“My argument with him [President Obama] is when he says ‘88 percent of the budget we’re not going to touch, reform or fix and we’re still going to solve our problems’ is an absolute falsehood. The fact is you can’t have Medicare out of the equation, you can’t have Medicaid out of the equation. And we can’t borrow the money, the $2.6 trillion that we’ve stolen from Social Security, in the international financial market without making Social Security sustainable.”
— Sen. Tom Coburn (R-Okla.), April 24, 2011
These are tough words on NBC’s “Meet The Press” from the junior senator from Oklahoma — who is personally close to the president despite disagreeing with him on virtually every public policy issue.
First, Coburn claims that Obama, in his budget speech on April 12, took 88 percent of the budget off of the table from any kind of reform. Second, he asserts that “we’ve stolen” $2.6 trillion of Social Security funds and that the money can’t be borrowed from the financial markets without major changes.
Coburn is a member of the so-called “Gang of Six” — three Senate Democrats and three Republicans looking for a budget compromise — but this is strong language. What’s he talking about?
Let’s deal with Social Security first. The figure that Coburn mentioned — $2.6 trillion — refers to the money that has been placed in the Social Security trust fund. This is a difficult and complex subject that politicians frequently exploit, so please be patient.
Using the loaded word “stolen,” Coburn suggests that the trust fund is a fiction, or as some politicians assert, “worthless IOUs.”
John Hart, a spokesman for Coburn, said: “The language isn’t strong at all. If a person shoplifts with the intention of returning merchandise that is still shoplifting. That’s precisely what Congress has done with the trust funds. Politicians, of course, promise they will pay back the money they’ve stolen but we can only make good on that promise if we can borrow to do so.”
IOU, however, is just another way of saying bond. These bonds are backed by the full faith and credit of the U.S. government. No president or Congress would risk defaulting on these bonds because it would ruin the nation’s financial standing.
The bonds are a real asset to Social Security and Medicare, but — here’s where it gets complicated — they also represent an obligation by the rest of the government. Like any entity that issues debt, such as a corporation, the government will have to make good on its obligations, generally by taking the money out of revenue, reducing expenses or issuing new debt. The action taken really depends on the resources available at the time. There is nothing particularly unusual about this, except that the U.S. government is better placed to make good on these obligations than virtually any other debt-issuer.
Coburn presumably understands this. He recently wrote an article in which he approvingly quoted a statement from a White House budget office report written during the Clinton administration. Note the word “redeemed”: “They [the bonds] are claims on the Treasury that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures.”
(Democrats who suggest redeeming those bonds will be painless or that Social Security is not adding to the deficit are making the exact opposite mistake. There is no free lunch when it comes to Social Security.)
Incidentally, it would have been very difficult for the government to have simply parked this money in the bank without affecting the financial markets. So the excess money generated by Social Security has been spent on other government activities and helped mask the overall size of the deficit. Coburn voted for some of those spending bills. To his credit, he did say “we’ve stolen” — including himself among the offenders.
There was a brief period — at the end of the Clinton administration — when the government generated so much money that the surplus was used to pay down the debt, in effect “a lockbox” of the funds. But that surplus disappeared with the advent of recession, war and sweeping tax cuts during the Bush administration. If the extra Social Security money had not existed, then the government would have had to borrow the $2.6 trillion in the public markets, in which case the overall debt would be the same.
Coburn’s assertion that Obama is walling off “88 percent” of the budget from “touch, reform or fix” is also a stretch. Obama never actually said anything close to that, but Hart said that Coburn based this statement on the fact that Obama’s proposed “debt failsafe” trigger in 2014 would require across-the-board spending cuts if certain debt targets were not reached — except for Social Security, low-income programs or Medicare benefits.
However, those programs are estimated to be less than 50 percent of the budget in 2014. Hart says Coburn was talking about the size of the programs far in the future, beyond 2025, and that “the long term projections matter because our unwillingness to deal with our long term debt problem is spooking the international financial community.” But it is a bit of rhetorical bait-and-switch to cite such a speculative figure as if it was established fact.
Moreover, Obama’s health-care law already is implementing cuts in Medicare (which many Republicans campaigned against) and Obama in his speech he would “build” on those cuts with other cost-saving measures in Medicare. Obama also said he would seek “more efficiency and accountability’ from Medicaid, the health-care program for the poor. That certainly sounds like Obama would touch the programs, if not “reform or fix.”
The Pinocchio Test
Coburn’s rhetoric on Social Security is not warranted by the facts. There were certainly consequences to using the Social Security surplus on tax cuts and government programs, and it is appropriate to discuss the choices Americans now face as a result of those decisions (which Coburn supported). But it does not help the public discourse on the debt to claim that the Social Security money was “stolen.”
Coburn’s claim that Obama is leaving 88 percent of the budget untouched is also not supported by the facts. His figure is speculative and, in any case, Obama did propose changes in Medicare and Medicaid.