Tag Archives: Pete Peterson

The Peterson Foundation’s Retirement Plan: Debtors Prisons

For readers interested in the emerging entitlement wars, and the insidious influence of Pete Peterson’s anti-entitlement campaign on the public debate (and, apparently, on Obama’s Deficit Commission), yesterday’s post on “Entitled to Know,” the blog of the National Committee to Preserve Social Security and Medicare, needs no introduction. I’m quoting the post in full, but you can click through to the original post to watch the segment on CNBC–and while you’re there, subscribe to the blog to receive the latest information on these issues. 

Apparently, these are the “good-old days” our nation’s fiscal hawks relish.  The Peterson Foundation’s David Walker co-hosted CNBC’s Squawk Box this morning (personally, we yearn for the good-old days when so-called “news” shows were hosted by journalists—not partisan advocates—but that’s another debate). 

The discussion followed the classic Peterson Foundation talking points—government bad, business good—but ultimately led to a nostalgic reminiscence for the good old days when Americans faced debtors prisons and had no sense of “entitlement” (presumably to the Social Security and Medicare benefits workers have funded for their entire working lives):

“The fact of the matter is we have to change how we do things. We are on an imprudent and unsustainable path in a number of ways. You talk about debtors prisons, we used to have debtors prisons, now bankruptcy is no taint. Bankruptcy is an exit strategy. Our society and our culture have changed. We need to get back to opportunity and move away from entitlement. We need to be able to provide reasonable risk but hold people accountable when they do imprudent things…it’s pretty fundamental.”… (David Walker, Peterson Foundation, CNBC Jun 10, 2010)

Now, maybe in the Peterson Foundation’s circle of Wall Street types and multi-billionaires, bankruptcy is an exit strategy, but for millions of middle-class Americans bankruptcy is, in fact, a life-altering and often debilitating choice.  As for pitting “opportunity” vs “entitlement”—that’s classic Peterson Foundation messaging designed to convince us that America’s seniors are somehow riding high on the hog and soaking taxpayers with all of their “entitlements”. 

Of course, these fiscal hawks never mention that fact that the government doesn’t pay for those “entitlements”, American workers do. It’s not the government’s money…it’s not Wall Street’s money…and those so-called “entitlements” have been paid for by you and me.  The truth is, retirees are entitled to receive the benefits they’ve been promised; however, fiscal hawks like David Walker would apparently rather roll back the clock, ignore those promises, and build more debtor’s prisons.

Time for Some Faux Financial Reform

The pitched battle over health care reform, won with considerable ease as predicted here long ago by the insurance, drug, and associated medical industries, can be viewed as just a warmup act for the fight over  financial reform. As the main event draws near,  eager reportorial eyes are supposed to turn to the awesome spectacle of Ben Bernanke’s Fed policing itself in the interest of protecting consumers. No. This is not a play by Dario Fo.

The base issue here is how corporate America can screw more money out of the middle and lower middle classes. They weren’t about to change health care and they sure as hell are not going to give up their authority over the nation’s wealth.

So what’s this all about? Very simply put, it is about reducing middle class America’s income by cutting entitlements. And that starts with Social Security.

Dave Lindorff on Counterpunch very neatly captures the moment:

The corporate press is weighing in with  dire warnings that this year, six years ahead of what had been predicted only a few years ago, the Social Security system would be paying out more in benefits than it takes in from the payroll tax. The reason for this earlier-than-anticipated event is the Great Recession, the paper explained. 

Well yeah. If you were 62, or 65, and you had lost your job, with no likelihood of it’s coming back, wouldn’t you, once your unemployment checks ran out, opt to start your retirement earlier than planned, so you’d at least have some money coming in each month?  Oh, and with 10 percent of the work force currently unemployed (actually close to 21 percent if you count the people who have given up looking for a nonexistent job, and those who have taken some low-paid part-time work out of desperation), there is a lot less money being paid into the Social Security Trust Fund. So with beneficiaries rising faster than anticipated, and the total national payroll in sharp decline, of course things have gone negative for Social Security earlier than originally anticipated.

So what to do about it?

Hank Paulson and Pete Peterson are both calling for benefit cutbacks, an older retirement age and other attacks on the system. Paulson of course is the the guy who as Treasury Secretary under President George W. Bush, helped engineer the real estate bubble that brought the economy to its knees, and who then engineered the sweet deal that helped his former company, Goldman Sachs, come out of the crisis as the nation’s biggest bank, fattened by tens of billions of taxpayer bailout dollars. Pete Peterson, the former ad exec turned self-described economic guru has been a perpetual doomsayer about Social Security, calling for its privatization.

But really, what’s the crisis?

A wave of Baby Boomers is about to start retiring next year (actually for those born first, in 1946, who decided to retire early at age 62, Baby Boomer retirement began in 2008), but that’s a demographic wave that will eventually pass. In the meantime, financing the benefits for Baby Boomer retirees simply means that current workers–the Baby Boomers’ children and grandchildren–will have to pay more in payroll taxes. Or–and this is what has people like Paulson and Peterson scared–Baby Boomers and their allies among younger workers, may decide to use their unprecedented electoral clout to take those extra tax payments not out of younger workers, but out of their employers. There is, after all, no legal, theoretical or even mystical reason why the Social Security payroll tax should be split 50/50, with half being paid by the worker, and half by the employer. It could easily be a 40/60 split, with the employer paying 50 per cent more than the worker, or even a 30/70 split. That is a political question. Likewise, there is no reason on earth why the payroll tax should be set at the same percentage rate for all income levels, as it is now, instead of progressively calculated, so that high-income workers would pay a higher percentage of income into the fund than low-income workers. And finally, there is no reason why the income subject to the payroll tax (the FICA tax on your W-2 statement) should be capped (currently at $106,800), or why investment income should be exempt.

The so-called Social Security funding “crisis,” which has Republicans and many Democrats warning of the system’s looming “insolvency” as though Social Security were just another AIG, could be solved simply by just eliminating the income cap, and taxing investment income.

Oh, but the conservatives wail, if we raise the payroll tax, America will become uncompetitive, and our economy will collapse.

How then to explain Germany, where social security as a percentage of GDP is much greater than in the US (40 per cent of Germany’s adult population receive some form of government income, whether in the form of retirement payments, unemployment compensation or disability payments–far higher than in the US)? Despite its high social welfare budget, and its high wages, Germany is the second-largest exporter in the world  after China, and despite Germany’s being a huge importer of goods and services, second only to the US, overall, Germany is a net exporter.

Clearly, the problem with America’s economy is not high social security costs, and the “crisis” facing Social Security is not that it is going to “go bankrupt.” It is simply that the corporate interests in America, and the wealthy, don’t want to have to pay for the system. They want the lion’s share of the funding to be paid by ordinary workers and the poor.

Obama’s Stealth Entitlement Commission

Less than a month after the Senate rejected a proposal for a bipartisan entitlement commission, President Obama has created his own version by executive order. It is not, of course, called an “entitlement commission”–that unsavory term has been banished from the political lexicon, since it clearly frightens the geezers. Instead, it is called the National Commission on Fiscal Responsibility and Reform. (Who wouldn’t support that?) The shorthand names are the “deficit commission” and the “debt panel.” This last term is remarkably similar to the much-maligned “death panels”–which seems appropriate, since its primary purpose is to pull the plug on old-age entitlements. Despite protestations to the contrary, the commission exists primarily to make cuts to Social Security and Medicare.

The commission’s slant is evident from the choice of its two co-chairs: former Wyoming Republican senator Alan Simpson, a long-time foe of entitlements, and Erskine Bowles, the middle- right former Clinton chief of staff. The rest of the 18-member commission will include 6 Republican and 6 Democratic members of Congress, and four more members named by Obama. They are supposed to make a report and recommendations to the president in December, after the fall elections, and Obama is expected to forward the recommendations to Congress.

In the best-case scenario, Congress will do the same thing it has done with all of Obama’s other proposed reforms–i.e. nothing. Because if it acts at all, it will almost certainly decide to pay down the deficit at the expense of the social safety net. While Social Security may be the proverbial “third rail” of politics, the other debt-reducing options–raising taxes on the rich, or making corporations pay their fair share–will be seen as even more deadly in the current political climate.

An aggressive move to cut entitlements is, of course, a long-cherished conservative goal. The Heritage Foundation has been promoting the idea for decades, and was a major cheerleader for creation of a Congressional entitlement commission. Billionaire anti-entitlement activist Pete Peterson has bankrolled a huge lobbying effort for a commission that could ready the cuts, then ram them through Congress on a fast track yes or no vote. When that idea ran into heavy opposition in the Senate, Obama came up with his comparatively toothless version.

The driving force behind the commission—in addition to Peterson’s determined lobbying– is a group of conservative Blue Dog Democrats, some of whom would most likely be just as happy to see Social Security privatized. They will likely join with Republicans to support cuts in Medicaid, Medicare, and Social Security.

This same alliance will also be key to a scaled-back health care reform, which looks to bypass altogether the so-called liberals in Congress. Instead, it depends upon senior conservatives in the Republican party, led by retiring New Hampshire Senator Judd Gregg. Gregg has said he thinks the health care system needs changing, and he wants to engage in “constructive dialogue” with the president on reform. But any plan Gregg champions will have to be relatively meager and inexpensive. The fiscally conservative Gregg  joined with Democrat Kent Conrad to support the Congressional version of a debt commission, and he now seems to making common cause with the perennial Democratic health care compromiser, Max Baucus.

The long and the short of this situation is that  the Democratic administration, along with a small group of conservative Democrats in Congress, may make considerable headway toward doing what neither Ronald Reagan nor George W. Bush was able to pull off. They will likely make cuts to Social Security, while at the same time advancing Obama’s government-subsidized “automatic IRA” scheme, which would divert people’s earnings into 401K-style retirement accounts. These, of course, would be invested by Wall Street, helping to rebuild the finance industry. So in the end, we could see a de facto privatization of a portion of Social Security–the ultimate conservative dream, brought to us by the Democrats.

By the same token, the Democratic-led health care reform is likely to bring about some cuts to Medicare and Medicaid–the only single-payer health care this nation has ever known. It will do so while preserving the power and wealth of the health care profiteers who are largely responsible for skyrocketing costs.  The corporations, once again, are set to emerge victorious.

Meanwhile, the old, sick, disabled, and poor, who rely on entitlement programs, will bear the weight of the national debt. The low- and middle-income people still reeling from the recession–who need more, not less, government spending–will be left out in the cold, victims of what the Center for Economic and Policy Research calls “the deficit hawks who distract the public and policy makers from the policies necessary to bring the economy back to full employment.” 

The people and policies responsible for running up the deficit look like the only ones who won’t be taking a hit. In a report released on Wednesday called “Where Today’s Large Deficits Come From,” the Center on Budget and Policy Priorities added up the numbers and found: “In fact, the tax cuts enacted under President George W. Bush, the wars in Afghanistan and Iraq, and the economic downturn together explain virtually the entire deficit over the next ten years.”

Time for Hell’s Grannies to Ride Again

This is not a good time to be old in America. In addition to dealing with the usual burdens of aging–our aches and pains, and our worries about senility and death–we now have to contend with a backlash against the supposedly greedy geezers who insist upon clinging to life in definance of the public good.

On one side, we have pundits like David Brooks babbling on about old people stealing the nation’s wealth, and billionaire geezer-basher Pete Peterson bankrolling a campaign for an “entitlement commission” to cut Medicare and Social Security. Why should we expect a government handout just because we’ve worked and paid taxes all our lives? (Never mind that Wall Street has already decimated our retirement savings and home values.)

On the other side we have the champions of age-based health care rationing, led by “ethicists” like Daniel Callaghan, trying to convince us to go gently into that good night, while our corrupt system of medicine for profit goes on unrestrained. How would you like to be denied a kidney transplant or even a new hip, on the grounds of enlightened “cost-benefit analysis,” while the drug and insurance companies continue to rake in their profits?

It’s no wonder elders around the world are taking matters into their own hands. The only thing that’s surprising about the German geezer gang described in yesterday’s post is that it doesn’t happen more often. You hear about other incidents every now and then: an oldsters’ crime wave in Japan, or an octogenarian bank robber with an oxygen tank in San Diego. Maybe soon we’ll be seeing more elderly sapper gangs in action.

In the meantime, a reader dropped me a line last night with a reminder that there is indeed a precedent for all this, deftly portrayed by Monty Python. Seems to me that it might be time for Hell’s Grannies to ride again.

David Brooks Goes After Greedy Geezers

David Brooks wants to pull the plug on us greedy, grasping old folks. Or more accurately, he wants us to pull the plug on ourselves, by giving up our generous “entitlements” and submitting to Social Security and Medicare cuts. We should be more than happy to do this, he says, out of an altruistic urge to rescue younger generations from misery and penury. Too bad Brooks fails to mention that what really needs rescuing is the nation’s system of social inequality and corporate greed.

In his Monday New York Times column, called “The Geezer’s Crusade,” Brooks zeros in on one of the increasingly popular straw men of our times–that enemy of the people known as the Greedy Geezer.

Dripping with condescension, Brooks runs through a list of all the wonderful things that come with old age in the 21st century. Instead of sinking into dimwitted oblivion, the modern geezer–lo and behold–is actually able to think and function. “Older people retain their ability to remember emotionally nuanced events. They are able to integrate memories from their left and right hemispheres. Their brains reorganize to help compensate for the effects of aging.” Brooks even has scientific proof for his claims: “A series of longitudinal studies, begun decades ago, are producing a rosier portrait of life after retirement,” he writes. According to these studies, old people “become more outgoing, self-confident and warm with age.” We “pay less attention to negative emotional stimuli,” and are just plain happier than the middle-aged.

Yet despite all these bountiful gifts (which undoubtedly offset such minor inconveniences as not being able to walk, see, screw, or control our bladders), we old coots just can’t shake the selfish idea that we ought to get a little help from society in our golden years. After working, raising and educating our kids, and paying taxes all our lives, we Greedy Geezers now want to sit back and rake in our “entitlements”–Social Security and Medicare. Can’t we see that in doing so, we are actually stealing  from the young, denying them a future, and worse, driving the nation into bankruptcy? Brooks writes:

Far from serving the young, the old are now taking from them. First, they are taking money. According to Julia Isaacs of the Brookings Institution, the federal government now spends $7 on the elderly for each $1 it spends on children.

Second, they are taking freedom. In 2009, for the first time in American history, every single penny of federal tax revenue went to pay for mandatory spending programs, according to Eugene Steuerle of the Urban Institute. As more money goes to pay off promises made mostly to the old, the young have less control.

Third, they are taking opportunity. For decades, federal spending has hovered around 20 percent of G.D.P. By 2019, it is forecast to be at 25 percent and rising. The higher tax rates implied by that spending will mean less growth and fewer opportunities. Already, pension costs in many states are squeezing education spending.

In the private sphere, in other words, seniors provide wonderful gifts to their grandchildren, loving attention that will linger in young minds, providing support for decades to come. In the public sphere, they take it away.

Brooks doesn’t specify the exact reforms necessary to correct this cancer on society, but we all know what they are: We need only reduce the entitlements, along the lines Pete Peterson has been strenuously advocating. That can be accomplished by setting up an Entitlement Commission to impartially hand down “fast-track” cuts to old-age entitlement programs, tell Congress what it has to do, and get the economy back on course. When Obama sees the happy-times oldster lolling about on his houseboat in the Florida Keys, he ought to react the way Reagan did when he observed the “welfare queen” who was supposedly ripping off  taxpayers: Cut off the supply of federal funds, and stop letting the Greedy Geezers feed at the public trough.

If it isn’t politically expedient to cut us off (because we darned geezers insist upon voting), then convince us to do it to ourselves. What Brooks calls the Geezer’s Crusade is an imagined “spontaneous social movement” by elders to reduce their own benefits. He writes:

It now seems clear that the only way the U.S. is going to avoid an economic crisis is if the oldsters take it upon themselves to arise and force change. The young lack the political power. Only the old can lead a generativity revolution — millions of people demanding changes in health care spending and the retirement age to make life better for their grandchildren.

Brooks has audacity, I’ll give him that. Too bad his premise is as phony as a three-dollar bill. But Brooks is far from alone in advancing what I call the Myth of the Greedy Geezer, in which old people’s selfish attachment to their entitlements is the primary cause of the nation’s economic woes, and entitlement cuts are the only solution. The myth is circulated by pundits of all political stripes, and graces the editorial pages of some of the nation’s largest newspapers.

This fabrication serves a myriad of purposes. It substitutes a phony intergenerational conflict–a phantom battle between young and old–for the real conflict in American society: the conflict between the interests of poor and middle-class people, who pay more than their fair share, and the corporations and wealthy elite, who get an easier ride in America than they do anywhere in the developed world.  

In the past 30 years, according to Congressional  Budget Office data, the income of the top 1% of Americans has risen 176%, while the middle fifth have seen a 21% growth in income, and the poorest fifth just 6%. But hey–why talk about taxing the rich when you can balance the budget on the backs of those Greedy Geezers?

Wall Street had to be bailed out to the tune of $1 trillion, and they’re back to business as usual. But why take measures that might “stifle” the “freemarket” when we can just cut Social Security instead? (And never mind that the Greedy Geezers saw their retirement savings decimated and their home values plunge; they’ll manage.) 

Millions of Americans suffer and even die from inadequate health care, and medical costs drive thousands into bankruptcy every year. But why should we expect the drugmakers and insurance companies to reduce their hefty profits, when we can just reduce Medicare payments to those Greedy Geezers? After all, does grandma really need that hip replacement when it means taking money out of the hands of her grandchildren? Should grandpa have a triple-bypass, just to get a few more years of life, when it means bankrupting the country?

What we have here is a classic bait-and-switch. Politicians are talking about the urgent need to cut Medicare because Democrats and Republicans alike won’t take on the real enemies of affordable health care–the insurance companies, Big Pharma, and other providers of medicine for profit. They’re saying we have to “reform” Social Security (a program which, compared to Citibank and Goldman Sachs, is a model of financial solvency) because they are unwilling to really take on Wall Street. They’re devising ways to skim off of entitlements, which have lifted millions of old people out of dire poverty, because they won’t consider a more “socialist” tax structure–like, for example, the one we had in the United States during the Nixon Administration.

In the long run, the Myth of the Greedy Geezer also serves one of the most cherished items on the conservative agenda: permanent cuts to core social safety net programs that date back to the New Deal and the War on Poverty. Commenting on Pete Peterson and the other right-wing “granny bashers” last year, Dean Baker of the Center for Economic and Policy Research wrote: “It should be evident that the granny bashers don’t care at all about generational equity. They care about dismantling Social Security and Medicare, the country’s most important social programs.” 

This quest just got a potentially big boost from David Brooks and his “Geezer’s Crusade.” I just hope we geezers don’t fall for it.

(For another take on Brooks’s piece, I recommend this post by FireDogLake’s pithy “Earl of Huntingdon.”)

Obama Cuts Deal To Reduce Social Security, Medicare, Medicaid

Hopes for any pretense of liberal change from the Obama administration collapsed yesterday, and not only because of the election in Massachusetts. While the Massachusetts voters were casting their ballots to install the upstart Republican Scott Brown to Ted Kennedy’s Senate seat, the White House was hammering out a closed-door deal to cut entitlements. Obama won the support of Democratic leaders for a plan to issue an executive order that would inevitably lead to reductions in Social Security, and especially Medicare and Medicaid.

The plan represents a capitulation to conservatives in both parties, and would leave Democratic liberals accepting unconditional surrender not only on health care, but on the most basic of all New Deal programs.  As hopes of even a tepid health care reform wane, the effect of this  plan, if accepted by Congress, will be to undermine the only single-payer health care programs this nation has ever known–Medicare for elders, and Medicaid for the poor. As an attack on entitlements, it has the potential to go beyond anything the Reagan and Bush administrations were able to achieve.

As the Washington Post explains this morning:

Under the agreement, President Obama would issue an executive order to create an 18-member panel that would be granted broad authority to propose changes in the tax code and in the massive federal entitlement programs — including Medicare, Medicaid and Social Security — that threaten to drive the nation’s debt to levels not seen since World War II.

The accord comes a week before Obama is scheduled to deliver his first State of the Union address to a nation increasingly concerned about his stewardship of the economy and the federal budget. After a year in which he advocated spending hundreds of billions of dollars on a huge economic stimulus package and a far-reaching overhaul of the health-care system, Obama has pledged to redouble his effort to rein in record budget deficits even as he has come under withering Republican attack.

The commission would deliver its recommendations after this fall’s congressional elections, postponing potentially painful decisions about the nation’s fiscal future until after Democrats face the voters. But if the commission approves a deficit-reduction plan, Congress would have to act on it quickly under the agreement, forged late Tuesday in a meeting with Vice President Biden, White House budget director Peter R. Orszag, and Democratic lawmakers led by Senate Majority Leader Harry M. Reid (Nev.), House Speaker Nancy Pelosi (D-Calif.) and House Majority Leader Steny H. Hoyer (Md.).

Senate Budget Committee Chairman Kent Conrad (D-N.D.), who has long advocated creation of an independent budget panel, called the agreement an “understanding in concept” that holds the promise of at last addressing the nation’s most wrenching budget problems.

“This goes to the question of the country’s credibility with managing its own finances. This is essential for the nation,” Conrad said.

The commission is likely to form the centerpiece of Democrats’ efforts to reduce projected budget deficits, which have soared into record territory in the aftermath of the worst recession in a generation. Government spending to bail out the troubled financial sector and to stimulate economic activity have combined with sagging tax collections to push last year’s budget deficit to a record $1.4 trillion. The budget gap is projected to be just as large this year and to hover close to $1 trillion a year for much of the next decade. 

In other words: The national treasury has been driven into deep deficits by a financial crisis caused by Wall Street greed, compounded by two wars, tax cuts for the rich, and the high prices charged by health care profiteers. And where will we turn to make up for this loss? To the poor and the old, who cling greedily to their “entitlements.”

The claim is made that we need to make these entitlements “solvent” and “sustainable” in their own right, so they don’t “run out of money”–but that’s just political flim-flam. Social Security is in fact perfectly solvent, and the fiscal problems of the Medicare and Medicaid programs stem from the excesses of profit-based health care. If cuts are made to these programs, which have saved millions of Americans out of desperate straits, it will be because there’s simply no political will to do anything else to address the deficit.

All this represents a major victory for the corporate take-over mogul Pete Peterson whose foundation has put up $1 billion to lobby the proposal. His efforts have even involved  a financial news service that pushes this rich man’s plan, and that  has wormed its way into the Washington Post.  William Greider, who has long been covering the Peterson story, writes in The Nation:

The retired mogul has created a digital news agency he dubs “The Fiscal Times” and hired eight seasoned reporters to do the work there. “An impressive group of veteran journalists,” Peterson calls them. I hope they have shaken a lot of money out of this rich geezer. Because I predict doing hack work for him will seriously soil their reputations for objectivity and independence.

With his great wealth, Peterson could have also bought a newspaper to publish his dispatches, but he did better than that. He hooked up with the Washington Post, which has agreed to “jointly produce content focusing on the budget and fiscal issues.” (This media scandal was first uncovered by economist Dean Baker.) The newspaper is thus compromising its own integrity. It’s like buying political propaganda from a Washington lobbyist, then printing it in the news columns as if it was just another news story. Shame on the Post, my old newspaper. I predict a big stink like the one that greeted the Post when its publisher decided to hold pay-for-access “salons” for corporate biggies.

The deal is based on rickety interpretation of the country’s basic laws governing taxation.  Normally, any change in taxes must be passed first by the House, with legislation wending its way through the Ways and Means Committee up to the floor. This proposed arrangement short cuts—indeed appears to bypass—this procedure. The appointed commission is to make a recommendation on the budget after the election and that recommendation then goes straight to Congress where it might go through hearings,floor debate and a vote,or as some proponents of the idea would like, just get an up or down vote. To rub salt in the wounds, it was largely crafted not by members of the House, but by vice president and former Delaware senator Joe Biden along two senators–Kent Conrad, the North Dakota Democrat, once considered heir to the Great Plains progressive tradition, and conservative Judd Gregg, from New Hampshire. The man behind the commission plan is Pete Peterson.

The National Committee to Preserve Social Security and Medicare, which has been fighting against the creation of the commission, recently sent a letter to Congress, saying in part: 

We appreciate the concerns of legislators who are looking for a means of reducing the federal deficit and slowing the growth in the debt. However, we have significant concerns about any process – including the Conrad-Gregg Commission – that would disenfranchise American voters and subject Social Security beneficiaries to harmful cuts in benefits. As supporters of Social Security, we are surprised to see the federal deficit and the federal debt cited as the reason a commission needs to be established to make cuts in Social Security. The truth is that neither the $1.4 trillion deficit nor the nearly $12 trillion debt has anything to do with Social Security benefits.   

For nearly three decades, Social Security has taken in more revenue each year than it has paid out in benefits. These excess funds have been invested in special issue U.S. government securities. Thus, Social Security has effectively been loaning its excess funds to the federal government to spend on other programs. Rather than increasing the federal deficit, Social Security’s annual surpluses have actually been covering up the true size of the deficit in the general fund.