Wednesday, March 16, 2011

Don't Complain to Mr. Quarter If You Haven't Saved For Retirement

Jacob Lew is the Obama Administration's Director of the Office of Management and Budget. He was also the director of the Office of Management and Budget under President Bill Clinton. Mr. Lew recently wrote that "[L]ooking into the next two decades, Social Security does not cause our deficits . . . Social Security benefits are entirely self-financing . . . the trust fund will continue to accrue interest and grow until 2025, and will have adequate resources to pay full benefits for the next 26 years."

This is either a blatant attempt to mislead the taxpayer public or it is an outright lie.

In the OMB official commentary on President Clinton's budget for Fiscal Year 2000, Mr. Lew's office wrote on page 337 of Analytical Perspectives that:

"These [trust fund] balances are available to finance future benefit payments and other trust fund expenditures--but only in a bookkeeping sense. These funds are not set up to be pension funds, like the funds of private pension plans. They do not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the Treasury that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures. The existence of large trust fund balances, therefore, does not, by itself, have any impact on the Government's ability to pay benefits."

It is well known that Social Security is not currently self-financing and will not be in the future so long as the current system remains in place. The plain facts are that the Social Security shortfall for 2010 was $37 billion and the projected shortfall for the next 10 years is $547 billion. So, absent changes in the nature of the entitlement program that is Social Security, the only scenario where the Social Security trust fund will "have adequate resources to pay full benefits for the next 26 years." is if China and the rest of the world agrees to loan us the money.

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