As you may remember, last week I sent a letter (via Anne) to Colorado Republican Senator Wayne Allard asking him to explain his questionable comments regarding Social Security and defaulting on trillions of dollars in U.S. government paper. This week, the Denver Post set the record straight in an editorial, and we received an email from Allard’s office that almost completely ignores the important questions raised in the original query. No comment of how his suggestion of defaulting is a possible breach of his oath of office, as well as a massive re-distribution of wealth from the middle class to the upper class. No mention of the less radical and less risky methods of fixing Social Security. Shocking, for sure.
Allard’s email follows, interspersed with my comments.
Mon, 24 Jan 2005
Thank you for writing to express to me your concerns about Social Security. I appreciate hearing from you about this important issue. In 1997 Congress passed, and I voted for, the Balanced Budget Act, which balanced the federal budget and strengthened Social Security for the first time since 1960. Balancing the federal budget is crucial to protecting Social Security. If Congress does not pass a balanced budget, it has the option of borrowing from the Social Security Trust Fund to fund the
government.
Balancing the federal budget is the first step toward protecting Social Security. Congress also must reform Social Security and strengthen its solvency. As baby boomers become Social Security beneficiaries in the next two decades, Social Security tax receipts will exceed Social Security benefits paid to beneficiaries.
Unless we take action, Social Security faces certain peril. Although the Congressional Budget Office (CBO) estimated in 2003, that the Social Security Trust Fund had a surplus of $156 billion, the surplus exists only on paper. Current benefits are not paid out of a reserve account, but rather from current Social Security tax collections.
When he says “Social Security tax receipts will exceed Social Security benefits paid to beneficiaries,” he obviously got it backwards, but really, that’s just bad staff work. If balancing the federal budget is so important, why isn’t it the top priority as it was in the last administration? At the end of the day, everything only exists on paper. If the White House and Congress were less hell bent on tax cuts and pork, the fund would be in the “lock box.”
In 2008, baby boomers will begin to be eligible to receive Social Security and our surplus will diminish each year. Although the income collected by the Social Security taxes currently exceeds program expenditures, the system will begin running cash flow deficits in 2018. Social Security will continue to face long-range financing problems, with full insolvency projected to occur in 2029 for the Old Age, Survivors, and Disabilities Insurance (OASDI) part of Social Security and in 2042 for the retirement and survivors part of Social Security.
By law, Social Security cannot write beneficiary checks unless the money is in the Trust Fund. The current system will only be able to survive a limited number of years and we should address reform before the account reaches a crisis point.
Ah, so we’re not in a crisis now?
In the 109th Congress, Social Security will continue to be a top issue of debate and discussion. President Bush has declared it to be one of his main domestic priorities. Once the President makes a formal proposal to Congress, it will be examined through the democratic legislative process. I intend to be actively involved as Social Security reform proposals are considered in hearings and on the Senate floor. I know that the President’s proposal will be thoroughly examined and Congress will not act in haste.
Of course not. Congress never acts in haste to ram through controversial legislation, right?
I believe that Congress should provide Americans with investment options to allow them the freedom to manage their money the way they want. Traditionally the Social Security Trust Fund has provided meager annual investment returns. Allowing individuals to invest their retirement dollars into even modest savings accounts, should they desire, would yield substantially higher returns than the current Social Security system, consequently providing Social Security solvency and adequate benefits for taxpayers who worked a lifetime to achieve them. Any component of reform or investment must also allow beneficiaries the option of remaining in the Social Security program as it exists today.
Hmm, no mention of downside risk, no doubt about “substantially higher returns,” this is faith-based economics if I’ve ever seen it.
Thank you for writing to share your concerns. I look forward to hearing from you again. If you would like more information on issues important to Colorado and the Nation, please log on to my website at http://allard.senate.gov.
Sincerely,
Wayne Allard
United States Senator