Social Security rumors can be put to rest
Published 11:26 pm Wednesday, August 29, 2001
By By SONNY CALLAHAN
During the past several days, I have received many telephone calls from individuals concerned about statements that have been made in the print and broadcast news media.
The comments which have prompted so many of you to call have revolved around the issue of whether or not Congress and the president are "dipping into" Social Security to pay for this year's tax relief and to fund any shortfalls resulting from changes in the projected budget surplus.
I know this is an issue of concern to nearly every American. For many years, the issue of Social Security was the so-called "third rail" of American politics and was a topic that many in government did not wish to discuss.
This changed dramatically during the most recent presidential election, and nearly every candidate made it a central theme of his individual platform. By no means is the issue of stability of the Social Security trust fund a terrifying subject, and it deserves to be discussed openly and honestly.
Let me take a moment to give you some background on this issue.
Background on Social Security
The Social Security program is divided into two individual components: the Disability Insurance Trust Fund and the Old-Age and Survivors Insurance Trust Fund. Both of these programs have been assigned what is commonly known as off-budget status. Basically, this means that the money in these two funds is generally excluded from the presidential and congressional budget resolutions.
Social Security tax revenues are deposited annually into a trust fund. Out of this fund, the benefits for both retirees and individuals who have been declared disabled are paid.
Any money that is left over after these benefits have been paid is invested in U.S. government bonds, which are considered the safest of all forms of investment. The money invested in these bonds earns the prevailing rate of interest, and the resulting additional money is reinvested in Social Security.
Typically, individual policymakers and members of the media include the funding available in the Social Security trust fund as a part of their calculations of the total annual budget. Naturally, when the budget is running a deficit, many people assume that the financial shortfalls necessary to run the government are made up from the Social Security trust fund.
What about the rumors?
A persistent but untrue rumor is that money from the trust fund has been used in the past for purposes other than the payment of Social Security benefits, such as the direct funding of operational expenses for other government agencies.
The confusion on this point is created primarily as a result of the investment procedures used for the money remaining after the payment of benefits. When an individual purchases treasury bonds for his or her family, they are in essence loaning money to the government to allow them to pay for various federal programs.
The same is true for the investments Social Security makes in government bonds. Just as the government would pay you back on your investment plus interest, it always fulfills its obligation to repay the Social Security trust fund plus any interest earned on those investments.
Will it affect the budget?
Because of this system, it is often perceived that the government compensates for any on-budget deficit by "using" the Social Security surplus. This is a point of concern for many members of Congress, and often gives the misguided impression to the American public that the amount available for benefit payments would be reduced or eliminated.
Will there be political posturing as new budget projections are released? You can be sure of that! Certain members of Congress will accuse President Bush of forcing an "unaffordable" tax cut and undermining Social Security in the process.
While granted, these budget numbers can be confusing, it is unfortunate that some will use the complexity of the issue to scare seniors for the sake of political gain.
Regardless of what the projections may say or what others may imply, neither President Bush nor the U.S. Congress is going to allow the Social Security trust fund to pay for government operations. That's the bottom line and that is what is important to know.
Rather than pointing fingers and saying what they think will most effectively scare the American people, the minority should be extending hands and saying "we're all in this together."
They might be surprised at how much we can get done if we would all work together.
Until next week, take care and God Bless.