Social Security's Link to Debt True but False

Tuesday, 12 Jul 2011 01:48 PM

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Assertions by President Barack Obama and other Democrats that Social Security has little or nothing to do with the nation’s $14.3 trillion debt are true. They are also false, The Washington Post concludes in a fact check of the claim.

Until recently, Social Security collected more payments than were Barack Obama, Social Security, Debt, Fact Checkneeded for benefits, so it loaned the extra to the U.S. government and received interest-bearing Treasury securities worth about $2.6 trillion. However, after years of running a cash surplus, Social Security now has a negative cash flow and the Treasury this year has to go into the private market and issue bonds to investors on Wall Street and overseas to make about $45 billion in benefit payments, the Post reported.

The bonds are a real asset to Social Security, but they also represent an obligation by the rest of the government. The government will have to make good on its obligations, generally by taking the money out of revenue, reducing expenses or issuing new debt, the Post reported.

Rep. Xavier Becerra, D-Calif., views the $2.6 trillion in assets built up by Social Security, and correctly asserts that Social Security did not add to the debt; it is indeed a creditor to the United States. “I’m obviously concerned the federal government has to pay its debts, but it pales in comparison to the trillions the federal government has taken and borrowed from Social Security,” he said according to the Post.

Others can look at the same numbers and conclude this is paper-shuffling among different parts of the U.S. government.

“We come down somewhat in the middle on this debate. The fact that the system is running a negative cash flow now — and the foreseeable future — is an important warning sign of fiscal imbalance,” the Post concluded. “Yes, Social Security in the past has not contributed to the nation’s debt. But it’s basically a meaningless fact and actually distracts from the long-term fiscal problem posed by the retirement of the baby boom generation and the shrinking of the nation’s labor pool. We are going to label this with that relatively rare rating: ‘true but false.’”

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