”.. that is cutting benefits below survival levels.  Again, there is NO “looming insolvency.”   SS does not borrow, does not contribute to the deficit, does not owe any money, and can’t go broke.  That is all the Big Lie that they are propagating to stampede you into accepting “spending changes”….”slow the growth of benefits”…as if benefits were growing… cuts that will make it impossible for you to retire when you need to.

But “retirement security” cannot be used to offer everything to everyone at little to no cost. That type of thinking will lead to stalemate; and as we’ve explained before, the longer we wait to reform Social Security the bigger the problem becomes and the harder it is to fix it. Eventually, the “do nothing plan” would result in a 23 percent across-the-board benefit cut. That’s a threat to retirement security that we ought to avoid.

Here we have the classical straw man. “we have explained…”  They haven’t explained a thing.  They have cleverly sown misleading phrases so that you will think SS is in trouble, and cutting benefits is the only solution… even as they pretend to be open to “revenue enhancements.”

The only revenue enhancement needed is an eighty cents per week per year increase in the payroll tax until life expectancies and wage growth have again stabilized.  It looks from here as if that eighty cents per week per year increase will be limited to about 20 of the next seventy five years while wages will go up about eight dollars per week per year in ALL of those seventy five years.  At the end of the day you will have twice as much money as you do today AFTER paying for your longer and better retirement.   But CRFB doesn’t want you to know that.  If they can cut Social Security they can keep you working… or part of the reserve army of the unemployed… until you are ready to die.  That’s their idea of maintaining your “incentive to work.”

And that’s what this is all about.  Without Social Security you will have to work longer.  And they make money out of every hour you work.