Several liberal Washington columnists have recently commented that many members of Congress seem unaware of President Obama’s willingness to cut Social Security and Medicare. The President has certainly spoken publically about his readiness to make these cuts, even mentioning during one of the campaign debates his intention to “tweak” Social Security, and he was much more specific during the 2011 deficit reduction negotiations.
With many in Congress now seriously discussing the need for deficit reduction, it is clear that some of them also have their eyes on Social Security. They see Social Security as part of the deficit problem.
This misunderstanding is exactly why the purpose of the Social Security Trust Fund must be explained to Congress and the American people. Social Security may now be running a small deficit (i.e. taxes collected are less than benefits being paid), but this was foreseen many years ago, and the Social Security Trust Fund was created for the purpose of protecting benefits during a deficit.
Congress passed a law in 1939 which required Social Security to loan any surplus funds (i.e. funds collected in taxes but not needed to pay benefits at that time) to the U.S. Treasury. The Treasury would spend the funds borrowed on other government programs, but would pay the money back when needed by Social Security for benefit payments.
Social Security ran a surplus every year from 1937 through 1956. However, from 1957 through 1962, there was a series of deficits and the Trust Fund’s assets were reduced from $22.5 billion to $18.3 billion as the Treasury paid back the money that was needed.
In 1975, Social Security once again began a period of deficits, and by 1983 the Trust Fund had been reduced from $37 billion to $19.7 billion.
Legislation passed in 1983 significantly affected the size of the Trust Fund, deliberately creating very large surpluses that were intended to fund deficits that were seen in the distant future. Never before had the annual surplus been much more than $4 billion. The 1984 surplus was more than $7 billion, and quickly the surpluses reached tens of billions, then more than $100 billion each year. By the second term of George W. Bush, it was approaching $200 billion.
The Washington politicians loved spending the surplus. They became addicted to having the money for their favorite subsidy and pork-barrel programs.
But then, as had been foreseen in the 1980’s, the surpluses turned into deficits. Not only was there no longer a surplus to spend, but it was time to start paying the money back to Social Security.
In 2010, the Treasury had to repay about $8 billion, increasing to $11 billion in 2011. But in 2012 it increased to more than $50 billion, with projections that it would be between $60 and $70 billion for each year, 2013 through 2017.
The Washington politicians panicked. They could only continue funding their favorite programs by running the biggest peacetime deficits in U.S. history, and the American people were demanding that deficits be reduced.
How could the politicians keep funding their pet programs? The biggest pot of money available was the Social Security Trust fund, about $2.6 trillion. If they could cut Social Security, they would not need to pay back that $60 to $70 billion per year. Instead, they could keep that money for other purposes.
Congress and the President face a choice. They can cut the programs they value the most – such as Obama’s “green energy” boondoggles – or they can cut Social Security instead, refusing to pay back the money from the Trust Fund.
We must demand that Social Security be fully funded, and that other programs be cut.