Big Lie #1 – Cutting Social Security’s Administrative Budget Helps Reduce The Deficit

Josef Goebbels, the Nazi Minister of Propaganda, once famously said, “If you tell a lie big enough and keep repeating it, people will eventually come to believe it. The lie can be maintained only for such time as the State can shield the people from the political, economic and/or military consequences of the lie. It thus becomes vitally important for the State to use all of its powers to repress dissent, for the truth is the mortal enemy of the lie, and thus by extension, the truth is the greatest enemy of the State.

Today’s Big Lie:  Social Security’s administrative costs are part of the overall budget deficit and must be cut to help reduce the deficit.

The cut to SSA’s administrative budget is just one cut, albeit a large one, among hundreds of cuts within the Republican-controlled House budget plan.  Overall, the budget measure cuts $61 billion from many different government programs, defunding some of them entirely.  This $61 billion represents cuts from FY 2010 spending levels.  The FY 2010 budget for SSA’s administrative expenses was $11.5 billion.  The President requested an increase for SSA to $12.5 billion.  In the House’s measure, the amount budgeted for SSA is $9.8 billion, a decrease of $1.7 billion (14.8%) from FY 2010 and a decrease of $2.7 billion (21.6%) from the President’s request.  Not a dime of this reduces the  Federal budget deficit.   Claiming that this cut is necessary to reduce the deficit is a lie.

Here’s why.

Social Security has been entirely self-funded since it was created in 1935.  It still is.

According to the Social Security Trustees Report issued in August 2010, in 2009 the total expenditures paid by Social Security were $686 billion. Most of this, $675 billion, went to pay benefits to beneficiaries. The administrative costs of the Social Security Administration were $11.9 billion.  Of this, about $6.2 billion was used to pay the cost of administering the Social Security program. (This means that it costs less than 1% of benefits paid to administer Social Security. No insurance company in the world can come anywhere near this exceptionally low administrative cost. When Republicans say that the government could save money by firing all those lazy, overpaid Federal workers who administer SSA and replace them with private contractors, like big insurance companies, that is another Big Lie.) The remaining $5.7 billion of administrative costs were used for  administering the Supplemental Security Income (SSI) program ($3.6 billion), providing administrative support to Medicare ($2.1 billion), and covering the costs of SSA’s Office of the Inspector General ($120 million).

Notice that the administrative budget amount in FY 2009 was $11.9 billion. This was cut to $11.5 billion for FY 2010, and for the current continuing resolution, which expires on March 4th. The money may come from Social Security’s own funds, but Congress still has the final say on the amount which SSA may use.

The total income to Social Security from taxes was $689 billion. Of this, $667 billion came from payroll taxes and $22 billion came from taxation of Social Security benefits, leaving a surplus of $3 billion, which was added into Social Security’s assets, referred to as the Social Security Trust Funds. The Trust Funds also earned $118 billion from interest, increasing their value to about $2.5 trillion. The interest rate earned by the combined Trust Funds was 4.9%.

Every penny Social Security spends, from benefit checks to administrative expenses comes from its own income or its own assets. If its income exceeds expenditures, like it did in 2009, the left over amount is used to purchase Treasury Department securities, which are held by Social Security as the Social Security Trust Funds.  This money is, in effect,  being lent to the Federal government.  If expendures exceed income, as was the case in 2010 and will be to a greater degree in 2011, due to the so-called “Payroll Tax Holiday” enacted last December, then Social Security cashes in some of its Treasury securities to make up the shortfall.

As long as there are still some Social Security Trust Funds, Social Security cannot affect the deficit one way or another, because the Trust Funds themselves are already part of the deficit.  As of 2010, Social Security held about 17.5% of the deficit.  The Trust Funds are expected to run out around 2037, if nothing is done to strengthen Social Security, but even then, it will not be part of the deficit.  Benefits and administrative costs will be paid for out of revenue, just like they are now, but the benefit amount will decrease by about 25%.  The Trust Funds will be gone, so there will be no way to make up the difference.  FDR always intended for SSA to be entirely self-supporting.

I have noticed that most of the attempts to cut Social Security come from the Republican side of the political spectrum.  They use as their justification the Big Lie that such cuts are necessary to reduce the deficit.  The corporate owned and controlled new media report these attacks, these Big Lies, but very seldom, if ever, make any effort to set the record straight.  Just once, I’d like to hear some newscaster, after playing a sound bite of some Republican spewing another repetition of this Big Lie, say something like, “Just for the record, Social Security benefits and administrative expenses do not affect the budget deficit.”  I am not holding my breath however.

For more on this topic, as well ideas to restore Social Security to full solvency, please see The Future Of Social Security – And What Can Be Done To Save It.

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