"Accounting Gimmicks" in Social Security

The first attack on Social Security this year was with the false accusation that there was rampant fraud in the disability program, when two different reports show only 0.4% fraud in the program — far less than any other government program — and probably far less than employee theft in the private sector — and much less that's found in the defense industry. Now Social Security is just a scam.

Below is from a recent blog at the Committee on Ways and Means, where it says:

Democrats continue to claim we can fix the looming shortfall in disability insurance by raiding retirees’ Social Security trust fund. But CBO Director Doug Elmendorf poured cold water on those assurances during his testimony before the House Budget Committee yesterday. Rep. Diane Black asked the head of the nonpartisan agency whether the Democrats’ preferred answer would actually work:

Rep. Diane Black: "As a matter of fact, I’ve heard some folks just talk about if this trust fund does become defunct, that we would then just transfer money from the Old Age Survivor fund into the Social Security Disability fund. Can you tell me how that would affect both of these funds over long term?"

CBO Dir. Elmendorf: "So the approach you describe has been used before, as you know. If money is moved from the Old Age Survivors Insurance trust fund into the Disability Insurance trust fund, that will extend the number of years from which the DI trust fund can pay benefits and reduce the number of years for which the OAS trust fund can pay benefits."

Rep. Diane Black: "So that old [adage] robbing Peter to pay Paul is certainly the case here, and if something is not done to reform both of these programs, that will be all that we’re doing is robbing Peter to pay Paul until essentially there’s nothing left in either program to rob or pay?"

CBO Dir. Elmendorf: "Certainly, Congresswoman, if you want to help both programs you’re not going to accomplish that by moving money around just between them."

But the real kicker was when Rep. Tom McClintock asked the director whether we could just keep kicking the can down the road:

Rep. McClintock: "If we continue down the path we’re on, can today’s college students count on receiving the Social Security benefits that they’ve been promised?"

[* Editor's note: "College students" —> The tactic of using "generational warfare" to divide the Boomers and Millennials on issues such as Social Security.]

CBO Dir. Elmendorf: "Um, no, Congressman."

The Ways and Means blog concludes: "If Director Elmendorf’s testimony tells us anything, it’s that we need a real solution, not an accounting gimmick."

The blog sounds partisan, so I'm currently looking for video and/or text of the entire hearing, as I'm very sure those remarks were taken out of context. Oral testimony was from "invited witnesses" only. However, they say any individual or organization may submit a written statement for consideration by the Committee (and for inclusion in the printed record of the hearing) by the close of business on Wednesday, March 11, 2015.

And transferring funds is not a "raid" or an "accounting gimmick" — it's temporary "tool" that the L.A. Times thoroughly explains has been used 11 times before, because of the partisan divide in Congress has yet to agree on a more permanent solution. But rather the "fix" the problem, some in Congress are trying to use this as an excuse to denounce the whole program as one big problem.

Rep. Diane Black (quoted at that Social Security hearing) also noted on her website that their newly proposed budget would also eliminate the ability for some people to receive both unemployment insurance and disability insurance benefits simultaneously — which at first glance, might seem very reasonable.

"This option would eliminate the ability of individuals to receive both Unemployment Insurance benefits and Disability Insurance benefits. A condition of receiving UI benefits is that the individual is available and seeking work. In direct contradiction, Disability Insurance is available to benefit only those who are unable to work. The President included a similar proposal in his fiscal year 2015 budget."

Rep. Sam Johnson concurs. He and others call these scoundrels "double-dippers", even though, only about 117,000 Americans double-dipped by cashing unemployment and Social Security disability checks — and that was during the worst time of the economic crisis. (We probably have more tax dodgers.)

And although Rep. Johnson's party always claims to support our Veterans (part of the 47%), they too have been targeted for cuts with chained-CPI. And their mouth piece (Fox News) also calls some of our Wounded Warriors "triple-dippers" — because about 60,000 also receive Veterans benefits. Yet in their new 2015 budget proposal, they feign compassion for our Vets.

Rep. Sam Johnson also set about muddying the Democratic narrative on past reallocations from the disability fund to the old-age fund with expert witness testimony insisting that previous reallocations always came with major reforms. From his opening remarks at the hearing today:

"I think it's fair to say that this program can and must work better for people with disabilities as well as for the hard working American taxpayer ... The Administration just wants to kick the can down the road and offers no ideas on how to make the program work better. That’s not right. Americans who have paid into Social Security and are currently receiving benefits as well as today’s younger workers deserve better. This Congress should and must act to make sure that Disability Insurance benefits continue to be paid in 2016 and beyond to those who rely on them. And in doing so we should make this program work better for those who depend on it."

[* Editor's note: When he says, "The Administration just wants to kick the can down the road and offers no ideas on how to make the program work better." That is a BIG FAT LIE. When he says, "Today’s younger workers deserve better," that too is using generational warfare. But it's that last sentence in his quote: Is he saying he and his party will do everything possible to make sure those on disability will not see any cuts, because they are going to make the program "work better for those who depend on it"? Because if so, he doesn't say how they will accomplish this.]

Below is from a new 2015 budget proposal titled "The Path to Prosperity" (Yes, just like their original budget was also named, which was just more "feed the rich and starve the poor" policies to starve the beasts). These are just excerpts from the section on Social Security — with a few duly-notated editorial remarks, marked with asterisks inside brackets:

The Obama administration has called on diverting funds from the retirement system (Old Age and Survivors Insurance or OASI) for Social Security to the Disability Insurance system. This will accelerate the insolvency of the OASI trust fund, necessitating earlier cuts to Social Security benefits for current and future retirees. This budget does not support the raid on the OASI trust fund.

[* Editor's note: It's not a "raid" or an "accounting gimmick" — it's temporary "tool" that the L.A. Times thoroughly explains has been used 11 times before, because of the partisan divide in Congress has yet to agree on a more permanent solution. But rather the "fix" the problem, some in Congress are trying to use this as an excuse to denounce the whole program one big problem.]

Any value in the balances in the Social Security Trust Fund is derived from dubious government accounting. The trust fund is not a real savings account. From 1983 to 2010, it collected more Social Security taxes than it paid out in Social Security benefits. But the government borrowed all of these surpluses and spent them on other government programs unrelated to Social Security. The Trust Fund holds Treasury securities, but the ability to redeem these securities is completely dependent on the Treasury’s ability to raise money through taxes or borrowing.

[* Editor's note: But a new report from the Social Security Administration says just the opposite, and states: "Although some observers view the trust fund reserves and interest income as accounting fictions, a careful tracing of the cash flows reveals that the reserves and their interest earnings are, for all practical purposes, as real as those of any bank account." So who do we believe, people at the SSA — who want to protect retirement and disability benefits for voters — or political leaders, who want to cut those benefits for their constituents?]

Social Security is currently paying out more in benefits than it collected in taxes — in other words, running cash deficits — a trend that will worsen as the baby boomers continue to retire. To pay full benefits, the government must pay back the money it owes Social Security. In testimony before the House Budget Committee, CBO Director Doug Elmendorf stated that: "Well, again, Congressman, on a unified budget basis, taking account of just the tax revenues, the dedicated tax revenues, and the benefits, [Social Security] is contributing [to] the deficit now. If one instead looks at just the balance in the Social Security Trust Fund, that balance is, the annual balance is positive now, but will be negative within about a half dozen years."

The President’s Fiscal Commission made a positive first step by advancing solutions to ensure the solvency of Social Security. They suggested a more progressive benefit structure, with benefits for higher-income workers growing more slowly than those of workers with lower incomes who are more vulnerable to economic shocks in retirement. The Commission also recommended reforms that take account of increases in longevity, to arrest the demographic problems that are undermining Social Security’s finances.

[* Editor's note: "Increases in longevity" —> But I thought it was mostly the rich who were living longer. But I digress...]

In addition, there is bipartisan support that Social Security reform should provide more help to those who fall below the poverty line after retirement. There is no security in a program that fails to the meet needs of the nation’s most vulnerable citizens — lower-income seniors should receive more targeted assistance than those who have had ample opportunity to save for retirement.

[* Editor's note: "Most vulnerable citizens" —> What is their proposal to meet the needs of these lower-income retirees — and those on disability? To repeal and replace Social Security with something much better? Show us your plan!]

While certain details of the commission’s Social Security proposals, particularly on the tax side, are of debatable merit, the commission undoubtedly took several steps forward on bipartisan solutions to strengthen Social Security. This budget seeks to build on the Commission’s important work, calling on action to solve this pressing problem by requiring the President to put forward specific ideas on fixing Social Security. The budget also puts the onus on Congress to offer legislation to ensure the sustainable solvency of this critical program. To be clear, nothing in this budget calls for the privatization of Social Security.

Trust us!

[* Editor's note: "Debatable merit" and "Specific ideas on fixing Social Security" —> Such as raising the $118,500 income cap for Social Security taxes — so that members of Congress also pays this tax on 100% of their incomes, just like 94% of all other American wage earners must? Or by taxing billionaires on their capital gains for Social Security? These seem like reasonable "solutions to strengthen Social Security" — but Congress won't raise one penny in additional revenues from the wealthy, even though they have made all the income gains over the past 30 years, while wages have stagnated or declined for almost everyone else.]

This budget calls for setting in motion the process of reforming Social Security by altering a current-law trigger that, in the event that the Social Security program is not sustainable, requires the President, in conjunction with the Social Security Board of Trustees, to submit a plan for restoring balance to the fund. This provision would then require congressional leaders to put forward their best ideas as well. Although, in the House, the Committee on Ways and Means would make the final determination, this provision would require that:

1) If in any year the Board of Trustees of the Federal Old-Age and Survivors Insurance Trust Fund and the Federal Disability Insurance Trust Fund, in its annual Trustees’ Report, determines that the 75-year actuarial balance of the Social Security Trust Funds is in deficit, and the annual balance of the Social Security Trust Funds in the 75th year is in deficit, the Board of Trustees should, no later than the 30th of September of the same calendar year, submit to the President recommendations for statutory reforms necessary to achieve a positive 75-year actuarial balance and a positive annual balance in the 75th year.

[* Editor's note: "A positive 75-year actuarial balance" —> Such as the way they insisted healthcare benefits be financed for retired Post Office employees? See my post and a short video from the last Senate hearing on disability.]

2) No later than the 1st of December of the same calendar year in which the Board of Trustees submits its recommendations, the President shall promptly submit implementing legislation to both Houses of Congress including recommendations necessary to achieve a positive 75-year actuarial balance and a positive annual balance in the 75th year.

3) Within 60 days of the President’s submitting legislation, the committees of jurisdiction to which the legislation has been referred shall report the bill, which shall be considered by the full House or Senate under expedited procedures.

Some people in Congress have borrowed the Democrats' terminology for strengthening and expanding Social Security (not cutting it) with specific proposals — but they claim (as quoted below) that their newly proposed 2015 budget will ...

  • Secure seniors’ retirement by strengthening Medicare and other vital programs.
  • Protect and strengthens Medicare for current and future generations.
  • Strengthens critical programs like Medicare by giving seniors more control over their health-care.
  • Strengthens our health-care system by repealing Obamacare.
  • Strengthens the safety net by retooling federal aid. It secures seniors’ retirement by reforming entitlements.
  • Empowers reformers at the state level to strengthen and secure Medicaid.
  • Protects and strengthens Medicare for current and future generations.
  • Strengthens Medicare for younger generations.
  • Protect and preserve Medicare for those in or near retirement, while saving and strengthening the program so future generations can count on it when they retire.
  • Strengthen and enhance this aspect of Medicare so seniors will have more health-care choices.
  • Reform aimed at empowering individuals — with a strengthened safety net for the poor and the sick.
  • Strengthen the Medicare program.
  • Strengthen the safety net and protect taxpayers.
  • Social Security must be reformed to prevent severe cuts in future benefits. This budget strengthens the program.
  • The commission undoubtedly took several steps forward on bipartisan solutions to strengthen Social Security.
  • Puts in place fundamental reforms to protect and strengthen Medicare.

...but they don't say how, not without cuts to benefits or by raising revenues. Glaring omissions, wouldn't you think?

As I've mentioned before, the true advocates for Social Security are people such as Senators Elizabeth Warren (as evidenced here and here) and Bernie Sanders (as evidenced here and here) who are the real advocates for Social Security — as well as progressives who caucus with the Democrats. President Dwight D. Eisenhower was the last Republican to advocate for (and expand) Social Security. Currently, no Republican politician supports Social Security or Medicare as a government program — at least, not in its current form.

If Congress wants to talk about "accounting gimmicks", look no farther or further than corporate tax dodgers. They talks about robbing Paul to pay Peter — but Paul has been robbing Peter for decades — and has trillions of dollars in offshore banks accounts as proof.




Social Security

The article states that fraud at DI is only 0.04%. But when you go to the link that supports that number you find that it is 0.4%. So an extra zero was added to make it appear that fraud is not an issue.

.4% on the $147B of DI benefits comes to $600,000,000 a year. That seems like a lot of fraud to me, hardly the rounding error suggested here.


That was a typo -- I wasn't attempting to mislead. As you can see, I correctly quoted this number (0.4%) in another post I did on this subject. But thanks for bringing that to my attention.

Any fraud is bad, but putting $600k in comparison to the fraud we have with defense contractors is tiny by comparison. Lockheed Martin CEO Robert Stevens gets paid $21.9 million a year.