In an article in USA Today,1 Bernie Sanders, the Democrat junior Senator from Vermont, talked a little about untaxed rich people, Social Security, corporate tax loopholes, and other Democrat talking points. Since I found his article so riveting, I thought I would respond to some of his major (entirely unsubstantiated) claims and address the twisted logic of his thinking about Social Security especially.
First, he reiterates the old lie that Social Security is an “earned income benefit”:
Let’s be clear: Social Security is not an entitlement program. It is an earned income benefit that has been enormously successful in cutting the rate of senior poverty.
Okay. Social Security is our money. That’s what politicians since FDR have been selling the American people: “We’ll take some of your money, put it in an account, and that way you’ll have something to live on when you retire.” But the fact is that Social Security is actually a negative investment. People would have more to retire on if they put their Social Security taxes in a zero-interest bank account and drew out of it after retirement. But at least we know that all of our Social Security taxes are being held in a giant trust fund bank account for us to draw on later, right? Wrong. But Bernie Sanders seems to think, or at least wants you to believe, this is the case:
Further, Social Security is not “going broke.” According to the Social Security Administration, the Social Security Trust Fund has a surplus today of $2.8 trillion and can pay out every benefit owed to every eligible American for the next 20 years.
But his information is very misleading, verging on mendacious. Listen to this tidbit from an NBC article on the Social Security crisis:
As a Congressional Research Service (CRS) report explained in 2000, “Contrary to popular belief, Social Security taxes are not deposited into the Social Security trust funds … Along with many other forms of revenues, these Social Security taxes become part of the government’s operating cash pool, or what is more commonly referred to as the U.S. treasury. In effect, once these taxes are received, they become indistinguishable from other monies the government takes in.”
Right. So, basically, the Social Security “trust fund” surplus Bernie Sanders refers to—that 2.8 trillion dollars—is actually in Treasury Bonds. Though it may look like a surplus on the books, it is in actuality a debt liability that the Treasury will have to pay out when those bonds are cashed. Ouch. Rather than being a surplus as Senator Sanders pretends, it is actually an added government deficit. In other words, our Social Security nest egg is already spent, and it has been replaced with a 2.8 trillion dollar IOU from Uncle Sam.
That means that, as Social Security benefits outstrip Social Security taxes, those bonds will be cashed in to pay for the difference, adding to the overall debt liability of the U.S. government. But, thankfully, Social Security taxes are so high, we should be all right for some time to come, right? Wrong:
Last year — partly due to high unemployment and the aging of the population — Social Security taxes collected (nearly $640 billion) were less than the benefits paid out (more than $701 billion). The system had a “negative net cash flow.”
That’s really bad. So Sanders’ solution is to increase Social Security taxes for people who make a lot of money:
The solution to making Social Security fully solvent for the next 50 years is to apply the payroll tax on annual income more than $250,000. Right now, the Social Security tax stops at $113,700 a year, so someone who earns that amount pays the same as a billionaire. This makes no sense.
Wait one second. If Social Security has a 2.8 trillion dollar surplus, why is Sanders worried at all about making it “fully solvent”? Answer: because he knows the surplus he reported is actually a liability. And his solution is ludicrous. He thinks it is an outrage that rich people don’t pay Social Security taxes on more than $113,700 of their income. But if what he argued earlier is true—if Social Security benefits are an “earned income benefit”—than that just means that rich people will get a Social Security payout commensurate with a lower income (about $113,700 a year to be exact). This isn’t unjust at all. And it makes a lot of sense. If Social Security is based on earned income, then a higher tax now should just mean a higher payout later. And no net gain for the system.
Unless, contrary to Sanders’ earlier avowals, Social Security payouts have nothing to do with what you’ve earned. If Social Security is just another way to redistribute wealth, then rich people will pay into the benefit for their entire salary even though they will get only a pittance back on that “investment.” And this is really what Social Security is all about. And Sanders wants to increase this discrepancy in an effort to force rich people to “pay their fair share.” I think they should pay their fair share as well. Which is why I think their taxes should be lower.
And, furthermore, if they did increase Social Security taxes on the wealthy, where would that added revenue go? Not into paying for poor old people to live more comfortably —unfortunately. That in itself would still be an unjust redistribution of wealth, but at least it would seem charitable on the surface. But no, it’s so much worse than that. Remember? The extra taxes would go to the Treasury—into the general pool. And the civil government would either spend it, or use the extra income to borrow even more money from the Federal Reserve. Ugh.
Bottom line: Bernie Sanders is a dirty liar and a thief’s handmaiden. He pretends to care about the poor in order to steal from the rich, but in the end, the rich man’s money will just go into Prince John’s pocket. All the poor man will get in return is a U.S. government IOU. And that IOU is looking more and more specious as the days go by.
- I think it is odd how many politicians write partisan opinion pieces for major news outlets. It seems obvious to me that fair and unbiased news is less than likely to come from professional liars with a vested interest in swaying public opinion. But alas… [↩]