Today, President Obama nominated his current Chief of Staff Jack Lew to be the next Treasury Secretary. And, while that news is everywhere, there is an important piece of information about Jack Lew that has rarely been reported.
He thinks "There Is No Need to Deal With Social Security."
Worse, he thinks that "dealing with it would have, at best, negligible impact" on the deficit.
Don't take my word for it though; watch this video of his remarks from a Christian Science Monitor breakfast in February of last year.
In the video, Lew says Social Security is "solidly funded through 2037." That, of course, just isn't true. In reality, Social Security started paying out more than it's bringing in from payroll taxes in 2010. According to Michael Tanner of the Cato Institute Social Security's deficit was nearly $150 billion last year alone.
And, as the Social Security trustee's reported in May of 2011, deficits won't be fixed by the lapse of the payroll tax cut and are "a permanent feature of the program's finances going forward."
But, what about the Social Security trust fund? Well, that's what Lew seems to be relying on when he says the program is "solidly funded" through 2037. That is the date the trust fund supposedly runs out. Or, at least, it was until just about three months after Lew made these remarks. Then, it was revised down a whole year to 2036 (a trend that'll almost certainly continue).
But, even that doesn't tell the full story.
The truth is that Social Security has been adding to the deficit ever since it started paying out more than payroll taxes bring in. It does it in a more indirectly than it will when the trust fund finally does run out but that's just a matter of semantics. As the trust fund operates, which is all explained on the Social Security's website, the money that is brought in from payroll taxes is immediately used to buy "special issue" securities from the Treasury.
Those are sweetheart bond deals since they can never be redeemed for less than face value. It doesn't matter when they're redeemed or why. Additionally, nobody but the Social Security trust fund can buy them. Then, the taxes used to buy those securities are sent into the general fund and immediately spent on whatever it is that Congress feels like spending it on.
When it comes time for the fund to pay retirees, it cashes in the securities and is paid back with treasury cash. The treasury cash used to buy back the securities comes from - you guessed it - the general fund. It's just one big dumb accounting trick.
The result of all this is that we end up adding to the deficit anytime Social Security taxes don't at least equal the Social Security payouts.
So, despite Jacob Lew's pronouncements, Social Security is now, and will continue to be, adding to the deficit. There's no way around that fact.
So that's what the next Treasury Secretary of the United States thinks about Social Security - and why he's wrong. At this point, it is probably safe to assume that the President himself feels there is "no need to deal with Social Security," as well.
I guess Social Security will be left for somebody else to deal with. That is, if it's left at all.