Froma Harrop Says Don’t Believe that Spending More on Social Security Than it Takes In Drives Up Deficits. And Then it Gets Worse.
Undeterred by fiscal or economic realities, Projo op-ed columnist Froma Harrop continues to argue that there is an actual “trust fund” backing the Social Security system. Here is the analogy made in her Sunday column, where she criticizes Ohio Congressman Rob Portman for expressing concern that Social Security now pays out more money than it takes in…
Portman’s assertions are like parents saying that when they tap their college savings account to pay tuition that they couldn’t afford with that year’s earnings, they are spending money they don’t have.What this rationale fails to acknowledge is that, in the case of social security, long before it comes time to pay out the benefits that the program was created to pay, the trust fund has already been spent and therefore cannot be spent again.
The reality is painfully obvious if you walk the college-fund analogy all the way through. Begin with a set of parents who decide that 15% of every paycheck should be dedicated to the college fund — but who don’t act that way. As each paycheck arrives, the parents spend everything that comes in on non-college related expenses while placing an IOU in a secure location to remind themselves to pay back the 15%. Maybe the immediate spending is necessary, maybe the spending is frivolous, it doesn’t matter from a fiscal perspective. The point is that the money is spent.
Now, years after the parents began writing themselves IOUs, the time comes to start making payments to a college. The parents look over the history of their pay stubs and their IOUs and say “the records in the trust fund say we have 15% of our lifetime income to spend on college”. But can they hand the box of IOUs they wrote to themselves to a college bursar? No, they have to go get real money from someplace to pay back the IOUs they wrote themselves. And if they hadn’t written themselves the IOUs, or created their mythical “trust fund”, there would be no difference. IOUs written to yourself don’t mean anything, whether you are an individual or a government or anything in between.
When the government has to go to get money to pay benefits that it has not saved real assets for, there are only a few choices; they have to raise taxes, cut programs, or borrow the money. The exact same actions would have to be taken in the absence of the “trust fund” accounting gimmick.
Harrop goes on to punctuate her flawed description of social security with a whole new level of fiscal insanity, arguing that Rep. Portman’s making accurate statements about the nature of the mythical “trust fund” equates to a desire to “stiff” (Harrop’s term) the taxpayers. Apparently, in the worldview of Froma Harrop, politicians who inform the public how the finances of Social Security actually work should be looked at with suspicion, while politicians who promise benefits without concern about whether the government has the resources to pay them are the ones to be trusted.
If nothing else, understanding this thought-process does provide some insight into the Projo editorial board’s decision to support a candidate like David Cicilline for Congress, despite the fact that during his tenure of Mayor of Providence, he was famously untroubled by such concerns as government spending more than it was taking in, or whether government accounts actually contained the money that they were supposed to. If Sunday’s column is any guide, these were amongst his positive quantities in the eyes of some! (Of course, the real lesson to take from all of this, as always, is that progressives and public finance don’t mix).
Finally, the analogy between a college fund and social security raises an ethical question: Is it honest for parents who are not saving real money into a college fund, to tell their children that they are, while the real plan to pay for college depends on getting money from some source in the future? I wonder, is there a specific name for this kind of scheme?