Conservatives in Washington have their knives out for Social Security. Soon after being named co-chair of President Barack Obama's deficit commission, former Sen. Alan Simpson--who recently described Social Security as "a milk cow with 310 million tits"--said unequivocally that Social Security has to be cut. He boasted, "It'll be a bloodbath." Simpson's co-chair, former chief of staff for Bill Clinton, Erskine Bowles, has been equally blunt: "We are going to mess with Medicare, Medicaid, and Social Security." Commission member and retiring Sen. Judd Gregg jocularly defended cutting Social Security by quoting Willie Sutton who, when asked why he robbed banks, replied, "because that's where the money is."
If one looks at the federal budget only as a unified whole, Social Security does indeed appear to be where the money is. Examining the budget that way is useful for analyzing broad fiscal policy, but it is a simplified, distorting view. It disregards the fact that Social Security is a defined benefit pension plan sponsored by the federal government, financed primarily with dedicated contributions of workers matched by their employers. Social Security has no borrowing authority and so does not and cannot contribute to the federal deficit. And it will be in balance for the next 26 years, even with no policy changes.
Just as private employers are required to keep company pension-plan assets in trust, segregated from general operating funds, so too are Social Security's assets held in trust. If a CEO talked about the company pension plan the way that today's deficit hawks refer to Social Security, he or she would appropriately be accused of seeking to raid the plan. So the analogy to Sutton takes on an unintended but revealing meaning--deficit hawks, like bank robbers, are eager to steal the money that hardworking Americans hand over every payday to a trusted pension plan.
To ensure that Social Security will always be able to meet all of its obligations, its board of trustees employs more than 40 actuaries whose job it is to project the program's income and outgo for the subsequent 75 years and to report those findings annually to Congress. Despite the hysterical claims of "crisis" and "bankruptcy" that conservatives assert with every annual report, recent reports show quite the opposite.
The latest report, released Aug. 5, states that Social Security ran a surplus of $122 billion last year and had accumulated a reserve of $2.54 trillion, which will grow to $4.2 trillion by 2024. For the entire 75-year valuation period, the actuaries project that Social Security will most likely face a shortfall of just 0.6 percent of gross domestic product, about the same as extending the Bush tax cuts for the top 2 percent of the income scale. With no congressional action whatsoever, Social Security can pay all benefits on time and in full until 2037 and at least three-quarters of scheduled benefits through 2084, the full 75-year valuation period.
The projection of a manageable deficit, still decades away, should provide Americans with a sense of confidence that Social Security is closely monitored and fully affordable. In light of the program's current surpluses and accumulated reserve, there is no justification for closed-door deliberations or hasty action. Congress should eliminate the projected shortfall sooner rather than later, but only by enacting changes that are good policy in and of themselves.
A number of such proposals exist, but cutting benefits is not among them. Social Security's benefits are modest, averaging less than $13,000 a year, but are vitally important to almost all who receive them. Two-thirds of the elderly receive half or more of their income from Social Security. About 6.5 million children, nearly 9 percent of the nation's children, receive Social Security themselves or live in households supported by another Social Security beneficiary. About 8 million disabled workers receive benefits, without which more than half would have incomes below the poverty line. …