The Absurdity of Cutting Social Security to Reduce the Debt
Shortly after the ceiling on federal debt was raised on October 17, 2013, the conservative Heritage Foundation notified its readers that the outstanding debt of the United States had “rocketed past $17 trillion,” and that “entitlement spending—the key driver of spending and debt—remains unaddressed.” The three assumptions in that statement—that the true measure of our debt is $17 trillion, that the cause of the buildup of debt is entitlement spending, and that therefore the appropriate policy to “address” this problem is to cut Social Security benefits and other “entitlements”—are endorsed by many politicians and policy pundits in Washington. But they’re all wrong as economic analysis and disastrous as policy recommendations.
the real issue is whether or not society will keep its commitment to retirees. The agenda of those who say we have to cut benefits is really that they don’t want to meet this commitment. We should recognize that this is their agenda, and not let them hide behind the smokescreen of supposedly out-of-control federal debt.
Seventeen trillion dollars certainly sounds like a big, scary number, especially when national debt clocks tell us that this translates into more than $53,000 for every person in the United States. But we shouldn’t be focusing on that number.
The $17 trillion figure is a measure of “gross debt,” which means that it includes debt owed by the U.S. Treasury to more than 230 other U.S. government agencies and trust funds. On the consolidated financial statements of the federal government, this intragovernmental debt is, in effect, canceled out. Basically, this is money the government owes itself. What is left is termed “debt held by the public.” It is this measure of debt that is relevant to a possible increase in interest rates due to competition for funding between the private and public sectors.