March 11, 2011

Krauthammer Explains Social Security, and Exposes Jack Lew’s Hypocrisy (See Update)

Filed under: Economy,Scams,Soc. Sec. & Retirement,Taxes & Government — Tom @ 9:01 am

SocSecBrokeCard0309I have been meaning to comment on White House Office of Management and Budget Director Jacob (“Jack”) Lew’s disgraceful “rebuttal” a few weeks ago to a USA Today editorial calling for Social Security reform, but haven’t — which is okay now, because syndicated columnist Charles Krauthammer got in his rips yesterday with far more devastating effect.

What I didn’t realize, and Krauthammer did, is that Jack Lew was telling USA Today the exact opposite of what he was telling the public 11 years ago when he was also — you won’t believe it (oh, yeah you will) — White House Office of Management and Budget Director.

Krauthammer’s column is so well done that I feel I must violate normal excerpting guidelines to make sure readers don’t miss anything essential (bolds are mine):

Et tu, Jack Lew?

Everyone knows that the U.S. budget is being devoured by entitlements. Everyone also knows that of the Big Three — Medicare, Medicaid and Social Security — Social Security is the most solvable.

Back-of-an-envelope solvable: Raise the retirement age, tweak the indexing formula (from wage inflation to price inflation) and means-test so that Warren Buffett’s check gets redirected to a senior in need.

The relative ease of the fix is what makes the Obama administration’s Social Security strategy so shocking. The new line from the White House is: no need to fix it because there is no problem.

As Office of Management and Budget Director Jack Lew wrote in USA Today just a few weeks ago, the trust fund is solvent until 2037. Therefore, Social Security is now off the table in debt-reduction talks.

This claim is a breathtaking fraud.

The pretense is that a flush trust fund will pay retirees for the next 26 years. Lovely, except for one thing: The Social Security trust fund is a fiction.

If you don’t believe me, listen to the OMB’s own explanation (in the Clinton administration budget for fiscal year 2000 under then-Director Jack Lew, the very same). The OMB explained that these trust fund “balances” are nothing more than a “bookkeeping” device. “They do not consist of real economic assets that can be drawn down in the future to fund benefits.”

In other words, the Social Security trust fund contains — nothing.

… When you retire, the “trust fund” will have to go to the Treasury for the money for your Social Security check.

Bottom line? The OMB again (in 2000): “The existence of large trust fund balances, therefore, does not, by itself, have any impact on the government’s ability to pay benefits.” No impact: The lockbox, the balances, the little pieces of paper, amount to nothing.

So that when Jack Lew tells you that there are trillions in this lockbox that keep the system solvent until 2037, he is perpetrating a fiction certified as such by his own OMB. What happens when you retire? Your Social Security will come out of the taxes and borrowing of that fiscal year.

… demography is destiny. The ratio of workers to retirees is shrinking year by year. Instead of Social Security producing annual surpluses that reduce the federal deficit, it is now producing shortfalls that increase the federal deficit — $37 billion in 2010. It will only get worse as the baby boomers retire.

That’s what makes this administration’s claim that Social Security is solvent so cynical. The Republicans have said that their April budget will contain real entitlement reform. President Obama is preparing the ground to demagogue Social Security right through the 2012 elections.

… With Lew’s preposterous claim that Social Security is solvent for 26 years, Obama is preparing to lead the charge against entitlement reform as his ticket to re-election.

Team Obama plans on continuing 75 years of government misinformation, fraud and deception, in the hope that enough of the voting public remains gullible and misinformed to carry their sorry butts across the 2012 electoral finish line.

Their actions, positions and (lack of) plans for Social Security are cynical, irresponsible — and all too typical.

John Boehner’s House needs to compel Jack Lew to explain himself in a hearing, under oath, so he can tell us whether he was lying in 2000 (he wasn’t), or is lying now (he is).


UPDATE: Just to be clear, the “solutions” Krauthammer IDs in the first three paragraphs are not the best ideas out there — not by a long shot.  They would “solve” the solvency problem for a while without addressing the fundamental intergenerational immorality of demanding that current workers take money that they should be able to keep for themselves, their own children, and their own purposes to pay the retirement benefits of the nation’s elderly.

UPDATE 2: A related item is at



  1. The only real solution to SS is to sever the “Trust Fund” from general budget. Only then will receipts be properly invested according to actuarial rules as a pension fund should. Until then, no fix will prevent Congress from looting the tax receipts that are supposed to be directed at SS. We would not be talking about SS if the money were properly invested, there would be actual assets not paper IOUs. Any other fix without this most fundamental one only kicks the problem to the next election cycle.

    Comment by dscott — March 11, 2011 @ 12:53 pm

  2. [...] As I noted last Friday, Charles Krauthammer negated this nonsense about a week ago. [...]

    Pingback by BizzyBlog — March 18, 2011 @ 8:36 am

  3. [...] especially when, as Krauthammer noted in his March 10 column (discussed on March at NewsBusters; at BizzyBlog), Jack Lew was saying the exact opposite thing (i.e., he was telling the truth) 11 years ago when [...]

    Pingback by BizzyBlog — March 19, 2011 @ 10:15 am

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