Southern Senators

The Honorable Johnny Isakson
131 Russell Senate Office Building
United States House of Representatives
Washington, DC 20515

Dear Senator Isakson:

During a recent talk at the Athens Country Club, you called for reform of entitlements saying, “…the real debt culprits are Medicare and Social Security.” You went on to predict that Social Security would begin to see benefit reductions as early as 2025.

In reality, neither of these statements is true. Social Security was created with a dedicated source of funding, Social Security payroll taxes, and because of this dedicated revenue stream, Social Security, by law, cannot contribute to the national deficit since it can only spend money taken in through this tax or from the bonds government purchased with surplus tax revenues in prior years.

Concerning future benefits, the legislation adopted based on the recommendations of the National Commission on Social Security Reform in 1983 led to the growth of a large surplus in Social Security. This surplus was used to buy bonds and now Social Security holds more than $2.6 trillion in government bonds. As a result, the Congressional Budget Office’s projections show that the program will maintain full solvency through the year 2038, a full 13 years beyond your prediction. After 2039, even if Congress makes no changes to the program whatsoever, Social Security will still be able to pay a substantial benefit. For example, if your children, now in their 30s, do as well as you have in your working years and retire at the normal retirement age, they would receive benefits of over $33,000 (in 2011 dollars) each year for the rest of their lives.

The real “culprit” that a serious plan would address is the soaring cost of healthcare. We pay twice as much per person compared to other developed nations yet have no better outcomes and shorter life expectancies. If we were able to rein in health care costs then there would be little problem balancing the budget in future decades.

As you continue to discuss Social Security and the national debt, I hope you and your staff will have the opportunity to further review the design and finances of the program as well as the factors that actually contribute to national deficits. If you would like any additional background on these topics, I would be happy to assist you.

Best regards,
Dean Baker

Editor’s Note: This story originally published Monday, November 1, 2011 at DailyKos.com.

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Dean Baker

Dean Baker

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, DC.

He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University. His blog, Beat the Press, features commentary on economic reporting.

He received his Ph.D in economics from the University of Michigan.

He has written numerous books and articles, including The United States Since 1980, Cambridge University Press, March 2007; The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer, Center for Economic and Policy Research, 2006; Social Security: The Phony Crisis (with Mark Weisbrot), University of Chicago Press, 1999; "Asset Returns and Economic Growth," (with Brad DeLong and Paul Krugman), Brookings Papers on Economic Activity (2005); "Financing Drug Research: What Are the Issues," Center for Economic and Policy Research, 2004; "Medicare Choice Plus: The Solution to the Long-Term Deficit Problem," Center for Economic and Policy Research, 2004; The Benefits of Full Employment (with Jared Bernstein), Economic Policy Institute, 2004; "Professional Protectionists: The Gains From Free Trade in Highly Paid Professional Services," Center for Economic and Policy Research, 2003; "The Run-Up in Home Prices: Is It Real or Is It Another Bubble," Center for Economic and Policy Research, 2002. His book Getting Prices Right: The Battle Over the Consumer Price Index (M.E. Sharpe, 1997) was a winner of a Choice Book Award as one of the outstanding academic books of the year. He was also the author of the weekly online commentary on economic reporting, the Economic Reporting Review (ERR), from 1996 - 2006.

He has worked as a consultant for the World Bank, the Joint Economic Committee of the U.S. Congress, and the OECD's Trade Union Advisory Council.

His columns have appeared in many major media outlets including the Atlantic Monthly, the Washington Post, and the London Financial Times. He is frequently cited in economics reporting in major media outlets, including the New York Times, Washington Post, CNBC and National Public Radio.