- The Washington Times - Sunday, February 27, 2011

Despite President Obama’s promises to lower the deficit and rein in spending, there was a conspicuous omission from his 2012 budget blueprint that many say would go a long way toward easing the nation’s financial woes: Social Security reform.

The White House and top congressional Democrats argue that Social Security isn’t contributing to the nation’s deficit. Others say that’s nonsense and accuse Democrats of using fuzzy math to justify their claim.

But with the Republican-controlled House eager to continue cutting spending and a bipartisan congressional commission suggesting significant Social Security scale-backs, expect the issue to gain momentum this year.

Chris Edwards, director of tax policy studies at the Cato Institute, a free-market think thank, said it was “bad politics” for the president not to tackle entitlement programs such as Social Security in his budget proposal.

“I actually think he’s made it easier for Republicans to go ahead with their discretionary spending cuts because they can say, ‘Look, the nation has got a fiscal crisis and the president is doing absolutely nothing,’” he said.

President Obama meets Friday with Democratic governors in the Eisenhower Executive Office Building on the White House complex. (Associated Press)
President Obama meets Friday with Democratic governors in the Eisenhower Executive Office ... more >

“Politically I think it was really stupid for Obama not to do anything.”

Social Security paid out more than it received in payroll taxes in 2010, marking the first time the program was in the red since it was overhauled in 1983. The trend is expected to continue through at least 2016, according to a White House budget analysis.

In past years, the Social Security fund received more taxpayer dollars than it needed to pay benefits, and the surplus money was put into trust funds. But the federal government has borrowed from these funds to pay for other projects, leaving IOUs that the government will soon have to begin paying back out of other revenue.

The White House and Democratic leaders on Capitol Hill defend the trust fund system, saying that with the IOUs, the program will remain solvent for years.

Senate Majority Whip Richard J. Durbin, Illinois Democrat, and Sen. Charles E. Schumer, New York Democrat, appeared separately last week on Sunday morning news programs to say Social Security doesn’t add “one penny” to the deficit.

Their view isn’t universally accepted.

“It’s false, period,” said Douglas Holtz-Eakin, former director of the nonpartisan Congressional Budget Office (CBO) and now president of the conservative-leaning American Action Forum. “It’s spending more in benefits than it takes in in payroll taxes, period. And that’s a very simple fact.”

Michael D. Tanner of the Cato Institute agreed that the two Democrats were wrong to say the program wasn’t running a cash-flow deficit.

“If you [borrow from] the Social Security Trust Fund, you have to redeem the bonds in the trust fund. Well, those bonds are redeemed from general revenue, which means you’re spending money you don’t have,” he said.

“They take an IOU that earns interest and pay the interest with a bunch more IOUs.”

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