Are they lying now or were they lying then?

During the recent Congressional debate on raising the debt ceiling, the President gave us a stern warning. Answering a CBS reporter who asks if Social Security checks would be delayed if the government shut down, the President said, “I cannot guarantee that those checks go out on August 3rd if we haven’t resolved this issue because there may simply not be the money in the coffers to do it.” This message was repeated later by Treasury Secretary Timothy Geithner on CBS Meet the Nation and again on a number of occasions by the President.

I find this statement curious because last February President Obama’s budget director Jack Lew, in a USA Today article, had this to say about Social Security. “Social Security benefits are entirely self-financing. They are paid for with payroll taxes collected from workers and their employers throughout their careers. These taxes are placed in a trust fund dedicated to paying benefits owed to current and future beneficiaries. … Even though Social Security began collecting less in taxes than it paid in benefits in 2010, the trust fund will continue to accrue interest and grow until 2025, and will have adequate resources to pay full benefits for the next 26 years.”

Syndicated columnist Charles Krauthammer wrote an article responding to Mr. Lew’s comments and he called Lew’s statement “a breathtaking fraud” - a strong statement but completely accurate.

The problem, as Mr. Obama let slip is that while there IS a trust fund … it is completely empty.

By law, the Social Security Administration can only invest the trust fund in funds fully backed by the United States government, which means government bonds are the only option. Every single dollar that is not paid out to citizens in the form of benefits is loaned to the federal government. The funds are tracked in their own accounting system but the Social Security surplus exists only as IOU’s from the federal government. When the Social Security Administration needs money it calls one of the IOU’s from the Federal Government due. If the government shuts down there is no money to pay back the trust fund and no money to pay out benefit checks.

So President Obama in a rare moment of candor has pointed out the big lie of Social Security. We are told it is some type of retirement fund, that our retirement money is safe, sound and held in a totally different account as opposed to just another government program financed by the general fund. In reality if the general fund stops paying its bills…. the social security check cease to go out.

Liberals are telling us that Social Security is not really in bad shape and we just need a little tweaking to make it solvent. But politicians have been telling us that for decades.

Eighteen times since 1939 the maximum amount of income to be taxed has been increased.

Fourteen times the percentage of your income taken for Social Security has been increased, and now stands at 12.5% (12 % paid by you and ½ % paid by your employer).

In the 1960’s, 1970’s, 1980’s, 1990’s Congress passed changes to the program that was supposed to make the program solvent for decades. In 1973, President Carter said of the newly enacted legislation, "This legislation will guarantee that from 1980 to the year 2030, the Social Security funds will be sound." He was off a bit, by the middle of the 1980’s (45 years earlier than he predicted) it was necessary to increase taxes and decrease benefits to shore up the program. In 1950 there was 15 workers for every person collecting social security, today there three and yet the liberals in Washington continue to act as if nothing has changed

The government has actually used the Social Security surplus to offset the debt in the general fund on paper. In 1968 under President Johnson, the trust fund balance was included in the regular federal budget, still tracked separately but any surplus in the trust fund helped offset the deficit in the general fund on the books. So although the federal government had borrowed and spent all the money in the trust fund, the government IOU’s that made up the surplus were subtracted from the federal debt. If you tried that accounting in private industry they would put you in jail. This type of government shell game was thankfully repealed under Reagan in 1983. As an interesting side note, when the Graham Rudman Bill passed in 1985 debt targets were set that would trigger automatic spending cuts in the federal budget. The thought was this would force Congress to be more fiscally responsible. When setting the debt limits that would trigger cuts, Congress again included the trust fund surplus so the federal debt looked lower than it truly was and that delayed the automatic cuts, some shell games are too good to waste.

And all the while, Congress is using the trust fund as their personal piggy bank, not to pay down the existing deficit, but to finance more and more programs with borrowed money. It is easy to see why in 2002 the Democrats in Congress fought so hard to prevent people from being able to invest 3% of their social security obligation in their own private retirement plans. That would mean 3% less that congress could not borrow.

We can continue to increase taxes and decrease benefits all the while financing more and more deficit spending OR we can demand the government get out of the retirement business and allow Americans to make their own retirement decisions.

Are they lying now or were they lying then?

Both - they lied to us then, they are lying to us now and I see no reason to think they will not lie to us in the future.