MEMORANDUM
BY EMAIL
To: House or Senate Member or Staffer
From: Dan Perrin, Seniors Center
Re: Social Security
Date: June 22, 2017
___________________________________________________________
Social Security is considered by all Americans to be a nearly sacred promise made to elderly Americans who have built America into the nation it is today, and that it’s a promise that will be kept.
We are proposing reforms that will not increase the retirement age, decrease benefits or increase taxes. However, the reforms we do propose we believe will lay the political foundation for greater Social Security reforms in the future.
To help keep the Social Security promise, the Senior Center wants to convert the inter-governmental debt, or IOUs that serve notice of what our seniors are due – to be real cash, not IOUs.
The Senior’s Center believes that in an era of growing deficits, when the total unfunded liability of the United States government exceeds any reasonable ability to pay it; one additional measure of financial security for the Social Security Trust Fund security is needed, and that is real cash in an account, ready to pay our seniors, as opposed to merely non-cash pledges to pay.
The total monies the U.S. government has pledged in one form or another to pay is called the U.S. government’s total unfunded liability. Some estimates put that total liability at between $117 trillion and $200 trillion, which many Americans believe is well beyond the ability to pay.
Financial crisis often hit individuals and nations with unexpected results, and the Seniors Center believes that when people pay their Social Security taxes, those taxes should be converted into U.S. Treasury bonds and put into the Social Security Trust Fund to pay Social Security, not placed in the general treasury where those Social Security taxes are immediately spent. This is what happens to Social Security taxes now, they are spent, not saved, and the U.S. Treasury, instead of putting cash into the Trust Fund, puts an IOU, a promise to pay the Trust Fund later.
The fact that most Americans believe there is an actual trust fund for Social Security with money in it, and not merely IOUs to be paid with debt or current taxes, is the main impediment to this “real money in the Social Security Trust Fund” reform. Therefore, the Seniors Center is committed to educating the American public.
Once the public knows what really is in the Social Security Trust Fund, we can have a debate about it.
Our position on Social Security is clear, IOUs are not as safe as real cash or Treasury bills, and our seniors would be better served if our Social Security Trust Fund contained money, not IOUs.
If you told the average Brazilian that their public social security trust fund for their retirement was spent the minute they paid their Social Security, and that when they retired the government would either use taxes collected that year or borrow the money to pay their Social Security, they would look at you like you were loco.
The Seniors Center supports a re-introduction of Congressman Paul’s H.R. 219, which changes the law so that instead of IOUs, the Social Security Trust Fund would hold money.
One of the reasons that most Americans do not know that only IOUs or inter-governmental debt is in the Social Security Trust Fund is that the Social Security Trust Fund IOUs and debt is not counted in the official calculations of the U.S. deficit. It is considered “off the books” debt – and to further add to the confusion, some members of Congress make public statements, which perpetuate the myth that there is no Social Security Trust Fund debt.
Therefore, the Seniors Center also supports adding a new section to the bill that the IOUs in the Social Security Trust Fund should be counted as part of the official national debt. This will do more to educate the American public of the what really is in the Social Security Trust Fund, to begin the conversation with the average American about whether they think the current system needs to be reformed.
Here is what Dr. Charles Krauthammer wrote in The Washington Post, which may explain this more elegantly:
“Senator Dick Durban, the Senate Democrats’ No. 2, says Social Security is off the table because it ‘does not add a penny to our deficit.’
This is absurd. In 2012, Social Security adds $165 billion to the deficit. Democrats pretend that Social Security is covered through 2033 by its trust fund. Except that the trust fund is a fiction, a mere ‘bookkeeping’ device, as the Office of Management and Budget itself has written. The trust fund’s IOUs ‘do not consist of real economic assets that can be drawn down in the future to fund benefits.’ Future benefits ‘will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures.’”[1] (emphasis added)
The Social Security Trust Fund is among the most resistant federal programs to change. The last legislative change to the Social Security system occurred 34 years ago, in 1980. Education of the average American is the only way to begin to reform Social Security.
The Senior’s Center believes H.R. 219 represents a critical change to the Social Security Trust Fund, along with an additional section to count the Social Security Trust Fund IOUs as part of our national debt, so that we can educate the public about the real state of affairs of the Social Security Trust Fund, which will keep our promise to America’s senior citizens.
The new section of the bill would simply state that any IOUs not yet converted to cash in the Social Security Trust Fund would be counted as part of the deficit of the U.S. government.
One other change we suggest to H.R. 219, after extensive discussions with Social Security experts, including an actuary who advises the U.S. Social Security Administration, is to very slowly replace the IOUs in the trust fund with real assets, say at 1 percent or 2 percent of the IOUs every year. The financial shock to the U.S. budget and financial system would be too great otherwise.
Below is the text of H.R. 219:
H.R.219 — Social Security Preservation Act of 2011 (Introduced in House – IH)
HR 219 IH
112th CONGRESS
1st Session
- R. 219
To amend title II of the Social Security Act to ensure the integrity of the Social Security trust funds by requiring the Managing Trustee to invest the annual surplus of such trust funds in marketable interest-bearing obligations of the United States and certificates of deposit in depository institutions insured by the Federal Deposit Insurance Corporation, and to protect such trust funds from the public debt limit.
IN THE HOUSE OF REPRESENTATIVES
January 7, 2011
Mr. PAUL introduced the following bill; which was referred to the Committee on Ways and Means
A BILL
To amend title II of the Social Security Act to ensure the integrity of the Social Security trust funds by requiring the Managing Trustee to invest the annual surplus of such trust funds in marketable interest-bearing obligations of the United States and certificates of deposit in depository institutions insured by the Federal Deposit Insurance Corporation, and to protect such trust funds from the public debt limit.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the `Social Security Preservation Act of 2011′.
SEC. 2. INVESTMENT OF THE FEDERAL OLD-AGE AND SURVIVORS INSURANCE TRUST FUND AND THE FEDERAL DISABILITY INSURANCE TRUST FUND.
(a) In General- Section 201(d) of the Social Security Act (42 U.S.C. 401(d)) is amended–
(1) by inserting `(1)’ after `(d)’;
(2) by striking `Such investments may be made only’ and inserting the following: `Except as provided in paragraph (2), such investments may be made only’;
(3) by striking the last sentence; and
(4) by adding at the end the following new paragraph:
`(2)(A) The Managing Trustee shall determine the annual surplus (as defined in subparagraph (B)) for each of the Trust Funds as of the end of each fiscal year. The Managing Trustee shall ensure that such annual surplus is invested, throughout the next following fiscal year, in–
`(i) marketable interest-bearing obligations of the United States or obligations guaranteed as to both principal and interest by the United States, purchased on original issue or at the market price, or
`(ii) certificates of deposit in insured depository institutions (as defined in section 3(c)(2) of the Federal Deposit Insurance Act).
`(B) For purposes of this paragraph, the `annual surplus’ for either of the Trust Funds as of the end of a fiscal year is the excess (if any) of–
`(i) the sum of–
`(I) in the case of the Federal Old-Age and Survivors Insurance Trust Fund, the amounts appropriated to such Trust Fund under paragraphs (3) and (4) of subsection (a) for the fiscal year,
`(II) in the case of the Federal Disability Insurance Trust Fund, the amounts appropriated to such Trust Fund under paragraphs (1) and (2) of subsection (b) for the fiscal year, and
`(III) in either case, the amount appropriated to such Trust Fund under section 121(e) of the Social Security Amendments of 1983 for the fiscal year, and any amounts otherwise credited to or deposited in such Trust Fund under this title for the fiscal year, over
`(ii) the amounts paid or transferred from such Trust Fund during the fiscal year.’.
(b) Effective Date- The amendments made by this section shall apply with respect to annual surpluses as of the end of fiscal years beginning on or after October 1, 2011.
SEC. 3. PROTECTION OF THE SOCIAL SECURITY TRUST FUNDS FROM THE PUBLIC DEBT LIMIT.
(a) Protection of Trust Funds- Notwithstanding any other provision of law–
(1) no officer or employee of the United States may–
(A) delay the deposit of any amount into (or delay the credit of any amount to) the Federal Old-Age and Survivors Insurance Trust Fund or the Federal Disability Insurance Trust Fund or otherwise vary from the normal terms, procedures, or timing for making such deposits or credits, or
(B) refrain from the investment in public debt obligations of amounts in either of such Trust Funds,
if a purpose of such action or inaction is to not increase the amount of outstanding public debt obligations, and
(2) no officer or employee of the United States may disinvest amounts in either of such Trust Funds which are invested in public debt obligations if a purpose of the disinvestment is to reduce the amount of outstanding public debt obligations.
(b) Protection of Benefits and Expenditures for Administrative Expenses-
(1) IN GENERAL- Notwithstanding subsection (a), during any period for which cash benefits or administrative expenses would not otherwise be payable from the Federal Old-Age and Survivors Insurance Trust Fund or the Federal Disability Insurance Trust Fund by reason of an inability to issue further public debt obligations because of the applicable public debt limit, public debt obligations held by such Trust Fund shall be sold or redeemed only for the purpose of making payment of such benefits or administrative expenses and only to the extent cash assets of such Trust Fund are not available from month to month for making payment of such benefits or administrative expenses.
(2) ISSUANCE OF CORRESPONDING DEBT- For purposes of undertaking the sale or redemption of public debt obligations held by the Federal Old-Age and Survivors Insurance Trust Fund or the Federal Disability Insurance Trust Fund pursuant to paragraph (1), the Secretary of the Treasury may issue corresponding public debt obligations to the public, in order to obtain the cash necessary for payment of benefits or administrative expenses from such Trust Fund, notwithstanding the public debt limit.
(3) ADVANCE NOTICE OF SALE OR REDEMPTION- Not less than 3 days prior to the date on which, by reason of the public debt limit, the Secretary of the Treasury expects to undertake a sale or redemption authorized under paragraph (1), the Secretary of the Treasury shall report to each House of the Congress and to the Comptroller General of the United States regarding the expected sale or redemption. Upon receipt of such report, the Comptroller General shall review the extent of compliance with subsection (a) and paragraphs (1) and (2) of this subsection and shall issue such findings and recommendations to each House of the Congress as the Comptroller General considers necessary and appropriate.
(c) Public Debt Obligation- For purposes of this section, the term `public debt obligation’ means any obligation subject to the public debt limit established under section 3101 of title 31, United States Code.
[1] Charles Krauthammer: https://www.washingtonpost.com/opinions/charles-krauthammer-cliff-jumping-with-barack/2012/11/29/6ddd39f8-3a5f-11e2-8a97-363b0f9a0ab3_story.html?utm_term=.f847b83fa248