Astonishingly, this is what the guy Obama nominated today to succeed Turbo Tax Tim at Treasury actually believes. At least that’s what he said in 2011:
There’s no reason to believe he feels any differently now since his boss continues to insist that “we don’t have a spending problem” and, with Social Security and other entitlements the primary drivers of our exploding debt, it’s only logical to assume Obama would nominate a fellow flat-earther on government spending. The fact is, Social Security went into deficit in 2010 and it, along with Medicare, will drive the nation into bankruptcy if they aren’t materially reformed. The longer we put off the inevitable, the more painful the day of reckoning will ultimately be. But Lew insists we can sit around and do nothing until 2037. Stephen Gutowski at CNS exposes Lew’s nonsense by doing one of the best jobs of explaining Social Security’s banana republic finances I’ve yet seen:
The truth is that Social Security has been adding to the deficit ever since it started paying out more than payroll taxes bring in. It does it in a more indirectly than it will when the trust fund finally does run out but that’s just a matter of semantics. As the trust fund operates, which is all explained on the Social Security’s website, the money that is brought in from payroll taxes is immediately used to buy “special issue” securities from the Treasury.
Those are sweetheart bond deals since they can never be redeemed for less than face value. It doesn’t matter when they’re redeemed or why. Additionally, nobody but the Social Security trust fund can buy them. Then, the taxes used to buy those securities are sent into the general fund and immediately spent on whatever it is that Congress feels like spending it on.
When it comes time for the fund to pay retirees, it cashes in the securities and is paid back with treasury cash. The treasury cash used to buy back the securities comes from – you guessed it – the general fund. It’s just one big dumb accounting trick.
The result of all this is that we end up adding to the deficit anytime Social Security taxes don’t at least equal the Social Security payouts.
So, despite Jacob Lew’s pronouncements, Social Security is now, and will continue to be, adding to the deficit. There’s no way around that fact.
First Obama nominates a guy to Treasury who cheats on his taxes, now he follows that up with a guy who’s living in the land of rainbows and unicorns. Lew’s pronouncements on Social Security’s finances are, without a doubt, a textbook Chip Diller moment: