Skip to comments.Santorum criticizes Ronald Reagan on Social Security (Oh the audacity!)
Posted on 01/05/2012 1:44:43 PM PST by SeekAndFind
Gotta say, every time I read a headline that makes me think I’ll like Rick Santorum less, I just find myself liking him more. When I came across this article in The Huffington Post, I cringed to think Santorum might have taken a cheap shot at conservatives’ most revered modern hero. But he did no such thing. Instead, he made a valid point — that Reagan, for all his many victories, still established a troublesome precedent of quickly “fixing” Social Security instead of meaningfully reforming the program. The relevant excerpt:
Santorum outlined his stance on social security at the event, spending a good 10 minutes on the issue. In the process, he took aim at a revered Republican figure, knocking former President Ronald Reagan’s 1983 Social Security deal. Santorum criticized Reagan’s decision to raise both the retirement age and taxes, linking those choices to the nation’s current fiscal crisis.
“I love Ronald Reagan, but if I would point to one thing during his administration that he did a serious wrong, it was this bill, it was this Social Security fix,” Santorum told the crowd. “He brought the idea of increasing taxes now, which is always what the left wants to do. Increase taxes now and reduce benefits later.”
To be fair, the George W. Bush presidency taught observers just how difficult meaningful Social Security reform will be — and SS will actually be the easiest of the Big Three entitlement programs to tackle. No doubt the appetite for reform in 1983 was even less than it is now. Nevertheless, Santorum’s willingness to speak negatively about Reagan demonstrates his comfort level with his own core convictions — which, as I wrote this morning, undoubtedly include a belief that we need to reform entitlements, if not a belief that we need to eliminate earmarks.
Reagan did blow it with this bill. When they raised the Social Security tax, there was a surplus of funds coming in for Social Security that was immediately stolen by Congress and used to increase the size of the Federal Government by about 300 billion a year.
Haha! Liking Santorum more and more...
RE: Reagan did blow it with this bill.
Are we now going to admit that Reagan blew it with his illegal immigrant amnesty bill too?
He blew it with this bill and he blew it with the amnesty deal and he said as much.
Ronaldus Maximus should have coupled amnesty will building a wall on the border.
Saw that live and was amazed that Santorum went there :) Yes, Reagan blew it!
Source: CBO "Combined OASDI Trust Funds; January 2011 Baseline" 26 Jan 2011. Note: See "Primary Surplus" line (which is negative, indicating a deficit)
Matters are even worse than this chart shows. In December, Congress passed a Social Security tax reduction. Workers are temporarily paying 2 percentage points less, from 6.2 percent to 4.2 percent, in Social Security payroll taxes this calendar year. Since the government is making up the shortfall out of general revenues, CBOs deficit projections for the trust funds do not include that. But CBOs figures predict that the "payroll tax holiday" will cost the governments general fund $85 billion in this fiscal year and $29 billion in fiscal year 2012 (which starts Oct.1, 2011.) Since every dollar of that will have to be borrowed, the combined effect of the " tax holiday" and the annual deficits will amount to a $130 billion addition to the federal deficit in the current fiscal year, and $59 billion in fiscal 2012.
Social Security has passed a tipping point. For years it generated more revenue than it consumed, holding down the overall federal deficit and allowing Congress to spend more freely for other things. But those days are gone. Rather than lessening the federal deficit, Social Security has at last as long predicted become a drag on the governments overall finances.
Social Security has seen many tax increases since its inception. Here is how much and when they were implemented. Notice that it started out as just 1% each for employer and employee and there was no SS tax for the self-employed.
In addition to the increases in the tax rate, the earnings cap has been rising almost every year as well. The maximum taxable earnings cap was $3,000 from 1937-50 and it is now $110,100.
SS has been running "surpluses" for much of its history. There were about 35 workers for every retiree when they program started in 1937. In 1950 there were 16 workers for every retiree and today it is currently 3.3. By 2030 it will be 2.
SS is your classic Ponzi scheme. It is unsustainable. Why? Because of our aging society and benefit increases that are not linked to revenue, it would go broke regardless of whether the surpluses were stolen or not. SS is a pay as you go system with the benefits of today's retirees being paid for by today's workers.
Here is how SS works. After the benefits are paid out any "surplus" is deposited into the General Fund. The Treasury issues interest bearing, non-market T-bills in the amount of the surplus and deposits them in the SSTF. These are really IOUs, which have the full faith and credit of the USG to redeem them when SS runs a shortfall, as it is doing now. The $2.6 trillion in the SSTF represents an unfunded liability, which is why it is part of our $15.2 trillion national debt and held under "Intragovernmental Holdings." Even if the SSTF held real assets, SS would still exhaust these funds by 2036 or so and by law, forced to reduce benefits.
The Social Security Trust Fund was created in 1939 as part of the Amendments enacted in that year. From its inception, the Trust Fund has always worked the same way. The Social Security Trust Fund has never been "put into the general fund of the government."
Most likely this myth comes from a confusion between the financing of the Social Security program and the way the Social Security Trust Fund is treated in federal budget accounting. Starting in 1969 (due to action by the Johnson Administration in 1968) the transactions to the Trust Fund were included in what is known as the "unified budget." This means that every function of the federal government is included in a single budget. This is sometimes described by saying that the Social Security Trust Funds are "on-budget." This budget treatment of the Social Security Trust Fund continued until 1990 when the Trust Funds were again taken "off-budget." This means only that they are shown as a separate account in the federal budget. But whether the Trust Funds are "on-budget" or "off-budget" is primarily a question of accounting practices--it has no affect on the actual operations of the Trust Fund itself.
The 1983 SS Faustian bargain between Reagan and Tip O'Neill (SUMMARY of P.L. 98-21, (H.R. 1900) Social Security Amendments of 1983-Signed on April 20, 1983) was supposed to make SS solvent for the next 75 years. It not only raised some taxes, but also, raised the age for full retirement benefits from 65 to 67. Yet here we are just 28 years later in the red. Why?
As I stated earlier, SS benefits are not linked to revenue and the benefit calculations, including COLA, are on automatic pilot. We also have the impact of 10,000 baby boomers retiring every day and will continue to do so for the next 20 years doubling the over 65 population compared to today. And people are living longer adding to the costs.
There is no limitation by Congress from allowing the SSTF to redeem its IOUs, i.e., its interest bearing, non-market T-bills. They have always been redeemed. The General Fund must come up with the money to redeem them. That is the irony and fallacy of reducing the payroll tax contribution by 2%. This means less revenue going into SS to pay benefits increasing the existing shortfall, which means more IOUs are being cashed in. So the General Fund must redeem them using funds that have 42 cents of every dollar borrowed. And even though the federal government says it will make the SSTF whole from the lost revenue by a variety of fees and tax increases, it can only do so by issuing more IOUs to deposit into the SSTF. In essence, we are having a stimulus package using SS as the conduit to distribute the money with almost half of it borrowed. It is the same way that we handled SS "surpluses."
What they should have done was just adjust the tax enough each year to pay outlays for the year. Then Congress would have not been able to steal the money and write up the fake IOUs.
That has been a suggestion by some, i.e., get rid of the SSTF and make SS a line item in the federal budget. It would give us a better handle on the actual costs and liabilities. It would also mean much higher taxes.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.