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All heck broke loose this week when PolitiFact Oregon checked U.S. Sen. Jeff Merkley's claim that "Social Security has never added one cent to the deficit. Not one cent."
Merkley, an Oregon Democrat running for re-election against Republican challenger Monica Wehby, made the comment during a meeting with senior citizens in Bend in August.
We rated the senator's claim as Half True, a ruling that generally followed the findings of similar PolitiFact checks around the country.
We agreed with Merkley's argument that Social Security is, by law, a "closed loop," and that its $2.7 trillion trust fund currently is sufficient to enable it to cover the annual benefits payments it is obligated to pay out.
It is also true, however, that the amount of money the program is taking in annually through its two primary revenue sources – payroll taxes paid by covered employers and employees, and from taxes on benefits assessed against wealthier recipients -- has, since 2010, fallen below what Social Security recipients are receiving in monthly checks.
Some, most notably Los Angeles Times columnist Michael Hiltzik, criticized our ruling. Hiltzik, focusing on 2010, insisted that there was no shortfall once the $117.5 billion in net interest earned against the $2.7 trillion Social Security trust fund that year was factored in.
"These are all legally equivalent revenue sources," he wrote, "and if PolitiFact is going to unilaterally rule any of them second-class or nonexistent, it needs to explain why. It doesn't."
Actually, we did, drawing on a previous check from PolitiFact New Hampshire: "When Social Security runs a deficit, the program draws on interest from the Social Security bonds, forcing government officials, already operating at a deficit, to borrow more money from other sources to make up the difference."
Hiltzik continued: "The money accounted for in the trust fund was borrowed by the federal government and spent on non-Social Security needs, as PolitiFact's own source says. When the bonds are redeemed, that's a repayment transaction exactly equivalent to what happens when you repay your mortgage, not a deficit-creating transaction. Even if you want to say that paying interest on principal on the bonds adds to the deficit, it's the spending on those non-Social Security needs that created the deficit, not Social Security."
So, ultimately, Hiltzik does acknowledge that the interest he's relying on to keep Social Security solvent can be viewed as adding to the deficit. It's all the non-Social Security spending that created the problem, he said, and not Social Security itself.
PolitiFact has weighed in on this topic before.
For the fiscal year ending June 30, 2012, for instance, Social Security had a $36 billion surplus, according to PolitiFact Wisconsin. That surplus was only recorded, though, because the program used roughly $110 billion in interest to help make benefit payments. "Because the government had to borrow money to pay the interest to Social Security, that contributes to the federal deficit."
And this from a separate PolitiFact New Hampshire check: "...in reality, Social Security is not closed off from the rest of the government. The program's surplus funds are frequently invested in Treasury bonds, and during surplus years, the bonds earn interest paid with other government dollars. And in recent years, the amount of taxes collected have not equaled the benefits distributed, leaving the Social Security funds facing a cash deficit, which then forces the government to borrow more money to offset."
We also heard from tax expert Dan Laschober, a frequent Merkley critic who characterized Social Security's interest "asset" this way: "Where does Social Security get interest? From debt, issued by the (U.S.) Treasury and paid from the general fund."
The back end of the equation, he noted -- where general fund money is tapped to cover Social Security's interest payments -- effectively blows a hole in the "Social Security as a closed loop" argument.
Most agree that Social Security, without changes to its funding and/or spending formulas, will become insolvent around 2033. But just getting to that point, Laschober said, will require all of the trust fund's bonds to be sold back to the treasury, a move he estimates will rack up more than $3 trillion in new public debt.
When it comes to Social Security, opinions about what constitute facts run rampant. When polar opposites stake out claims of absolute truth, finding that actual point can be difficult. PolitiFact Oregon will watch for developments and weigh in again as necessary.
This article was revised to correct the name of the Los Angeles Times' Michael Hiltzik.
PolitiFact New Hampshire
Congressional Research Service
Los Angeles Times