On Fox & Friends, Fox Business host Stuart Varney bizarrely claimed that the Social Security "trust fund is empty" because it "is full of IOUs from the Treasury" that won't be "IOUs any longer, by the year 2037." In fact, without any changes, Social Security will be fully funded through 2037, and the trust fund holds a $2.5 trillion surplus, funded by Treasury bonds, which are backed by the full faith and credit of the U.S. government and are widely considered to be the safest investment around.
Varney Claims Social Security "Is Broke," Trust Fund "Is Empty"
Varney: "[Social Security] Trust Fund Is Empty" And "Is Full Of IOUs From The Treasury." On the January 28 edition of Fox News' Fox & Friends, the co-hosts began a segment on the solvency of Social Security by playing a clip of Sen. Bernie Sanders (I-VT) telling Fox News host Neil Cavuto, "I think it is not a good idea for us as a nation to try to frighten people and say, 'Social Security is not going to be there for you. Social Security is going bankrupt,' which is obviously not the case."
Co-host Steve Doocy responded by saying, "Oh, really?" Doocy and co-host Gretchen Carlson then hosted Varney to attack Sanders' assertion. Varney claimed that the "[Social Security] trust fund is empty" and that money paid into it has been "taken out of the trust fund to pay for other things." Varney also echoed an often-advanced right-wing talking point that "the trust fund is full of IOUs from the Treasury," suggesting that these bonds were not secure. From the show:
VARNEY: Look, the thing we should be worried about is that all of that $547 billion --
VARNEY: -- $45 billion each and every year has to be borrowed.
DOOCY: Of course.
VARNEY: We should be angry that the trust fund is empty. We've all been paying into it all of these years. That trust fund is empty.
CARLSON: So there were no rules attached to it, that when you strip all of the Americans of their taxpayer dollars, that it doesn't necessarily have to go to that fund?
VARNEY: It goes into the trust fund, but then it's taken out of the trust fund to pay for other things. Over the past two generations, that's what's been happening. So right now, Social Security pays out a lot more -- $45 billion a year -- than it takes in. Where does that $45 billion come from? Can't come from the trust fund, because you don't have it. You've got to borrow it. That's the source of concern. What happens if somebody says, "Ah, we're not going to lend you all this money?"
DOOCY: That's right.
VARNEY: We've got a debt crisis. That's the source of worry over Social Security.
DOOCY: And ultimately, it's a problem with priorities. I mean, the federal government has a certain amount of money, and they have chosen to spend it a certain way. Look, Social Security is a big priority. Let's get our priorities in order.
VARNEY: Absolutely. And we got a shock to the system this week when it was announced by the Congressional Budget Office that we have a deficit this year of $1.48 trillion. That's a shock to the system. We've got to borrow all of that money. We're borrowing to pay Social Security. That's why people are worried.
CARLSON: Let me ask you a really stupid question. How can they say that it's going to be broke in 2037 when you're telling me right now it's broke?
VARNEY: Because the trust fund is full of IOUs from the Treasury. Those IOUs are completely exhausted, they're not even IOUs any longer, by the year 2037. That's the technical definition of totally running out of money. [Fox News, Fox & Friends, 1/28/11]
But Full Social Security Benefits Are Secure Through 2037; Experts Say "I.O.U." Label Is "Absurd"
AP: "Social Security Has Built Up A $2.5 Trillion Surplus ... Benefits Will Be Safe Until That Money Runs Out ... In 2037." A January 27 Associated Press article noted that while "Social Security will post nearly $600 billion in deficits over the next decade," without any changes to the fund, "[b]enefits will be safe until that money runs out. That is projected to happen in 2037." From the article:
Social Security has built up a $2.5 trillion surplus since the retirement program was last overhauled in the 1980s. Benefits will be safe until that money runs out. That is projected to happen in 2037 -- unless Congress acts in the meantime. At that point, Social Security would collect enough in payroll taxes to pay out about 78 percent of benefits, according to the Social Security Administration.
The $2.5 trillion surplus, however, has been borrowed over the years by the federal government and spent on other programs. In return, the Treasury Department has issued bonds to Social Security, guaranteeing repayment with interest. [Associated Press, 1/27/11]
Baker: "Treasury Bonds ... Are Never Referred to As 'I.O.U.'s'" In "The Business Pages Of Major Newspapers." In an August 25, 2010, post on his Center for Economic and Policy Research (CEPR) blog Beat the Press, economist Dean Baker, who is co-director of CEPR, pushed back against a New York Times piece that referred to Treasury bonds as "i.o.u.'s." [The New York Times, 8/25/10] Baker called this "absurd" and continued:
The business pages of major newspapers are full of references to Treasury bonds all the time. The bonds are never referred to as "i.o.u.'s." The article then includes the bizarre assertion about government bonds that the only way for the government to make good on the bonds it has outstanding: "is to issue mountains of new debt or to take the money from elsewhere in the federal budget, or perhaps impose significant tax increases -- none of which seem like especially practical options for the long term."
[Times reporter Matt] Bai's opinion is radically at odds with perceptions in financial markets. These markets view it as almost inconceivable that the government will not honor its bonds, which is why the interest rate on long-term bonds is near its lowest level in the last 60 years. [Beat the Press, cepr.net, 8/25/10]
NYT: "False Impression" That Trust Fund Is "A Worthless Pile Of I.O.U.'s." In a January 2005 editorial published during the weeks before the Bush administration released its plan to privatize Social Security, The New York Times responded to President Bush's suggestion that in 2018 Social Security would be bankrupt by saying, "In suggesting that 2018 is doomsyear, the president is reinforcing a false impression that the trust fund is a worthless pile of I.O.U.'s -- as detractors of Social Security so often claim." The editorial added that for decades, payroll taxes had "exceeded benefits, with the excess tax revenue invested in interest-bearing Treasury securities." The editorial continued:
That accumulating interest and the securities themselves make up the Social Security trust fund. If the trust fund's Treasury securities are worthless, someone better tell investors throughout the world, who currently hold $4.3 trillion in Treasury debt that carries the exact same government obligation to pay as the trust fund securities. The president is irresponsible to even imply that the United States might not honor its debt obligations. [The New York Times, 1/10/05]
Left Unchanged, Tax Income Will Still Cover 78 Percent Of Benefits After 2037
Social Security Board Of Trustees: After 2037, "Annual Tax Income" Would Fund "78 Percent Of" Social Security Costs. Contrary to Varney's suggestion that after 2037 Social Security benefits would no longer be funded, the 2010 Annual Report Of The Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds reported that even if no changes were made to Social Security's funding, the "annual tax income to the trust funds is projected to equal about 78 percent of program cost" after 2037. From the report:
Social Security's combined trust funds are projected to allow full payment of scheduled benefits on a timely basis until the trust funds become exhausted in 2037. At that time, annual tax income to the trust funds is projected to equal about 78 percent of program cost. By 2084, annual tax income is projected to be about 75 percent as large as the annual cost of the OASDI program. [2010 Annual Report Of The Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds, 9/9/10]