People used to call Social Security the “third rail” of politics — mess with it, you’ll get seriously shocked.
For me, Social Security has become the third rail of column-writing. Show people that the system is spending considerably more cash than it’s taking in, and you get zapped by readers, friends and sources.
So let me try to explain where I think Social Security’s problem comes from. Which I couldn’t do in a recent column because unlike the people who post comments or send email, I am writing to a relatively small fixed space.
Despite what some readers seem to think, I wasn’t trying to run down Social Security, or blame it — whatever “blame it” means in this context — for its current financial problems. All I wanted to do was to inject a dose of reality into the Social Security debate, which seems to revolve around the program’s trust fund rather than around the true state of the program’s finances.
Here’s the deal: Social Security’s current cash problems date to the way Congress changed the program in 1983. Those changes were the result of a report issued by the Greenspan Commission, appointed in 1981 when Social Security was running out of cash.
The 1983 legislation increased Social Security taxes, raised the retirement age, and did various other things to get more money flowing into Social Security and less flowing out.
These changes produced large cash surpluses for Social Security in the early years, when the program took in much more money than it needed to pay benefits. That surplus was going to be drained by huge negative cash flow in the “out” years.
But rather than set up a mechanism to save the temporary surpluses in a way that was useful to the government as a whole — please note the italics — such as putting the money into corporate bonds, the commission and subsequent Congresses and administrations left things the way they had been.
The fund could own only Treasury securities — no corporate bonds, no stocks. Nothing but Treasuries. So the government as a whole borrowed less when Social Security ran a cash surplus, but would borrow more when Social Security began running a cash deficit. But that was in the then-far future. Insert “kick the can down the road” or the cliche of your choice.
Some people say that money was “stolen.” Not so. Everything was disclosed, and — if only by inaction — 25 years worth of Congresses and administrations knew about the situation, but left things the way they were.
But starting in 2010, as I had warned (and warned and warned and warned), Social Security began running cash deficits, which are now projected to continue indefinitely. Social Security pays its bills by cashing in some of its trust fund securities, and the Treasury comes up with the money to redeem the trust fund’s securities by borrowing from investors. So the government as a whole is using investor money to pay Social Security’s bills, even if Social Security is showing a profit.
The true state of the program — which is enormously important to tens of millions of people — is hidden by the bizarre accounting. Despite running a cash deficit of about $70 billion in calendar year 2015, according to its recently issued trustees report, the program reported a $23 billion surplus because the trust fund collected $93 billion of interest from the Treasury.
Economic justice says that people who paid Social Security taxes from 1983 on — which would include me — should be repaid by having the government drain the trust fund to pay benefits. But as things stand now, that would require borrowing hundreds of billions of dollars a year. I don’t think it’s supportable.
Look. I have enormous respect for Social Security. Social Security let my late parents retire in dignity. My wife and I are currently drawing retirement benefits, and we’ve got kids and grandkids for whom I hope Social Security will be available 50 or 60 or 100 years from now.
The financial challenges are considerable. But if we approach them in an intelligent, long-term way, they’re surmountable.
Allan Sloan is a columnist for The Washington Post. He is a seven-time winner of the Loeb Award, business journalism’s highest honor.