Debts, Deficits and Social Security
With the release of Tim Geithner’s new autobiography the old quarrel about whether Social Security does or even can add to “the deficit” has cropped up again. So rather than weigh in let me start from a more neutral spot. CBO produces a document called the Monthly Budget Review and in Nov 2013 it carried this title: Monthly Budget Review—Summary for Fiscal Year 2013 The introductory paragraph of the Summary of this Summary reads as follows:
The federal government incurred a budget deficit of $680 billion in fiscal year 2013, which was $409 billion less than the deficit in fiscal year 2012. The fiscal year that just ended marked the first since 2008 that the deficit was under $1 trillion. As a share of the nation’s gross domestic product (GDP), the deficit declined from 6.8 percent in 2012 to 4.1 percent in 2013. (The deficit was 1.1 percent of GDP in 2007, prior to the recent recession.)
and in turn was illustrated with the following graph: Fiscal Year Totals
Now in the normal course of reporting CBO gives figures for any number of ‘deficits’ including ‘on-budget deficit’, ‘off-budget deficit’, and ‘primary deficit’. But here they simply reference THE ‘deficit’ without qualification. So which of the three above adjectivally modified ‘deficits’ is CBO using in this Summary of its Summary of Fiscal Year 2013? Well none of them. Instead it is using a metric which by some measures no longer exists, at least under some readings of current law. Which has led to untold confusion. Confusion which I hope to unravel a bit under the fold.
Defenders of Social Security generally claim that it does not ‘contribute’ to the deficit and indeed can not by law. And they make a fine case, certainly linguistically. Because you would think that the right way to measure THE ‘budget deficit’ would be to include the items that were ‘on budget’ and exclude the items that were ‘off budget’. Because otherwise why use the terms ‘on’ and ‘off’ in relation to the budget to start with? Now it turns out that under current law there are two federal programs that are ‘off budget’ – Social Security and the Post Office. So the case would seem to be open and shut “What part of off-budget don’t you understand?”
On the other hand self-styled ‘Reformers’ of Social Security insist that this is pure nonsense and that what really matters is real world cash flow. They would have it that any time total dedicated tax revenues for Social Security fail to cover all current cost with the difference being made up from the General Fund that it should be considered in deficit. And their case seems fairly linguistically sound because CBO calls the number that gives this particular total the ‘primary deficit’. Which would seem to make any other metric be by definition ‘secondary’. Or as they might say “What part of primary budget deficit don’t you understand?”
Well what I understand is that these two camps will never understand each other. Or for that matter properly interpret CBO’s Summary of its Summary. Because in the above quoted text and table CBO is using a metric that combines ‘on-budget’ and ‘off-budget’ deficits and which ignores ‘primary deficit’ entirely.
Can anyone say ‘incommensurate’? Well I can and have but with very little success. So instead I invite all who might come across this post to link through to the CBO Summary of Fiscal Year 2013 and examine for themselves what is included in ‘outlays’ and ‘revenues’ that in turn gives a combined figure of “$680 billion in fiscal year 2013”.
(Spoiler: it includes Social Security revenues and outlays INCLUDING interest and so doesn’t match EITHER of ‘on-budget’ or ‘primary’ deficit.)
One way out of this thicket is to repose the question. Rather than ask:
“Does Social Security contribute to the deficit?” we could ask:
“Does Social Security’s net of Revenue including Interest minus Cost get calculated as part of CBO’s $680 billion reported deficit?”
The answer to the first question is “It depends”.
The answer to the second question is “Yes”
On the other hand that nice simple question and answer requires a followup:
“Does that calculation of Total Revenue Including Interest minus Total Cost carry a positive or negative result/” And then another: “And will it always carry the same sign?”
Because as wise men often say “Everything is simple if you ignore the complexity”.
A bit of a nitpick, the Postal Service isn’t fully off budget. Yes, it’s operations and revenues appear mostly off budget but it’s retirement accounts and debts are largely on budget. The 2006 PAEA which has largely caused postal “losses”, mostly through an accelerated schedule of accounting for retiree health benefits, was designed to budget score positively and in ways that were intended to transfer off budget postal revenues into on budget accounts to lessen deficits.
Federal budgeting is very problematic. As you show it doesn’t clearly account for SS. It doesn’t distinguish between investment and immediate spending very well either.
I have never studied Post Office financials but one thing I do know: Congress has been fucking the PO around for years apparently just to validate their “government is the problem” “private is always more efficient” talking points.
Similarly they have crippled Social Security operations funds forcing early closures of field offices nationwide and the outright closure of smaller more convenient ones. In Seatttle there used to be a field office in the International District/Chinatown which was easily reached by low income seniors of all ethnicities. Today if you want to ask a question you have to go to the downtown Federal Building and go through the full blown security procedures attendent on going into that kind of faciity. And all this even though Social Security Admin currently incurs costs of less than 1% of benefits paid and is funded 100% from the existing $2.8 trillion Trust Fund.
In both cases, PO and SocSec, it seems to be pure spite exercised purely to advance a partisan agenda. Which raises the question of why the Democratic Senate has just gone along.
The federal government collects from me every paycheck an amount that is called the OASDI tax (Old Age, Survivors and Disability Insurance). I think the basic question is whether or not the fact that it is called that means anything. If it does, then if the US takes in more in OASDI (Social Security) taxes than it pays out (as it has for decades), then it has incurred a debt, and the cumulative amount in the Social Security Trust Fund is a part of the national debt. If the Trust Fund redeems some Special Treasuries and the US then sells the same amount of regular Treasuries, the debt stays the same, so Social Security has not contributed to the deficit (if that means change in the debt – of course, there are different ways to measure debt). So I think those that say Social Security can contribute to the deficit are saying that OASDI taxes are no different from any other tax, and the government has no obligation to spend them on Social Security.
Mike B all that is broadly correct but often wrong in detail.
For example OASDI is not currently taking in enough from FICA alone to pay benefits and hasn’t for some years. Much longer if you take DI in isolation. Instead the revenue gap was bridged by tax on benefits and these days interest on the Trust Funds. But this is a small point.
And yes it matters that FICA is a dedicated premium/tax. The accounting is pretty straightforward: Treasury collects funds from FICA and from quartlery income tax receipts (for tax on benefits) and twice a year makes interest payments to the special segregated accounts that represent the Trust Fund and account for every penny (literally) in a montly report.
As to net redemptions of Special Issues being offset dollar for dollar by issuance of new Regular Treasuries, well I think the reality if more complicated than the simple equation suggests. On the other hand top, top economists like Henry Aaron of Brookings are insistant that this is true, and Henry has chided me directly for claiming otherwise so I’ll just let that one go.
Plus you can’t just slide from ‘debt’ to ‘deficit’. The former is not just the sum of the latter, especially when it comes to Social Security. In fact Social Security surpluses add directly to Public Debt.
Finally there are three camps of people who insist that Social Security adds or can add to the deficit: the liars, the confused, and then a small handful of Social Security supporters who actually understand the nuts and bolts of Social Security budget reporting. I like to flatter myself that I am in the latter category but am always at risk of being assigned to one of the first. Because all people hear when you say “Social Security adds to the deficit in certain cicumstances, just not now or at anytime since 1982” and they assume you have just swallowed AEI/Cato propaganda whole. Au contraire mon frere. On the other hand simple denial of the possibiity of SS on paper adding to the deficit as CBO defines it in the passage cited does run the risk of validating the Bad Guys once that happens. Which it wil within the decade. Even as Social Security will then be sitting on a $3 trillion stack of assets.
To repeat: Everything is Simple. If you Ignore the Complexities.
To boil this down a little bit. We have two camps ‘Supporters’ and ‘Reformers’ each making a parallel claim:
‘Supporters’: If you use our definition of ‘deficit’ Social Security has not and cannot ‘contribute’ to it. This is supported by current law.
‘Reformers’: If you use our definition of ‘deficit’ then Social Security can and current does add to it. This is supported by real world cash flow analysis.
Me: Well CBO doesn’t use either of your definitions of ‘deficit’ in its top-line number and the MSM typically takes their reported numbers from CBO. So in the context of the numbers that are most often in the public domain neither of your claims is exactly correct. Though internally consistent given your definition.
I think the only significant measure of deficit is the deficit that directly adds to the debt. If it doesn’t increase the debt, it doesn’t matter, or if it does not increase the debt, why does it matter?
Bruce – I obviously should have qualified my last sentence. I was referring to your “Reformers,” which I took to mean those who use the deficit argument to push for cuts (and who often also say that the Trust Fund isn’t real). Clearly Social Security can contribute to the deficit under some definitions of deficit, including the one you cited, which I think goes along with using debt held by the public as the measure of debt, which doesn’t include the trust funds. Together, these suggest that Social Security taxes and the Trust Fund are just another part of the USG.
Webb slips in:
“Even as Social Security will (a decade from now) then be sitting on a $3 trillion stack of assets.”
The April CBO Base line has OASDI assets of $2.15T in ten years. We shall see what SSA has to say soon, but I don’t think even they will say it will be $3T.
The CBO report:
Oh Krasting you got Me!
I could have said “half a decade from now” or “a butt-load stack of assets” but you are correct. It would only be $2 trillion+ in a decade. Really such an insignificant amount that we can justify shuttering SocSec field offices in 2014.
Damn! I was THIS close to a clean getaway when Sheriff Krasting pulled his gun on me. Darn the bad luck.
Oh EXCET I didn’t even say what you claim I said. I never said “a decade from now” and it wasn’t a parenthetical. I was very careful to say “within a decade” in a separate sentence (and three to five years is “within a decade”). Moreover I was referring to the time when Social Security went into ‘deficit’ as CBO would define it. So I guess Sheriff Krasting is just a pole-cat liar with an empty gun. So Vamanos Compadres! WE RIDE!
Jerry I think it is close to a category mistake to think of ‘deficit’ primarily in terms of ‘adds to debt’. As my friend Steve Roth might say in other contexts “don’t confuse flow and stock”.
In FY 1998 Social Security ran a surplus and the General Fund ran a surplus. And yet Total Public Debt went UP. Now it is true that Debt Held by the Public went down but however you slice it it is difficult to wrestle the surplus numbers that year in line with the changes in debt level. Mostly because of the odd ways that Trust Fund interest is handled in the two sets of calculations.
To put it another way while in an overall sense any firms Income Statement, Balance Sheet and Statement of Cash Flows repesent the same reality and ultimately use the same set of numbers they can and do have vastly different ‘bottom’ lines. That is a given firm can run a huge ‘profit’ yet in certain cases be cash flow negative for the year. Which can be a problem.
The same thing can be true if you focus too strongly on ‘deficit’ or certain types of ‘deficit’ and their relation to certain types of debt. It just might not tell you the whole story.
Well Webb, if you look at the CBO report they have the OASDI TF topping out at 2.75T in fiscal 2017, and down from there.
We shall see soon enough what SS has to say. I say the TF will not hit $3T in any time period under current law.
I am sorry to say that I think my friend Bruce Webb only adds to the confusion and ends up supporting the liars.
SS is paid for by payroll taxes. It cannot run a deficit.
Congress (“the budget”) has borrowed money from the Social Security Trust Fund.
Those who say that paying back this money “adds to the deficit” are using words “creatively” to tell a Big Lie.
Bruce knows this, but he is also in love with “complexity.”
It’s not complex. It’s a matter of simple honesty and using words the way they are going to be understood by the people… instead of crossing your finger behind your back and using “special” definitions… you get to pick one of many… in order to sell a LIe.
Paying back money you borrowed does not add to your “deficit” in any normal, honest use of words. It doesn’t matter how you “account” for it in your own budget… except to the extent you mange to fool yourself into thinking that paying back what you owe adds to your deficit… while thinking with a double-minded idea of what even you mean by deficit… do i mean the way i account for it on my budget, or the way the people who pay the bills and lent the money are thinking that i mean?
“Cute” games with words for evil purposes is what honest people call “lies.” Damn lies.
When you sit down at the kitchen table and write out your budget for the coming month (year), you put down on one side of the ledger all your sources of income, and on the other side all of your expected expenses. And when you subtract expenses from income, that is your “deficit” the money you are going to have to borrow from the bank to get through the month (or year).
You include under “income” the fifty bucks a month your grandmother started lending you when you went to college to help you out. “But,” she said, “remember this is a loan. I am going to need to have it paid back when I get old and want to retire. And to be fair to me, I am going to need to collect some interest to make up for inflation.”
Okay, you said, gee thanks, grandma! and you went to college, and then graduate school, and then looked for a job or started your own business… And you got used to calling grandma’s fifty bucks a month loan “income,” and forgot about your promise to pay it back.
Now, gramma is getting old and she say… “Grandson, I need you to start paying back the money I have lent you all these years.”
You say, “Gee, grandma, now is not a good time for me. If I start paying you back, that will add to my deficit!”
And indeed it will, as long as your “deficit” is the difference between your “income” and your “expenses”. But counting grandma’s loan as “income” while it was reducing your “deficit” and counting it as an “expense” while you are paying it back, while “correct” according to your accounting, is seriously misleading to the point of dishonesty if you start telling yourself and everyone else, including grandma, that you “can’t pay her (softly now: BACK) because that will “add to your defict.”
That bit of self deception is a lie. A damned lie. or did I say that already.
“I am sorry to say that I think my friend Bruce Webb only adds to the confusion and ends up supporting the liars.”
Well I am sorry to say that my friend Dale Coberly is too stubborn for words. (I have told him in private and friendly e-mails that he could give lessons to a Missouri mule.)
The fundamental question is this: Is it a lie to use the word ‘deficit’ in the way CBO uses it in their top-line numbers? Dale’s position holds that the answer to that question is “Yes, that is a lie”. Which is to say “I Dale Coberly get to establish the meaning of ‘deficit’ by MY use.” Now that has been a reasonable tactical move up to now, in large part because under CBO’s definition of ‘deficit’ Social Security is not yet running one and in fact is still in ‘surplus’ as defined.
But this will not always continue to be true. And Sheriff Krasting is precisely correct on this singular point, the direction of the sign for this metric goes from positive (surplus) to negative (deficit) immediately after Trust Fund Balances hit their peak. Or sometime WITHIN the next decade.
Now it may outrage everyone’s sense of equity that a system on course to pile up NEARLY $3 tn (h/t BK) can remotely be said to be in some sort of crisis such as is suggested by the word ‘deficit’. This is particularly true since the whole purpose of building up that huge fund was precisely to bridge a projected gap between revenues and cost and that in this case the draw down from $2.75 tn (or whatever) is a fully intended design feature and not a bug. And that is all well and good. But it just doesn’t justify the Humpty Dumpty Defense.
“When I use a word,’ Humpty Dumpty said in rather a scornful tone, ‘it means just what I choose it to mean — neither more nor less.’
’The question is,’ said Alice, ‘whether you can make words mean so many different things.’
’The question is,’ said Humpty Dumpty, ‘which is to be master — that’s all.”
Dale, and I might add my friends in the Strengthen Social Security Coalition, are at times just as scornful as Master Dumpty on this issue. While I am just pointing out that CBO, by many people considered the neutral scorekeeper in matters of this sort, use the word in a different sense. And that defenders of Social Security need to be cognizant of that.
http://www.cbo.gov/sites/default/files/cbofiles/attachments/01-31-2012_Outlook.pdf p. 124
OAS Trust Fund Balance peak at $3.001 tn in 2021
DI to Zero in 2016
OAS Trust Fund Balance peaks at $2.892 tn in 2019
I am not sure what “CBO Report” Krasting is using that has “the OASDI TF topping out at 2.75T in fiscal 2017”. It is not an unlikely number but would require subtracting out DI’s unfunded liability (about $33 billion a year over that period) from OAS projected balance. But then again links are always good. You know on the modified “don’t trust unless verified” principle.
ALL this talk of SS adding to the deficit is to get THOSE SS T-BILLS sold to The Fed (QE style) instead of Treasury redeeming them, IMHO. Cashing in ALL those instruments through The Fed opens the way to dumping the money on Wallstreet. It won’t benefit SS or The Retirees much if any, may well help Treasury, and would be just the bestest shot of heroin, evah, to Wallstreet.
If the government had not borrowed the 2+ Trillion dollars from SS, it would have borrowed it from somewhere else. If the government has to pay some of it back, it will just borrow the payback money from somewhere else and the total debt will stay the same. It is just changing who the money is borrowed from. What’s the big deal?
No, Mr Webb
certainly you must have learned in college that words can have more than one meaning.
YOU are allowing the liars to pick a meaning that means something different from what MOST people mean when they say “Social Security does not contribute to the deficit.”
So let me say again, Social Security did not, does not, cannot contribute to what MOST people… the people who are being talked to in this deceptive way… mean by “contribute to the deficit.”
hmmm, note there are three, four words we are talking about now. NOT some “deficit” that exists in a pure state as some Ideal meaning in the mind of Plato… but as a concept that exists, fuzzily, in the minds of MOST people… particularly the people your “experts” are trying to mislead.
you know, and the experts know, and even I know, that when they say “deficit” (with their fingers crossed behind their back) they are “thinking of” that piece of paper the congress writes down its expenses and income on, without regard to whether the income is “taxes” or “loans.” … because of course the loan from Social Security is ultimately from the “payroll tax” and that’s a “tax” and we all know what a “tax” is, surely. except we don’t. the payroll tax is the Federal Insurance Contribution… designated by law to be used ONLY for paying benefits to the people who paid the “tax” (insurance premium).
life being complex and all, some of that “only to be used for” money actually goes to pay the expenses of administering the insurance program, and any temporary surplus is lent to the government. LENT to. Surely we all know what “lent to” means. Except we don’t.
The liars say that since all the money that comes into the Treasury is “fungible,” it can be spent on anything the government wants… and since it is in unmarked bills why, us poor congressional budget office people can’t tell a “social security” dollar from a “tax” dollar. Except of course they can, and it is a lie to say they can’t. A real lie, not just “what most people would call a lie.”
Now, you may enjoy this game of confusing the people with “complexity” they can’t hope to understand, but it’s not “complexity”, it is duplicity.
The Congress COULD, if it wanted to be honest… with itself… “account for”… you know what “accounting” is… by recording the money FROM Social Security as a “debt”… but for their purposes they don’t need to do this… just count the money coming in the door and the bills that have to be paid, and call the negative surplus “deficit” and let the people who paid their “taxes” and their “federal insurance contribution” worry about the difference…. which of course they have done and structured the difference into law.
So that when you are talking about “the deficit” you are talking about something different than they are thinking about when they hear “the deficit” and you know this.
It’s not a matter of me stupidly insisting that the word mean “what I choose it to mean.” IT’s a matter of me trying desperately to point out that YOU insist a word mean what you secretly mean it to mean while knowing full well that the person you are talking to doesn’t know that’s what you mean.
Well, it’s not Bruce that is lying… he’s just been confused by the liars. and an inadequate education in the “meaning of words”…
But if you say “Social Security does contribute to the deficit” without making very clear exactly what you mean by “deficit” and why this does not mean what it seems to mean when the LIars say it, you are contributing the the Lie.
and just to try a little harder to be clear
when most people…. those not Liars or cute experts… hear “contributes to the deficit” they think “spent money it didn’t have” that “we” or “our children” are going to have to suffer to repay.
but as i tried to make clear with my kitchen table argument above..
most people know that when you borrow money from granny, it is NOT granny that is contributing to your “deficit”, it is YOU.
In this case the YOU is Congress, which borrowed from very real grannies and is now telling itself and “the children” that is was their greedy granny who created all this “deficit” that the children are going to have to pay for.
But granny did not create the deficit. Congress created the deficit when it borrowed money… from granny, china, or Pete Peterson…
in this case “deficit” means “money we spent that we didn’t have so we had to borrow it from granny (the Social Security Trust Fund) or china or Pete Peterson.
But for purposes of it’s own budget accounting, Congress does not “account” for the money borrowed from granny as “borrowed, needs to be repaid” (and of course ithe money it borrows from china etc is not accounted for as such ON IT’S BUDGET. it is “accounted for” outside the budget under the heading “deficit”… because China, and Peterson are not budget items. But all the things that are budget items contribute to the deficit… actually it is only Congress by spending the money it does not have (except by borrowing) that “contributes to the deficit.”
Congress does not account for “money borrowed from Social Security” as “reduces the deficit” .
but when it comes time to repay granny, it wants to be sure you know that the money going to pay granny “increases the deficit”. actually it doesn’t. the “deficit” as they account it… is only the difference between what they take in and what they spend. singling out SS as “increases the deficit” as somehow different from all the other money that congress spends…. (and remember, in this case it is spending not “on SS” but to REPAY money it borrowed FROM SS)… is simply another way of lying… creating an untruth in the minds of your hearers by artful playing with words for the purpose of hurting them.
Don’t fall into the trap of thinking “experts” “know” “the correct” meaning of “a word.” they may from time to time have a special meaning that is useful in the course of their work. but when they begin to pretend that their special meaning is “the correct”, and your common meaning is “incorrect”, and worse, use their special meaning deliberately knowing that you will assume the common meaning in order to deceive you, they go from being experts to being liars.
Social Security does not increase the deficit.
PAYING BACK Social Security does “increase the deficit” the way we account for the deficit on the Congressional budget… IF we don’t raise the money to PAY BACK Social Security by other means such as taxes or cutting other budget items which increase the deficit.
Please note the difference between “Social Security” and “Paying back Social Security.”
and don’t confuse that with a scholarly debate about the word “deficit.”
SS does not, never has, and can’t “increase the deficit.” Paying back the money borrowed FROM Social Security can arguably be part of some future budget deficit… but it is disingenuous (a lie) to separate out paying back Social Security from all the rest of “the budget” to claim that “Social Security” increases the deficit.
It does not. Never has. Cannot. No matter what the Liars say, or some who should know better confuse themselves with words and lose track of all the words that matter… as the difference between Social Security and PAYING BACK Social Security.
I knew you would.
Dale you have arrogated to yourself the ability to know what ‘most people’ think is the meaning of ‘contribute to the budget’. My question is how do you know what you claim to know?
I mean it is not like I don’t understand your argument, God knows I have heard it enough times.
And Jerry and Dale you are both missing the rhetorical move here.
The right answer to the claim that ‘Social Security contributes to the deficit’ is not ‘No it doesn’t! Not at least under what me and most people like me consider to be a deficit’. But instead
‘Who cares, that is a design feature as well as just an artifact of the bookkeeping system. Besides it would never be a significant amount in any year until the very last few and wouldn’t happen at all if we just stopped yammering about ‘debt’ and ‘deficit’ and fixed Social Security the way Dale Coberly suggests’.
Social Security can be cash flow negative and still run surpluses. Okay that is odd. Social Security can be sitting on $3 trillion in assets and yet the instant it starts cashing in that principal it will start running deficits as defined by CBO. Okay that is odd as well. Which suggests we just ignore talk of ‘deficits’ all together and start examining real world impacts on workers on the one hand and the federal fisc on the other.
But all this trying to turn an word that was originally a technical word of art into some common language term and then privileging the latter doesn’t accomplish anything at all. What will matter is if in 2018 the Bad Guys can point to a table in a CBO Long Term Outlook document that unequivocably shows Social Security adding to the deficit and then deride supporters of Social Security for claiming otherwise all those years. Sputtering then that “Well that is not what me AND all my buddies meant by ‘deficit’ ” will not I think work well. Because it will be there in black and white under the imprint of the official scorekeeper of such things.
Coberly – I read/participate in the SS discussions at Angry Bear because It is my belief that some of the ‘deciders’ on this topic are checking in to see what is said. Assume I’m correct on that, and then look at the comments you’ve made today – you have used the word lie/liar 19 times. This word, and the accusation behind it has no place here. You don’t make your case when you revert to that.
The CBO does not lie, SSA does not lie, Webb does not lie and neither do I.
YOU certainly lie, or have a very very bad memory.
SSA lies by misleading phrasing in the “Report” As in “will require significant increases in the payroll tax” (on the assumption that we only “fix” the actuarial deficit for 75 years at a cost of 2% of payroll, instead of fix it for “the infinite horizon” at a cost of 4% of payroll.
CBO lies by, for example, in their “SS fixes”.. paper a few years back showing that a one half of one tenth of one percent of payroll increase in the tax for “thirty” years fixes “only” 5/6 of the actuarial deficit, and not bothering to note that continuing that one half of one tenth of one percent raise in the tax per year for another 14 years fixes the entire actuarial deficit and funds SS out into the infinite horizon…. and fails to note that one half of one tenth of one percent of payroll is 20 cents per week per year for the average worker.
Peter Peterson lies every time he opens his mouth. I can’t say that Alan Simpson is lying. he is too dumb to know what he is saying. I can say that CATO is lying… they are not dumb…
I can say that a lie is a deliberate attempt to deceive people in order to cause them harm… even if every single thing you say is absolutely true.
Bruce Webb does not lie, but he aids the liars by adding to the confusion created by the “ambiguous” uses of the word “deficit” and especially “adds to the deficit” as in “Social Security adds to the deficit.”
Social Security does NOT add to the deficit. Cannot. Will not ever. Paying BACK Social Security MAY become PART of some future “budget deficit” if by what we mean by that is that having to pay back the money Social Security has LENT TO “the budget” will show up on the “expenses” side of the ledger.
I hope most people are smart enough to see the LIE in that.
Bruce in his most recent reply to me suggest that by falling in with the lie now, we won’t be embarassed in the future when they bring out their LIE and say “see, there is “Social Security” adding to the deficit.”
because we have been too dumb to see that it is NOT Social Security adding to the deficit. It is Congress which added to the DEBT by borrowing from Social Security, now adding to its “expenses” by having to PAY BACK the money it BORROWED.
If you , and he, can’t see that, you are suffering from moral
In my moral world it is no excuse to aid the LiARS by making yourself too stupid to understand the lie… and, heh, heh, if we only knew what they meant by “adds to the deficit” we wouldn’t have been fooled. Poor dumb us, I guess it’s our fault then. So we have to cut Social Security. “Snooze you lose.” Is to be our motto..
you may have heard it enough times, but you still don’t understand it.
it doesn’t matter what the word “deficit” means. it matters what “Social Security adds to the deficit” means.
I have focussed on the word “deficit” because that seems to be the key to your confusion. But it is the REALITY of the situation that counts, not what word we use for it. Unless the word is misleading.
And “deficit” is not a “term of art.” It’s a perfectly good old fashioned word, understood by “most people” (i know them). And like all words it means different things in different contexts said by different people.
My objection to your discussion of this is not that you are “wrong,” but that you are adding to the confusion right now.
And appear to have confused yourself if you think that years from now “they” can point to “Social Security” as an “expense” in their “budget” and say “see, SS causes a deficit”… and they will be right. NO! they will still be wrong. SS did not cause the deficit. Borrowing FROM SS created a deficit that was “off budget” but still added to “the debt.” PAYING BACK the money BORROWED FROM Social Security may well add to some future deficit… while decreasing the debt. Funny how that works.
Meanwhile I arrogate to myself the knowledge of how “most people” understand this. I have been a “most people” all of my life. Ran screaming from “Philosophy” classes to save my sanity.
I did not mean above, or should not have meant, by “off budget” what the budgeteers mean when they talk about on and off budget.
I meant merely that the fact that the money borrowed from Social Security appears in “the budget” as “revenue” without mentioning that it is “borrowed” and needs to be paid back.
Money borrowed from the Trust Funds does not show up as revenue in “the budget”, there is no such line item.
Revenue from Social Security’s dedicated premium and tax streams plus accrued interest shows up as Revenues and expenditures on benefits and Admin show as Outlays with the balance showing up as a deficit or surplus. If there is a surplus it is added to Trust Fund balances in the form of net new Special Issues. Since the source of these net new Specials is not necessarily and certainly not now in the form of cash from workers and taxpayers but instead by conversion of a portion of interest due into Special Issue Treasuries you can’t really say that anything is being borrowed at all.
There was a time where using terms like “borrowing” made sense but that time ended around 2010. Now everything is about the right way to account for Trust Fund interest.
Bit in any event “borrowing” as such never appeared as a line item, to the extent tht we could put a number on it that number was derived/abstracted from others.
I thought MY point was that “borrowing” never showed up in the budget.
I am a little surprised that SS revenue and outlays show up in the budget since they are “off budget” and the SS “off budget” surplus or deficit is
added to the “on budget” surplus or deficit to determine the “unified budget” surplus or deficit…. which looks to me like an exercise designed to fool the people, or maybe just to fool Congress.
Now, let me say “i am not a budget expert” but I do know enough about Social Security to know that “they” are lying when they say “Social Security contributes to the deficit.” And they are lying in order to induce people to believe that SS spending is out of control and we need to cut it.
Bruce Webb knows that SS spending is not out of control, and that cutting it would hurt… critically hurt… tens of millions of people, whereas raising the tax enough to let the people pay for their own benefits…. as they always have… as Social Security was designed… would hurt no one. would in fact not even be noticed except by the professional liars.
just as the professional liars will say that I am wrong about the people paying for their own benfits… because there are ways to twist the language to make “the young” feel like they are paying for “the old”
the thing here is to try to keep the reality straight in your mind.
if i err about the technical use of words, or the technical way the budget enters what it is accounting for, feel free to correct me. but try to keep track of “material” vs “immaterial” error.
Social Security does not contribute to the deficit. Paying BACK the money Congress has borrowed FROM Social Security may show up as an expense in some budget that is in-the-whole “in deficit”
but saying that Social Security contributes to the deficit is like saying that the money granny lent you to help you out in your time of need is contributing to your deficit when she asks you to pay it back.
If you can’t understand that, then god help us.
Deficit, deficit, deficit. Guys! Why are we even arguing about the deficit? It is all semantics; one definition vs. another definition. Why does the deficit even matter.
The important number is the debt. It is the debt that has to be paid back. The debt is the important number. My understanding is that SS does not contribute to the debt.
What am I missing here…if anything?
Jerry – The talk of debt is like the discussion on deficits. You have to define exactly what you are talking about. So what is debt? It is the sum of Debt Owed to the Public and the Intergovernmental Debt (owed to SS and other TFs).
When SS draws down its holdings of TF assets to pay benefits there is a decrease in Debt owed to the TFs and an equal increase in Debt Owed to the Public.
To me, and many others, the thing to be careful about is the Debt Owed to the Public. Coberly (and possibly Webb) would disagree with this. So there are two answers to the question of, “How does SS influence America’s debt”:
1) It is correct to say that a $1 of deficit at SS does not change the overall debt level of the USA.
2) It is correct to say that a $1 of deficit at SS ADDS $1 to the Debt Held By the Public.
Look again at that CBO report I provided. You will see that CBO is forecasting a cumulative $1.8 Trillion dollar deficit through 2024. Every penny of that deficit MUST result in an increase in Debt to the Public.
In 2013 the deficit at SS was $71B – that amount had to be borrowed from the Public. Every year from now on, for the rest of your life, the deficits will build up. This ship will never turn around again.
So if you believe as I do, that Debt to the Public is the metric to measure this by, then SS is adding massively to that debt load.
Webb and Coberly will respond that this outcome is exactly what has been planned for many years (since 1983). I disagree with this. The cash deficits are coming a decade earlier than was thought a few years ago, and they are much larger than was thought to be the case.
The fact is the Boomers were unable to save what was expected (it’s not their fault – the 2008 recession killed them). The SS TF is $2T light of what would be required for a smooth transition of the Boomers.
So in answer to your question, SS adds to the debt that matters.
I disagree, Bkrasting. The debt definition that should be used is the total sum owed by the government including both public and intragovernmental debt. To ignore one portion is to say that it does not have to be paid back. The money that SS loaned the government needs to be paid back just as money loaned by China, etc.
SS loans money to the government because that is what it has to do when it takes in excess revenue. If the government did not need the money (say, it had a budget surplus), it would simply pay down other debt with the SS money. SS is not contributing to the debt. It is simply loaning money to the government that the government would get from elsewhere if SS did not have surplus revenue.
The government causes its own debt just as you cause your own debt.
Or do you go around blaming the bank?
you are exactly right.
Krasting does not understand what he is talking about.
and he puts words in my mouth which really makes me angry.
Jerry – What is the debt metric that is most often used when discussing US Macro? That would be Debt held By the Public. Yes, this definition does exclude debt owed to to the TFs.
Follows is a link to the annual review by CBO. This is the key document of the year. Now go to page 5, the very first chart is of the trajectory of Debt Held by the Public. This is how CBO looks at things, this is how most economists look at debt. You may not like or agree with this, but that is the way things are. Debt to TFs are not consider as important as Debt to Public.
Bkrasting – “Debt to TFs are not considered as important as Debt to Public.”
But as you admit, it is still debt and still needs to be paid. Accounting tricks are just tricks often used in an attempt to make things appear differently than they really are.
And SS does not cause debt anymore than banks cause debt when they loan money.
Jerry – SS is causing an increase in Debt To Public. It was $75B in 2012 and $71B in 2013 from 2014 through 2024 it will be $1.8T.
Do you get this? As the TF is unwound it is causing an increase in the critical Debt to Public.
You may continue to think that Debt to Public is equal in consequence as Debt to TF, but you would be wrong.
If SS is “causing” an increase in Debt to Public, then it is also “causing” a decrease in Intragovernmental Debt. If you are going to show an increase in one, you must show a decrease in the other.
Do you get this? They cancel out!
Jerry you are confused. Naturally enough because the terms are confusing.
There is a big difference between ‘Public Debt’ and “Debt Held by the Public”
Public Debt = Debt Held by the Public + Intragovernmental Holdings
Any increase in Intragovernmental Holdings adds to Public Debt directly. In some cases this may result in a reduction in NEW Debt Held by the Public but it wouldl not reduce EXISTING Debt Held by the Public. But before you can examine and understand those second order effects it is imperative to understand the difference between ‘Public Debt’ “Debt Held by the Public’ and whichever of these your ‘Debt to Public’ refers.
In any event you have introduced some sort of automatic offset into the equation that does not exist in practice. The relation between the three categories of debt is not an accounting identity equal to Assets = Liabilities + Owners Equity. Sure it is an equation but the pieces don’t interact in the same way.
Anyway when Social Security “causes” an increase in Public Debt it also “causes” an increase in Intragovernmental Holdings. And doesn’t have any necessary direct effect on Debt Held by the Public.
Thanks for the clarification, Bruce. Yes, in my comment above, I meant Debt Held by the Public. Public Debt is what I have referred to as Total Debt, or the total debt that needs to be repaid.
Of course, SS does not cause an increase in intragovernmental debt. It is the borrowing from SS that causes the increase. Borrowing causes debt increases. SS is simply the source of the funding, not the source of the debt.