Misinformation About Social Security Funding As A Scare Tactic

Paul Krugman explains why social security can't be two things at the same time. Its kind of like saying that an apple is an apple but it is also an orange. Most people would have problems with that description of an apple. On the other hand, critics of social security have no problem with that kind of illogic when they complain about social security spending.

The case in point is an article in the Washington Post that publishes a headline about social security running out of money to pay out benefits. Social security tax revenues have declined in the recession and the payments to beneficiaries are greater than the revenue collected. However, social security revenues have exceeded payouts since 1983. The excess revenues created a $2.3 trillion surplus. The government borrowed this surplus and issued interest paying bonds that it put into a social security trust fund. If we regard those assets in the trust fund as real, those funds can be drawn upon to make payments to beneficiaries. Consequently, there is no immediate funding problem. On the other hand, if the trust fund in an illusion, and social security revenues are not distinct from other tax revenues, then expenditures on social security are no different from other government spending mandated by current law. In either case, there is no immediate social security funding problem. Either it draws down its trust fund to make payments, or it makes payments just like we make payments for other programs. If the government borrows to make payments it is no different from government borrowing to fund the defense budget.

Unfortunately, misinformation about social security funding is widespread and many young people believe that they will not collect on social security when they retire. That is just what the propagandists desire. If young people do not believe that they will collect benefits, they will be less supportive about maintaining a program that conservatives hate.