On Social Security, FactCheck Didn’t
“Democrats Deny Social Security’s Red Ink,” a recent FactCheck article blared. The article panned Senators Durbin and Schumer for stating that “Social Security does not add one penny to the deficit” and took Office of Management and Budget Director Jack Lew to task for calling Social Security “self-financing.” But the senators and the budget director are on solid ground: FactCheck’s figures ignore the substantial sums that Social Security earns — and will continue to earn for many years — on its investments in Treasury securities.
FactCheck erroneously claims that Social Security will run a $45 billion deficit this year. In reality, while the program will collect $45 billion less in payroll taxes than it spends on benefits and administrative costs, it also will earn $118 billion in interest on the $2.6 trillion it has accumulated in its trust fund over the years. Those earnings will enable the program to run a $72 billion surplus in 2011, according to the Congressional Budget Office — the very same source that FactCheck cited.
As we explained last August, although the economic downturn has hurt the program’s finances and large demographic challenges loom ahead, Social Security faces no imminent threat. It can continue paying full benefits for nearly three decades even if Congress makes no changes in the program. After that, if policymakers had made no changes, the program would pay about three-fourths of scheduled benefits — because it has no authority to pay out one penny more than it has collected over the years.
Of course, doing nothing for decades and then chopping benefits by nearly one-fourth is an unacceptable outcome. Policymakers should act much sooner to put the program on a sound footing for the long run. But they have enough time to do the job right, by phasing in a plan that spreads sacrifices fairly across generations and income groups and gives workers ample notice so that they can adjust their financial plans accordingly.