CommunityMy FDL

Orrin Hatch Smears Social Security At Senate Finance Hearing

Senator Orin Hatch

Senator Orin Hatch by Leadership Conference on Civil and Human Rights, on Flickr

This week was chock full of GOP Senators ignoring or actively distorting the truth about Social Security. Senator Orrin Hatch (R-UT), ranking member on the Senate Finance Committee, made his own disingenuous contribution to the volumes of conservative misinformation about the program at a Committee hearing on Tuesday.

Welcome to the club, Senator Hatch. Last Friday, former Senator and Fiscal Commission Co-Chair Alan Simpson (R-WY) called Social Security a “Ponzi scheme” and wished away inconvenient facts about life expectancy. Ezra Klein and Jonathan Chait have already covered that issue top-to-bottom. But Hatch’s less colorful distortions have been absent from the media. In his opening statement at Tuesday’s hearing, “Perspectives on Deficit Reduction: Social Security,” Hatch parroted the frequently deployed–and frequently discredited–canard that the Social Security trust fund is “just a bunch of IOUs.”

For many years, the Social Security Trust Fund ran surpluses. Under the unified budget, those surpluses masked the size of the deficits the federal government was running. By law, the trust fund is made whole by the issuance of Treasury IOUs to the trust fund to reflect the surpluses and interest. In the late 1990s, under a Republican Congress and Democratic President, that trend reversed briefly, but returned back to normal under Congresses and Presidents of both parties. … To be sure, those IOUs sitting in the Parkersburg, West Virginia offices of the Treasury’s Bureau of Public Debt are claims against the federal government. They’ve got to be paid. How will they be paid if the trust fund comes to rely on them?

Hatch’s remarks are confusing. On the one hand, he concedes that the trust fund’s treasury bonds are “claims against the federal government” that have “got to be paid,” but then he refuses to call them United States Treasury bonds, opting instead for the belittling “Treasury IOUs” and “IOUs.” (A cursory look at the Social Security Administration web site clears up any doubt about the status of the trust fund bonds. “By law, income to the trust funds must be invested, on a daily basis, in securities guaranteed as to both principal and interest by the Federal government.”)

If Hatch seriously only considers United States Treasury bonds “IOUs,” then he was casting aspersions on the full faith and credit of the United States government, and the ability of our government to honor any of its debts. He might as well have been speaking at a hearing on a trade agreement with China, referring to the bonds the United States owes its largest trading partner as IOUS. Somehow I think Hatch would be reluctant to say it in that context. The American business community would be none too pleased. No, it is more likely that Hatch was cynically using the term “IOUs” to undermine confidence that Social Security will “be there” for coming generations, and perpetuate the common misunderstanding that the trust fund have been “raided” by the government.

That wasn’t Hatch’s only distortion of Social Security at the hearing. His question for Charles Blahous, a conservative policy expert and a Public Trustees of the Social Security trust fund, turned into a back-door attack on the program. Hatch asked what kind of combined Social Security benefit a couple would receive, if the husband were the sole breadwinner, had average annual earnings of $150-200,000, and claimed benefits at age 70. Blahous answered that the husband, who would be considered a maximum taxable earner (Currently $106,800), would probably receive a benefit in the range of $30,000, and the wife would receive a benefit of 50% of that, which is $15,000. Together, they would receive a combined benefit of $45,000. Blahous correctly stipulated, however, that this would be reduced to stay under the family maximum benefit, which was $40,711.69 in 2009.

Wrapping himself in the progressive mantle, Hatch used Blahous’s answer to denounce Social Security for not being progressive enough. Hatch said it was “immoral” that Social Security should be paying out such large benefits to wealthy Americans, while the average annual benefit hovered around $13,000. He went further, suggesting that this was a serious financial drag on the program. “I imagine there are many such similar-earning couples” getting huge Social Security benefits, Hatch declared. He insisted that Social Security could be made solvent if we just reduced benefits for the caviar set.

Then, the facts got in the way. Blahous pointed out that historically only 1 percent of beneficiaries had earnings equivalent to the taxable maximum. So contrary to his assumptions, Hatch’s hypothetical high-flying couple is statistically insignificant. (Senator, your class is showing.) Thus, the financial part of Hatch’s argument is null and void.

But just because Hatch was silenced in the hearing room, by a conservative policy expert no less, it does not diminish the traction his line of questioning has in the media and with the public. Fiscal hawks have repeatedly claimed the progressive high ground in their calls to flatten the benefit formula and eviscerate Social Security’s middle class benefits. And, at first, even to reasonable people, it sounds convincing. Only when you start to look at the details do you realize that it is a back-door attack on Social Security’s integrity.

Because there are so few of Hatch’s $150K earners, rolling back benefits for them barely saves Social Security any money at all. (Click here for a complete fact sheet on means-testing.) For that they’d have to dip down to seniors in the $50-60,000 range–as Lindsey Graham and Rand Paul do in their “progressive” Social Security plan.

The Republicans’ real agenda is not to make Social Security more progressive, but rather weaken the program’s political advantages over other government programs. You see, Social Security’s progressivity is hidden. Benefits are earnings-related, so they are larger in absolute terms for higher earners–and seem regressive. But they replace a larger proportion of pre-retirement earnings the lower your lifetime earnings. Therein lies the progressive part. Plus, wealthier beneficiaries’ benefits are taxed as income to help fund the program.

Attempts to disturb this delicate balance of redistribution-by-stealth jeopardize upper middle class support for Social Security by turning it into another welfare-style subsidy program that they have no stake in. That way, Republicans, who don’t believe in Social Security for ideological reasons, will be able to chop the program to pieces with greater political ease. Consider the GOP’s treatment of more “progressive” welfare programs in recent budget talks.

Home heating oil for the poor? Cut under threat of a government shutdown.

Food stamps for poor children? Cut under threat of a government shutdown.

Medicaid? Gutted in the GOP budget, and still a part of Republican demands to raise the debt ceiling.

On Social Security itself, Hatch is new to the progressive cause. Back in 2007, he voted with his Republican colleagues to privatize Social Security. Was that the “moral” thing to do?

Previous post

MICHIGAN: Voters better wake up today and write their state senators before it's too late!

Next post

Congress Moves To Shut Internet Down. But Just The Parts That Threaten Corporate Profits. The "PROTECT IP Act of 2011" Replaces COCIA.

Daniel Marans

Daniel Marans