For the WaPo, It’s Not Really a Debt if You Borrowed From the Elderly

The Washington Post editorial (5/14/09) on the Social Security and Medicare trustees’ report didn’t break much new ground, other than perhaps a uptick in the sarcasm quotient. (“Oh, please,” is their retort to critics who point out the paper’s demonstrable hostility to the Social Security program.)

But this line jumped out at me as noteworthy:

Furthermore, the size of the Social Security surpluses has shrunk, posing a problem for the government since it relies on these funds to help plug its deficits. Over the next seven years, the cumulative surpluses will be $157 billion instead of the previously estimated $454 billion, forcing the cash-strapped feds to borrow even more than they had expected.

This is wrong in an important way: The Social Security surpluses are money that the program is lending to the U.S. government; when the government accepts this money, it is borrowing it, with a legal obligation to pay it back—just as if it had borrowed money from private sources. So whether or not the Social Security surpluses have shrunk doesn’t change the amount of money the government is borrowing—it just changes who the government will owe the money to.

But folks like the Washington Post editorialists don’t seem to see the money being loaned by Social Security as really being a loan–that’s why they express alarm at the fact that “the date when the Social Security trust fund will start running deficits has moved closer by a year, to 2016.” Now, the reason that there is a Social Security surplus is that taxes dedicated to the program were raised in 1983 for the specific purpose of paying for the baby boomers’ retirement—which will be well underway by 2016 and which will be mostly over by the time that the trust fund is scheduled to run out in 2037.

If the government doesn’t actually intend to pay back that money—if it hopes to engineer a new “save” of Social Security that results in the money continuing to flow indefinitely from the program to the Treasury—then a fraud will have been perpetrated on the working Americans. And the Washington Post will no doubt cheer this fraud as an act of fiscal prudence.