Fact Check: Social Security Does Not Increase the Deficit
The American people love Social Security, and with good reason. It protects seniors and the disabled from poverty, and it is the most important life and disability safeguard available to the nation's 75 million children. The program is a bargain: Its administrative costs are lower than privately managed retirement plans. Social Security returns in benefits more than 99 cents of every dollar collected, whereas a typical 401(k) could easily eat up 20 cents of that dollar in fees. The program is fiscally sound and prudently managed — a policy triumph.
There are basically two categories of people who want to see Social Security cut: 1) financiers who wish to move us toward privatized retirement accounts so that they can charge us fees; and 2) rich people who do not like to pay taxes. Their main champions are conservatives at the Heritage Foundation, libertarians at the Cato Institute and Wall Street financier Pete Peterson.
Just about everybody else in America is against cutting Social Security, as poll after poll demonstrates. The people have continued to speak loudly and clearly, and yet Washington can’t seem to get the message. This is obviously because a lot of media people and politicians rely on money from the two groups mentioned above. So they have to come up with arguments to try to convince the public that up is down and red is blue. It’s a war of attrition: repeat lies and distortions often enough and maybe they’ll come to be taken as facts.
The latest volley is a shameful and distorted editorial in the Washington Post which attempts to downplay the retirement crisis faced by Americans and to stoke generational tensions by suggesting that Social Security is a burden on young people instead of a vital safeguard. The editorial actually mocked a sensible bill introduced by Sen. Tom Harkin (D-Iowa) that would boost Social Security benefits by increasing taxes on the wealthy. The Washington Post's nonsense was blasted by Senator Elizabeth Warren, who spoke out strongly against cuts of any kind, including Obama's "chained CPI" cut which would prevent Social Security from keeping up with seniors' increasing costs.
A favorite tactic of Social Security's foes is to push the notion that the program somehow drives up the federal deficit, an argument that is completely without merit.
In the first place, the federal deficit is shrinking. That’s a highly inconvenient truth for people trying to stoke deficit hysteria, but they’re banking on the fact that a lot of Americans don’t know about the deficit going down. So they go on pretending that the federal deficit is a dire, pants-on-fire problem, even though most of them know that’s a bunch of hot air.
Even if the deficit were rising — which it’s not — the sensible way to deal with that would be to concentrate on putting people back to work and to invest in productive things like education and infrastructure. That gets the economy going and then, guess what? As tax revenues come back, the deficit goes down on its own, which is what’s happening right now.
Taking money out of people's pockets, which is what cutting Social Security would do, actually could have the perverse effect of increasing the deficit because it means that people can’t buy the stuff they would normally buy with this money, like food and healthcare. What that happens, the businesses trying to sell those items have to scale back and lay off employees, which means less tax revenue for the government. And so on. Not exactly a recipe for a booming economy.