APPENDIX G - Dialog With AARP (American Association Of Retired Persons) Regarding Their "Social Security Is Solvent For Decades" Viewpoint (fb-91.html) (258)

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[A] Correspondence With AARP Regarding Their "Social Security Is Solvent For Decades" Viewpoint (259)

This is a great example of how supporters of the current Social Security system will go to great lengths to deny that the Social Security Trust Fund is a liability on future general taxpayers.

Letter 1: Jim Larson To AARP ( sent via a feedback form on the AARP site on 1/28/2000 )

Dear AARP,

I read the January 2000 Feature - Interview With Robert D. Reischauer

     http://www.aarp.org/bulletin/jan00/reischauer.html

Its the same old stuff -- the Social Security Trust Fund (SSTF) is invested in U.S. Treasury bonds, the safest investment in the world. What it doesn't address is where the money is going to come from to redeem those U.S. Treasury bonds -- the U.S. general taxpayer (mostly income taxes). Nor does he mention the amount -- the U.S. general taxpayer will have to come up with $7.8 Trillion between 2014 and 2034 to redeem these bonds ($1.5 trillion in year 2000 dollars). Then the SSTF is mercifully empty and the hoax is over. But of course, extra money will still have to be raised from somewhere to close the funding gap (difference between SS tax revenues and SS benefit payments) after 2034, just as before 2034.

And what about Medicare? The Concord Coalition estimates that over the next 75 years Social Security and Medicare will have a cumulative cash deficit of more than $30 Trillion IN TODAY'S DOLLARS.

If the SS surpluses hadn't been spent by the federal govt in exchange for IOUs on future taxpayers -- and instead spent to purchase say corporate bonds -- then we wouldn't have the problem of the U.S. taxpayer having to come us with $1.5 trillion in today's dollars. Instead, the federal government would just sell their corporate bonds, and not impact taxpayers.

I am a progressive -- I read Mother Jones, The Nation, FAIR Extra, and a couple of others. But lying about Social Security -- telling about the "assets" in the SSTF without also making clear that they are also liabilities to the general fund that future taxpayers, not Santa Claus, will have to make up -- is not progressive. To me, a half truth like this is a lie lie lie. You should be ashamed of yourselves.

For the truth about the Social Security Trust Fund (its assets in no way will help the federal government to pay benefits, and its assets don't affect the government's obligation to pay benefits -- as the obligation to pay benefit is in current law, unrelated to whether the SSTF is full or empty), see quotes from the OMB, CBO, GSA, and Congressional Research Office at:

http://geocities.datacellar.net/jalarson3/fb-50.html

Here are some excerpt from it:

The below quote about the funds in the Social Security Trust Fund is from the "Analytical Perspectives, Budget of the United States Government, Fiscal Year 2000", by the Office Of Management and Budget, Feb 1, 1999. ( http://www.access.gpo.gov/usbudget/fy2000/pdf/spec.pdf ).

[Begin Analytic Perspectives quote, p. 337:] "These funds are not set up to be pension funds, like the funds of private pension plans. They do not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the Treasury that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures. The existence of large trust fund balances, therefore, does not, by itself, have any impact on the Government's ability to pay benefits." [End Analytic Perspectives quotes.]

The below is an excerpt from the Testimony of Congressional Budget Office (CBO) Director Dan Crippen before the Senate Budget Committee February 23, 1999 ( http://www.senate.gov/~budget/republican/about/crippen223.pdf ) regarding The President's Social Security Framework.

[Begin Excerpt from Crippen Testimony, p. 8: ] "Although there is no money in the Treasury to pay for future obligations, the obligations to people eligible for Social Security benefits are real. And most important, those obligations are a direct result of federal law, not a consequence of whatever may or may not be credited to the trust funds. In particular, the size of the balances in the Social Security trust funds -- be it $2 trillion, $10 trillion, or zero -- does not affect the obligations that the federal government has to the program's beneficiaries. Nor does it affect the government's ability to pay those benefits.

"This fact is explicitly recognized in the President's budget for fiscal year 2000 in the same words used in previous budgets. To quote page 337 of the Analytical Perspectives volume: 'The existence of large trust fund balances, therefore, does not, by itself, have any impact on the government's ability to pay benefits.' The fact that trust fund balances are unrelated to the government's obligation or ability to pay benefits needs to be recognized before any proposals to address the Social Security and Medicare trust funds can be analyzed." [End Excerpt from Crippen Testimony]

Even the Social Security Trustees allude to this problem in the March 1999 Social Security Trustees Report by saying that the problem of where the general fund is going to get the revenues to redeem the trust fund IOUs is "not within the scope of this report".

Thank you
Jim Larson

Letter 2: AARP Reply 2/10/00

Date: Thu, 10 Feb 2000 16:00:02 -0500 (EDT)
From: Member 7
Subject: Re: Robert Reischauer's Half-Truths
To: jalars

Thanks for your recent email

Like you, AARP is concerned about adequate retirement income. Our goal for Social Security reform remains steadfast: a program that will guarantee benefits for future generations, that cannot be jeopardized by misfortune, eroded by inflation, or depleted by a long life.

Some critics have characterized Social Securitys investments as "just a bookkeeping entry" or an "IOU" which suggests that the investments are somehow worthless; this is just plain wrong. By law, the Treasury must invest the payroll taxes not needed to pay benefits or administer the program in interest bearing government securities.

Its natural that people are confused and wonder what these trust funds are and where the money goes. Well, here is how it works: the Social Security trust funds buy interest-earning Treasury Bonds just like the bonds pension funds and private investors buy. In 1997, the Trustees invested what was an $88 billion Social Security surplus, buying Treasury Bonds that are earning interest in the trust funds. It brought the total holding of the trust funds to $600 billion. When we need to use them, the trust funds will cash in these bonds.

The bonds are safe and are earning approximately 7% in annual interest. In 1997, 10% of Social Securitys total income of $44 billion was just interest alone. For over 200 years, these bonds have paid off, and they are continuing to pay off. With no changes at all, Social Security can continue to pay 100% of promised benefits until 2034, and 75% of its obligations for decades after that. But 75% wouldnt be fair to Boomers and future generations, so AARP is committed to making changes needed to ensure Social Security will continue to pay full benefits.

AARP believes the 25% gap that occurs after 2034 can be closed without jeopardizing the lifetime guaranteed, inflation-protected benefits provided by Social Security. Please join AARP in calling on Members of Congress to take action now on Social Security. For more information on the Social Security trust funds, we have a publication available which you might find interesting. You can order a free copy "The 1999 Social Security Trustees Report for the Old Age and Survivors and the Disability Insurance Trust Funds (OASDI)" by calling us at 1-800-424-3410, or sending an e-mail to MEMBER@AARP.ORG and including your name, mailing address and the name of the publication.

Again, thank you for taking the time to share your ideas, concerns, and opinions with us.

Deborah
AARP Online

Letter 3: Jim Larson Reply 2/11/00

(In the below, AARP's quotations are enclosed between ##> and <## symbols. And also indented)

To: Member 7, INTERNET:MEMBER7@aarp.org
From: jalars
Date: 2/11/2000, 12:13 AM
Re: Robert Reischauer's Half-Truths

##>Some critics have characterized Social Security's investments as "just a bookkeeping entry" or an "IOU" which suggests that the investments are somehow worthless; this is just plain wrong.<##
They are assets to the Social Security program and liabilities to the rest of the federal government (they are even part of the national debt!!), so on net, they are not assets to the federal government. These bonds will not help the federal government one iota to pay Social Security benefits.
##>It's natural that people are confused and wonder what these trust funds are and where the money goes. Well, here is how it works: the Social Security trust funds buy interest-earning Treasury Bonds - just like the bonds pension funds and private investors buy. In 1997, the Trustees invested what was an $88 billion Social Security surplus, buying Treasury Bonds that are earning interest in the trust funds. It brought the total holding of the trust funds to $600 billion. When we need to use them, the trust funds will cash in these bonds.<##
Who is going to redeem the bonds? Santa Claus?? No, future taxpayers.

You should be ashamed of yourselves for writing these half-truths -- writing about the Social Security Trust Fund (SSTF) as if it were an asset to Social Security (true), without mentioning that it is at the same time a liability to the federal government. And it is after all, the federal government that will have to come up with the real money -- from future taxpayers -- to redeem these bonds.

You also use the word "confused". Well, is the GAO, OMB, Congressional Research Service, and the CBO confused when they say the SSTF has no real economic assets in it? ( http://geocities.datacellar.net/jalarson3/fb-50.html ). Even the Social Security Trustees alludes to the problem by saying that where the federal government will get the money to redeem the SSTF securities "has important economic and public policy implications that go well beyond the operation of the OASDI program itself. Discussion of these broader issues is not within the scope of this report" -OASDI Trustees March 1999 Report, p. 26

I'm ashamed to be a member of the human race -- to see so many of my fellow human beings carrying on this deception -- this accounting shell-game to fool people into thinking that we're supposedly saving up for our retirement through 2034, when in fact we haven't saved a dime!! We've spent all of the Social Security surpluses, and written IOUs on future taxpayers.

##>The bonds are safe and are earning approximately 7% in annual interest.<##
The interest is just more IOUs on future taxpayers. Future taxpayers will have to come up with the real money to pay off those IOUs. You know that.

I think the AARP is trying to evade responsibility for this Social Security mess as long as possible. The current seniors are making off like bandits on Social Security, and not taking any responsibility for the past spending of ALL of the Social Security surpluses.

##>With no changes at all, Social Security can continue to pay 100% of promised benefits until 2034, and 75% of its obligations for decades after that.<##
It is 75% in 2034. Then the percentage declines steadily from 75% in 2034 to 67% in 2075, according to the March 1999 OASDI Trustees Report, Intermediate Assumptions.

Between 2014 and 2034, the federal government will have to redeem $7.8 Trillion of the SSTF's bonds. You never mentioned the need for the federal government to come up with the trillions of dollars to redeem the bonds in your entire letter. Except to say "For over 200 years, these bonds have paid off, and they are continuing to pay off"

(Not that the bonds really matter at all. Because the obligation to pay Social Security benefits is a matter of law, and has no tie to the SSTF balance. Promised obligations have to be paid whether the SSTF balance is $100 Trillion or $0. Per CBO director Dan Crippen.)

I've always wanted to work in a policy advocacy group that had similar views and goals as mine. But I was always afraid that I'd be forced to write grossly misleading half-truths (if not outright lies), and I could never do that and live with myself. I'd rather be homeless then to obfuscate the truth, no matter how noble the cause in general is.

Please start telling the WHOLE truth about Social Security -- the liability part as well as the nice-sounding asset part.

Jim Larson

Letter 4: AARP Reply 2/11/00

Date: Fri, 11 Feb 2000 09:48:22 -0500 (EDT)
From: Member 7
Subject: Re: Robert Reischauer's Half-Truths
To: James Larson

Thanks for responding to the email.

Today, Social Security collects more revenue than is needed to pay benefits. Any revenue not used to pay benefits or administer the program is credited to the Social Security Trust Funds to help pay benefits for future retirees. How to meet Social Security’s long-term obligations is the challenge facing America today.

AARP believes that if we are to achieve consensus regarding a solution to Social Security’s long-term financial challenge, we must engage the American people in a meaningful debate on the issue. We encourage a thorough discussion so that all options and their effects on individuals and our economy are thoughtfully considered.

Information about the debate over the future of Social Security can be found on AARP Webplace at www.aarp.org/focus/ssecure and www.aarp.org/realitycheck.

We invite you to view these statements and see how your ideas compare with others on these important issues. Again, thanks for visiting AARP Online.

Deborah
AARP Online

(hits since July 2, 2001)
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