A PolitiFact Social Security Stretch
One can only wonder whether the Providence Journal‘s PolitiFact team reads their own newspaper. The other day, they did what they love most to do (whacking Republican candidates) and graded Senatorial candidate Barry Hinckley “false” for saying that “there’s no money in Social Security.” Theirs is not a new argument — it’s one that partisan Democrats have been making for years:
Those who say the fund has no money, or that it has nothing more than a bunch of IOUs from the federal government, are referring to the fact that Social Security doesn’t have $2.5 trillion in cash sitting in a vault somewhere. The federal government has loaned the money to itself, using the cash to pay for other expenses.
But these aren’t IOUs, which generate no interest. The loan is in the form of special-issue Treasury bonds that earned $117.5 billion in interest in 2010, according to the latest trust fund report.
The reader suspects from PolitiFact’s stretched analogy that the Hinckley’s point is being deliberately missed:
So maybe a better analogy would be: Saying that Social Security has no money is akin to saying that you’re broke if you have 20 cents in your pocket but $20 million in the stock of a heavily leveraged company.
Only if you are the sole proprietor of that company and the company itself is broke. I could draw up papers from Anchor Rising promising me a million dollar bonus, but that doesn’t make me a millionaire. Even more: Currently, the government can only pay itself the Social Security IOUs because it borrows almost half of every dollar it spends, making the system not unlike a Ponzi scheme.
Indeed, the folks at PolitiFact should have read this Q&A-style article, which the Providence Journal ran on the first page of its Nation section on July 29:
Q: What about the Social Security Trust Fund? Can’t that be used to pay Social Security benefits?
A: No. The government will continue to collect Social Security taxes, but the taxes flow in across the month, while the checks go out at the beginning of the month. Normally, the Treasury advances money to Social Security at the start of each month to pay that month’s checks, then gets repaid as the tax money comes in. But the Treasury can’t make that advance if it doesn’t have cash. And while the Social Security Trust Fund has more than $2.5 trillion in assets, that money is invested in U.S. government securities. Usually, that’s a good thing because U.S. government securities are considered the world’s safest investment. In this case, it’s a problem because if the government doesn’t have money, it can’t cash in the securities.
It’s too bad Hinckley didn’t think to cite that article as a source. It would have been amusing to see PolitiFact take it on.