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Practically every politician, government official, and media report talks about the Social Security Trust Fund (SSTF) lasting until 2034 (or whatever year is projected to be the insolvency date in the latest SS Trustees report). By speaking in terms of the SS system being fine until the trust fund becomes insolvent, they are misleading people into thinking that the SSTF is a reservoir of assets. (They don't mention that it is also a reservoir of future general taxpayer liabilities). And it is also common for them to talk about the SSTF's assets earning interest (without mentioning that this interest -- in the form of Special Issue Treasury obligations paid into the SSTF -- is also future general taxpayer liabilites).
I don't get too upset anymore when I hear the SS program's health being discussed in terms of the SSTF insolvency date, even though it is quite misleading. But when some official flat out states that we are saving for the future by investing the social security surpluses in government bonds, and putting them in the Social Security Trust Fund, then I get really upset, as that is a direct false statement. I've heard 3 government officials make such a statement so far. They are President Bill Clinton, Kenneth S. Apfel, Commissioner, Social Security Administration, and Trustee, and Alice Rivlin, Vice Chair of the Federal Reserve Board.
I heard Kenneth Apfel state this February or March 1999 on NPR radio.
I heard Alice Rivlin state this on MPR Radio on 5/13/99 when she was in Minneapolis. At the time, Alice Rivlin was Vice Chair of the Board Of Governors of the Federal Reserve System.
Regarding Bill Clinton, it is interesting what Peter Peterson has to say on page 211 of his 1999 book, Gray Dawn -- How The Coming Age Wave Will Transform America And The World :
[Peterson:] To help push attitudes in a future - oriented direction, leaders and citizens in the developed world must engage in a more open and candid dialogue about the aging of their societies. Leaders must do a much better job of educating the public. On this score, I must say that Bill Clinton's track record has been uneven. He has told me personally that he understands fully the pay - as - you - go "chain - letter" structure of Social Security. He knows that what really matters are not the "trust funds," but the annual operating balances, which will return to deficits in 2013. [2014 per 3/99 report]. But when political pressure heats up, what he knows so well in private is not what he says in public. Shortly after my conversation with him, the President declared to the nation:[Bill Clinton:] "Now here's the bottom line. The Social Security trust fund is sufficient to pay all the obligations of Social Security -- both retirement and disability -- until 2032 [2034 per 3/99 report], after which it will no longer cover those obligations."
[Peterson:] On the other hand, Clinton took a laudable step in 1998 by launching an unprecedented national conversation of the future of Social Security, consisting of four televised town meetings in which the nation's top leaders came face to face with ordinary Americans.
Regarding Kenneth Apfel, I did hear him on MPR Radio make this assertion, but I can't find a transcript. As far as something in writing, I've only looked at a couple of his works and can't find any bold assertion that we are saving for the boomers' retirement by investing in government bonds and putting them in the social security trust funds. So I will have to dig for more of his and other government officials' statements to find such a bold assertion in writing. However, looking at his two works -- his December 1, 1998 speech to the National Press Club and his February 23, 1999 Senate testimony, he certainly emphasizes trust fund solvency and actuarial balance as the vital issues. (Actuarial balance is a measure that counts the trust fund assets as if they were real assets -- as opposed to the real situation of them being both real assets and real liabilities ).
Quoting from his December 1, 1998 speech, he is implying that what we have now is an advance funding system rather than a pay - as - you - go system:
[Apfel quote:] ...There are tough issues to talk through. One central question in the debate is whether we should return to a purely pay-as-you-go system, or advance fund more of the system
Whereas, what should be clear by now is that the only "advance funding" that we have been doing is stuffing Special Issue Treasury Obligations into the SSTF. These SIT obligations are assets to the SSTF and liabilities to the Treasury general fund, and so are of no net value to the federal government or future taxpayers.
Quoting from his February 23, 1999 Senate testimony:
[Begin Apfel quotes:] As you know, under the 1998 Trustees Report intermediate assumptions, the annual combined tax income of the OASDI (Social Security) program is projected to exceed annual expenditures from the funds until 2013. After that, because of interest income, total income is projected to continue to exceed expenditures until 2021. The funds would begin to decline in 2021 and would be exhausted in 2032. In 2032, when the trust funds are projected to become exhausted, the Social Security system will have enough income to cover only about three-fourths of benefit obligations.
. . . To assure confidence in Social Security it is important to bring the program into 75-year actuarial balance.
The first two steps [of the President's Jan. 1999 proposal] will keep Social Security solvent until 2055, and bipartisan agreement on the hard choices could extend that solvency at least through 2075. [end Apfel quotes]
So, in his view, its kind of like all that matters is trust fund solvency, and that the problem in 2013 -- when tax receipts fall short of expenditures -- is kind of like only an early warning sign of trouble. But the whole point of this web page, and of fb-50.html, is to show that ALL that matters is that tax receipts fall short of expenditures -- because interest on the trust funds debt and the trust funds themselves are only accounting devices that are of no economic value to the federal government overall or to the future taxpayer.
But, continuing the Apfel testimony, I found this assertion very interesting. It is an acknowledgement of sorts that redeeming the bonds -- which will have to begin in 2013 (when tax receipts fall short of expenditures) -- is going to be a problem:
[Begin Apfel quote:] Allocating a portion of budget surpluses to debt reduction, as the President proposes, is a conservative strategy that makes sense. Reducing the debt will result in increased national savings, lower interest rates, and stronger long-term economic growth than would otherwise be the case.
The lower interest costs and higher growth will make it possible for the Social Security Trust Fund to redeem its bonds without creating pressure on other government programs. [End Apfel quote, emphasis mine]
His next assertion is quite interesting:
Indeed, OMB calculations indicate that the decline in government interest payments will provide sufficient resources so that the combined government expenditures on interest and Social Security benefits will be below current levels as a share of the economy until 2050 and beyond. [End Apfel quote]
I've looked into this assertion -- see section non210 and section non212 -- and it appears to be true. But it must be emphasized that this assumes that the publicly - held federal debt will be paid off. And it ignores Medicare and Medicaid and federal employee pensions and military pensions -- programs that are also projected to greatly increase with the aging of the population.
His quote illustrates the tactic that the "no-big-problem" people use -- of discussing Social Security and Medicare and Medicaid and federal employee pensions and military pensions as separate relatively small problems, rather than looking at the combined impact.
When Medicare is factored in, so that we are talking about federal net interest + Social Security + Medicare, I find that the combination of the three is projected to be about 24% higher as a percent of GDP in 2050 than in 1999 ( See section non212 ). And again that assumes that the publicly - held federal debt will be paid off, and it ignores Medicaid and federal employee pensions and military pensions.
If anyone finds an article in the media or a quote from a government official or any other source generally considered credible, that says in effect: "the Social Security surpluses are being saved in a Social Security Trust Fund so as to provide a reservoir of savings to fund the boomers' retirement", then please let me know where you saw it (name of newspaper or magazine or whatever, and the date) so that I can track it down. Or email me the article or the URL to the article. Thanks!
When I get the rest of the web site up, before the end of September, 1999, I plan on having an email mailing list where I alert people to the most misleading statements about the Social Security Trust Fund being a reservoir of savings for the future. People can then write to the offending publication or source. It is important that the media and others tell the truth, so that we aren't blind-sided in 2014 and after to the tune of $7.8 trillion dollars in bills in the following 20 years alone.
(hits since June 8, 1999)
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