Sunday, October 30, 2011
When journalism goes bad
Wow, this Washington Post article about the Social Security system financing is so boldly bad that I fear it may change the debate forever. Every Villager who is smacking his or her lips over the prospect of "shared sacrifice" (that won't hurt them because they're wealthy) is having a wonderful morning, secure in the knowledge that average people will be suffering in their old age:
"Last year, as a debate over the runaway national debt gathered steam in Washington, Social Security passed a treacherous milestone. It went 'cash negative.'"
I'll let Dean Baker do the honors:
Read on. It gets worse.
Of course Senator Reid is exactly right. The system is self-financed under the law. In 2009 it began drawing on the interest on the government bonds it held. That is exactly what the law dictates, when Social Security needs more money than it collects in taxes, it is supposed to draw on the bonds that were purchased with Social Security taxes in the past. This means it is self-financing.Again, this is like Peter Peterson selling his government bonds to finance one of his political ventures. Just like Social Security, he is drawing on his own money. The Post may have missed it, but there was a big debate last summer over raising the government's $14.3 trillion debt ceiling. This $14.3 trillion figure included the $2.6 trillion borrowed from Social Security. If Social Security sells some of these bonds and this money is used to pay benefits, it does not raise the debt subject to the ceiling by a penny. This is very simple and very clear.
This "treacherous milestone" is entirely the Post's invention, it has absolutely nothing to do with the law that governs Social Security benefit payments. Under the law, as long as their is money in the trust fund, then Social Security is able to pay full benefiits. There is literally no other possible interpretation of the law.
As the article notes the trust fund currently holds $2.6 trillion in government bonds, so it is nowhere close to being unable to pay benefits. The whole point of building up the trust fund was to help cover costs at a future date when taxes would not be sufficient to cover full benefits. Rather than posing any sort of crisis, this is exactly what had been planned when Congress last made major changes to the program in 1983 based on the recommendations of the Greenspan commission.
The article makes great efforts to confuse readers about the status of the trust fund. It tells readers:
"The $2.6 trillion Social Security trust fund will provide little relief. The government has borrowed every cent and now must raise taxes, cut spending or borrow more heavily from outside investors to keep benefit checks flowing."
This is the same situation the the government faces when Wall Street investment banker Peter Peterson or any other holder of government bonds decides to cash in their bonds when they become due. In such cases it "must raise taxes, cut spending or borrow more heavily from outside investors." The Post's reporters and editors should understand this fact.
The article then goes on to incorrectly accuse Senate Majority Leader Harry Reid of misrepresenting the finances of Social Security:
"In an MSNBC interview, he [Senator Reid] added: 'Social Security does not add a single penny, not a dime, a nickel, a dollar to the budget problems we have. Never has and, for the next 30 years, it won’t do that.'
Such statements have not been true since at least 2009, when the cost of monthly checks regularly began to exceed payroll tax collections. A spokesman said Reid stands by his comments and his view that Social Security is entirely self-financed."
And as Krugman points out here
, it's yet another example of cherry picking whatever piece of the argument that makes your case:
In legal terms, the program is funded not just by today’s payroll taxes, but by accumulated past surpluses — the trust fund. If there’s a year when payroll receipts fall short of benefits, but there are still trillions of dollars in the trust fund, what happens is, precisely, nothing — the program has the funds it needs to operate, without need for any Congressional action.
Alternatively, you can think about Social Security as just part of the federal budget. But in that case, it’s just part of the federal budget; it doesn’t have either surpluses or deficits, no more than the defense budget.
Both views are valid, depending on what questions you’re trying to answer.
What you can’t do is insist that the trust fund is meaningless, because SS is just part of the budget, then claim that some crisis arises when receipts fall short of payments, because SS is a standalone program. Yet that’s exactly what the WaPo claims.
(Cue Brad DeLong: "why, oh why can't we have a better press corps?")
But this is exactly what the Villagers are looking for in order to defend their insistence on a Grand Bargain. Certainly these guys will be pleased:
At least 100 House lawmakers plan to urge the deficit-cutting congressional supercommittee to accomplish what the Obama administration and Congress failed to achieve this summer: a large agreement aimed at reducing the federal deficit by $4 trillion over 10 years.
In a letter that the bipartisan group plans to send to the supercommittee next week, the lawmakers will argue a large deal is vital to the nation’s future. Economists generally believe that long-term deficit-reduction of about $4 trillion is needed to put the U.S. on sound fiscal footing.
Importantly, the letter calls for the 12-member Joint Select Committee on Deficit Reduction to consider “all options,” including both spending and revenue – suggesting that Democrats are open to entitlement reforms while Republicans would back tax increases if they were part a giant deal.
“We know that many in Washington and around the country do not believe we in the Congress and those within your committee can successfully meet this challenge,” the lawmakers plan to say, according to a draft copy. “We believe that we can and we must.”
The letter, spearheaded by Rep. Heath Shuler (D., N.C.), stems from an informal discussion group led by Reps. Mike Simpson (R., Idaho) and Steny Hoyer (D., Md.), lawmakers said.
The Republican signers include Rep. Steve LaTourette of Ohio, a close ally of House Speaker John Boehner (R., Ohio). LaTourette said it is important to demonstrate a large group of lawmakers will back a big agreement.
“I think the moment’s here for the big deal,” he said, acknowledging that calls to include revenue in a deal can spook some Republicans who worry about a primary challenge from the Tea Party, which opposes new taxes.
“We felt that this was the moment to express both our mutual trust as well as our desire to get something big and important done here even if it’s painful,” said Rep. Jim Himes (D., Conn.), who intends to sign the letter.
And progressives will be told that we must clap louder for these cuts in "entitlements" because millionaires are being asked to kick in some tip money they won't even miss. I am quite sure they actually believe that this "balanced" approach is also fair moral and decent. This is because Villagers are completely out of touch with what is happening in the real world and see these problems as items on a spread sheet instead of real people with real needs. No, asking millionaires to throw some of their ample spare change into the pot in exchange for the sick and elderly being asked to sacrifice their bare subsistence is not fair, moral or decent.
Right now Occupy Wall Street is focused on the malefactors of great wealth. But there are other issues that are quite urgent and this Super Committee nonsense is one of them. I don't know if there's any way of stopping this train, and I suspect our greatest friend right now is partisan gridlock. But just in case, one little thing that those who are occupying their desk chairs can do today is send Dean Baker's column
around to all the usual suspects in the media.
Here is FAIR's list of media contacts
. I've sent the column
to all of them. If you have time, please send it to at least a few of these people. So far, Social Security has been kept out of the mix, but the Super Committee has the ability to put it back on the menu. Right now is the moment of maximum danger for the safety net in general and I don't think this article appearing in the Sunday WaPo
pages is an accident. If nobody raises hell or even attempts to rebut it there's every reason to believe that the insular Villagers will take it on faith and give the Catfood advocates a totally free pass.
digby 10/30/2011 12:00:00 PM