Social Security, Simplified

Dick Armey, former Representative from Texas, chairman of Tea Party Express bankroller FreedomWorks, and dedicated corporate lobbyist, has said it. Rand Paul, who appears poised to replace Jim Bunning as a Senator from Kentucky, has said it (video, from Talking Points Memo, below). Ron Johnson, who has been reported to be leading incumbent Senator Russ Feingold in Wisconsin, now says it (video way below).

They've all characterized arguably the most popular government program in American history, Social Security, as a "Ponzi scheme." The eagerness to spread disinformation infects even the mainstream media. Matt Bai in The New York Times on August 26 claimed the only way the federal government can redeem the Treasury bills in the (dedicated) Social Security trust fund is "to issue mountains of new debt or to take the money from elsewhere in the federal budget, or perhaps impose significant tax increases." Appropriately exorcised with Bai, who ignorantly compared the system with the lottery, the Daily Howler's Bob Somerby explains

It’s true: The federal government has borrowed money from the Social Security trustees over the past 27 years. More specifically, it has borrowed the annual over-payment of taxes written into the system in the 1983 reforms authored by President Reagan. How were those (perfectly sensible) over-payments designed to work? Preparing for their future retirement, workers would pay more into the system each year than was required to pay the benefits of that year’s recipients. These over-payments would be borrowed by the federal government, thus reducing the amount of money the government had to borrow from other sources. These over-payments would be repaid to the trustees in future years, when retiring baby boomers began to place a stress on the system.

Boomers would pay extra money each year, then get paid back when they started retiring....

It’s true! To pay back the money it borrowed from the trustees, the federal government will have to “issue new debt, take the money from elsewhere in the federal budget, or perhaps impose tax increases.” That said, the government will basically “issue new debt”—it will simply borrow more money from somewhere else to pay the trustees back. But this is what the government always does when it pays back its many loans, whether to the Social Security trustees or to those big Chinese banks. Duh! The federal government runs big annual deficits; where do you think it gets the money to pay back the money it previously borrowed when such loans come due? The president doesn’t hike through the woods, hoping to find big sacks of lost money. To pay back its debts as they come due, the federal government borrows again! You may not like the fact that your government borrows money each year to fund its large deficits. But this is the way it repays its debts—all of them, to all its debtors.

Johnson, Paul, Joe Miller (Alaska), Sharron Angle (Nevada), Pat Toomey (Pennsylvania); these are only a few of the Republicans running for the U.S. Senate this year who have their eyes on Social Security funds, aiming to pleasure their Wall Street benefactors by privatizing the system or otherwise undermining it. It is a major reason there is no limit to how much a Congress dominated by hard-right ideologues may decimate the nation's socio-economic consensus.

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