The National Organization for Women (NOW) is not happy that President Obama’s fiscal commission is being allowed to consider changes to Social Security in order to close our country’s long-term fiscal imbalance.  Yet in encouraging their members to bother elected Representatives about taking Social Security reforms off the table, NOW seriously misleads them about Social Security’s financial prospects.  NOW writes:

Social Security, with a separate funding source and a separate fiscal system, is completely detached from the federal operating budget. Social Security is funded by a payroll tax. Some of our payroll taxes are used to pay current retirees, and the rest are invested in U.S. Treasury Bonds — the safest investment you can make. Currently, the Social Security system has more than a $2 trillion surplus. It was set up that way in the 1980s to account for the baby boomers’ retirement years. There is no Social Security crisis — the program is solvent for at least the next 27 years, and with moderate tweaking (like lifting the cap so higher-income people would pay closer to their fair share) it would be solvent even further into the future.

To be sure, Social Security is “solvent” for the next 27 years as the Social Security Administration (SSA) cashes in the $2 trillion in bonds in the “trust fund.”  But what does this means for taxpayers?  Taxpayers are going to have to come up with the money to pay back all those bonds-which are the world’s safest investment only since the federal government has the power to compel people to fork over as much money as is necessary to cover its costs. 

Social Security may be officially separate from the general budget, but paying back Social Security’s trust fund is going to become a bigger and bigger budget item in years to come.  Taxpayers will find little comfort in knowing that Social Security held $200 billion in bonds, so that the $200 billion in tax dollars needed for the program is really just a repayment of a loan.  For taxpayers it’s all the same:  more and more tax money will be needed to pay Social Security benefits.

The idea of Social Security’s trust fund is akin to a husband and wife keeping separate accounts, with the wife loaning the husband millions and collecting millions in IOUs.  Sure, that wife may have millions of IOUs in her purse, but that’s little comfort since the couple has joint finances and joint liabilities.  At the end of the day, those debts have to be paid and the income will have to be raised to cover it.  SSA may have its own trust fund, but it’s still all government money, which means it will all have to be collected from taxpayers.

NOW goes on to blame the current national debt on tax cuts for the rich, the wars, and economic crisis (caused by a smattering of Bush-era policies, naturally).  But NOW is missing the big picture.  We can debate how we racked up this $13 trillion in debt, but it’s more important to recognize that this official debt is dwarfed by the monstrous unfunded liabilities of entitlement programs like Social Security and Medicare (whose unfunded liabilities are estimated as high as $100 trillion   

NOW may protest, but the reality is that meaningfully addressing our long-term fiscal imbalance requires reforming Social Security.  Taking entitlements off of the table is to render the entire exercise pointless.