The debate on the future of Social Security is about to heat up. Two major events are scheduled for later this month in Washington, where policymakers will turn their attention to possible cuts in entitlement programs.

President Obama’s bipartisan National Commission on Fiscal Responsibility and Reform, charged with coming up with solutions to the nation’s debt and deficit crisis, holds its first meeting on April 27. Although the Commission has no pre-determined agenda, some are worried that it’s made up mainly of deficit hawks and too few members who will fight to protect Social Security. The next day, the Peter G. Peterson Foundation sponsors a “fiscal summit”  looking at the fiscal problems posed by the coming retirement of baby boomers and rising pressure on social insurance programs–chiefly Social Security and Medicare.

Peterson is a Wall Street billionaire who underwrites the foundation with his own funds. He’s pushing an aggressive  agenda of  strict caps on budget outlays for Social Security and Medicare, as well as creation of a commission that would have legal authority to create a plan to reduce the deficit and then simply present it to Congress for an up or down vote–no debates, no amendments. (The Obama commission doesn’t have that authority).

Rising Medicare expenditures pose a much bigger threat to the federal government’s budget deficit than Social Security–and its future is tied up in the broader effort to reform health care.

Social Security’s problems are more straightforward, and don’t really constitute an imminent crisis. Yes, the recession has pushed the program into a cash-flow negative position this year–much earlier than expected. That’s due to the sharp drop in employment (and collections of Social Security payroll taxes), and an  unexpectedly spike in new applications for benefits by unemployed older workers.

But Social Security has a long-term surplus of about $2.5 trillion that has been accumulating since the last “fix” to the program was implemented during the Reagan Administration. That money is sitting in Treasury notes, but current estimates suggest the surplus is large enough to keep paying benefits until 2037.

Conflating the Social Security’s problems with the federal deficit presents a false choice between balancing the federal budget and paying out benefits people earn by paying into the system over the the course of their working lives.  Remember that Social Security is an insurance program funded through taxes on payrolls, with the implicit promise that benefits will be paid at a later date.

Social Security is the most successful and valuable part of our retirement safety net. The program operates with tremendous efficiency,  keeps millions of Americans out of poverty every year and pays an annuity-style benefit at a time when traditional pensions are declining. Perhaps most valuable is the program’s automatic annual adjustment of benefits for inflation–a feature you can’t find in very many retirement benefit programs.

Learn more

Listen to a debate on the budget deficit and entitlement programs, featuring Peterson Foundation CEO David Walker and Robert Kuttner, co-editor of The American Prospect.

AGENDA PROJECT: Deficit Breakfast Discussion from Century Foundation on Vimeo.

Tags | Medicare, Social Security