We will need honesty to solve debt problem

First published by RealClearPolitics: With the 2012 elections casting a glow on the horizon, politicians in Washington are busy positioning their arguments and rallying their troops.  Nowhere is this pandering more obvious than with Social Security. 

Apparently, Social Security is no longer going bankrupt and has been miraculously healed of any budget shortfalls until 2037.

"Social Security is a program that works, and it’s going to be – it’s fully funded for the next 40 years. Stop picking on Social Security," said Senate Majority Leader Harry Reid (D., Nev.) at the beginning of session on Meet the Press.  Rep. Chris Van Hollen (D., Md.), head of the Democratic Congressional Campaign Committee, echoed this message on Face the Nation: "Social Security is not a driver of these deficits and debt.  And we’re not going to balance the budget on the backs of Social Security beneficiaries. It is solvent a hundred percent until the year 2037."

More troubling, though, was a piece in USA Today by Jacob Lew, Director of the Office of Management and Budget, which contradicted his own previous statements and gave credibility to the crass political arguments of party leaders.  Mr. Lew wrote that "[L]ooking into the next two decades, Social Security does not cause our deficits . . . Social Security benefits are entirely self-financing . . . the trust fund will continue to accrue interest and grow until 2025, and will have adequate resources to pay full benefits for the next 26 years."

This is misleading.  In 1983, for example, payroll taxes were increased in anticipation of today’s large number of Baby Boomers who would be retiring.  The money that was to be placed in the so-called trust fund was instead spent on other priorities and replaced with IOUs.

These financial shenanigans were no mystery to Mr. Lew when he was director of the Office of Management and the budget under President Bill Clinton.  In OMB’s official commentary on President Clinton’s budget for Fiscal Year 2000, he wrote on page 337 of Analytical Perspectives, "These [trust fund] balances are available to finance future benefit payments and other trust fund expenditures–but only in a bookkeeping sense.  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."

Lew was right in 1999, but not today. Social Security is not self-financing.  In 2010, the government borrowed $37 billion to fund the program. Over the next decade we will borrow $547 billion to pay benefits.  In politics, it’s very easy to take hard choices off the table, particularly near an election.  But you can’t take demographics off the table.

As the President’s Debt Commission report explained, people are living longer while there are fewer workers per retiree than when the program was created.  For instance, in 1950, there were 16 workers per beneficiary.  Today, the ratio is 3 to 1.

I voted to force the Senate to take up the Deficit Commission’s recommendations along with Senators Kent Conrad (D., N.D.), Mike Crapo (R., Idaho) and Dick Durbin (D., Ill.) because we all looked at the same demographic problem and agreed Congress cannot keep kicking the can down the road.

Democrats are right that there are other areas of the budget that have a greater impact on the deficit.  But if we can’t talk honestly about Social Security, how will we ever deal with Medicare, which is facing a far more serious shortfall?

In the short-term, Social Security benefits are secure, as long as China and the rest of the world agrees to loan us enough money to replace the dollars Congress diverted from the Social Security accounts. Sooner or later, though, Washington will have to reform entitlements.  The American people are looking for fiscal discipline, not message discipline.  We can make these choices on our terms, or we can wait until a crisis and have these choices forced on us by foreign creditors.  Giving the American people a false sense of security may help win an election, but it may also help lose a country.


Staff Report:

Dr. Coburn proposes cuts within S. 493

Dr.  Coburn is proposing to cut spending by $20 billion as the Senate debates the small business bill.  Dr. Coburn has filed the following seven amendments to S. 493 and looks forward to their adoption.  

 Targets include ethanol, funding for PBS and duplications identified by GAO.  

1. Eliminate funding for the ethanol subsidy                       $ 6 billion
2. Eliminate funds for leftover earmarks                             $ 7.3 billion
3. Eliminate program duplications identified by GAO           $ 5 billion
4. Eliminate unemployment payments to millionaires            $  20 million
5. Reduce new car purchases by the government            $ 900 million
6. Eliminate funds for ‘covered bridges’ program                $  8.5 million
7. Eliminate taxpayer subsidies for public broadcasting      $ 550 million

For the full background on each of the listed cuts, click here