- Eye on Media
While checking my twitter feed this morning I noticed that the US Chamber of Commerce is running a series of promoted tweets like the one below under the curious hashtag #jobs13.
"Entitlement programs are not self-funding and are a main driver of our nation's deficits" #jobs13
— U.S. Chamber (@uschamber) June 19, 2013
Unfortunately, the claim isn’t true – from The Motley Fool
Entitlement spending: The great canard
The growth of entitlement spending is a long-term problem for the U.S. government. Thus, conservatives who argue for “fixing” entitlements are not wrong, per se: The rapidly rising cost of health care is of particular concern. However, present-day entitlement spending is not the biggest driver of the federal deficit. Spending on the three major entitlement programs — Social Security, Medicare, and Medicaid — is typically blown out of proportion in debates about national fiscal policy. For example, the “Face the Facts” group highlights annual “mandatory” spending of more than $2 trillion as a major cause of federal deficits.
While it is literally true that mandatory spending exceeds $2 trillion, that figure is grossly misleading, because it ignores program-specific revenues. Social Security and Medicare are social-insurance schemes that are primarily funded by payroll taxes. Lots of money passes through those programs, but the net impact on the federal budget is relatively small (less than $200 billion last year).
According to the Congressional Budget Office, Social Security expenditures were $768 billion and Medicare expenditures were $551 billion in 2012. (The Social Security Administration reports spending of $786 billion; I cannot resolve that discrepancy.) However, excluding the effects of the payroll tax holiday, Social Security was overfunded. Revenue from the FICA payroll tax, interest on the Social Security Trust Fund, and taxation of benefits totaled $840 billion. Medicare ran a deficit, but spending of $551 billion was offset by total receipts of $334 billion, including payroll taxes and premiums paid by participants. On a net basis, the Social Security and Medicare combined deficit was well under $200 billion.
If we include Medicaid — the third major entitlement program — the cost of entitlement spending grows to a little more than $400 billion. While that total is nothing to sneeze at, it is clearly not the primary driver of the federal deficit, which was roughly $1.3 trillion last year. Entitlements are projected to become a massive draw on the federal budget in the future, particularly as the baby boomers retire, but entitlement spending has actually been a relatively small contributor to federal deficits over the past decade.
Lie No. 3: Social Security and Medicare are $60 trillion in the hole.
As efforts to cut Social Security and Medicare gather steam in the budget wrangling in Washington, you’ll hear these mega-trillions being thrown around more and more. Beware. They’re numbers designed to terrify, not edify.
The assertion comes from something called the “infinite horizon” projection. It’s a calculation of funding gaps projected out to the limitless future and then converted to present value — meaning what the cost would be if we had to pay it all today. For Social Security, the figure was $20.5 trillion, as reported in the program trustees’ latest report. For Medicare, the number comes to about $42.7 trillion.
Even professional actuaries say this calculation is bogus. In 2003, when it was first inserted into Social Security’s annual report, the American Academy of Actuaries warned the trustees that the infinite projection provides “little if any useful information” and is “likely to mislead anyone lacking technical expertise … into believing that the program is in far worse financial condition than is actually indicated.”
Other topics misrepresented by the US Chamber promotions via #jobs13 include education and immigration. (Warning: The inevitable Ronald Reagan quotes are peppered throughout the feed).
We can’t blame the local chambers for the actions of the US Chamber but you have to consider that some of this thinking “trickles down”…