Analysts: Social Security Benefits Not Threatened

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Politicians may have to dip into the Social Security trust fund again after all their hands-off promises.

Just how worried should we all be about our retirement? Not very, experts say.

"This doesn't mean a blessed thing," said David John, senior Social Security analyst for The Heritage Foundation, a conservative Washington think tank. "It's essentially a theoretical discussion that won't affect Social Security in the short term or even in the long term."

Last week, the White House projected a slim $1 billion non-Social Security surplus this year, meaning the retirement funds would not have to be touched. But on Tuesday, the Congressional Budget Office reported the government wouldn't even have that much, and would need to pull $9 billion from the Social Security surplus to make ends meet. That still leaves Social Security with a $153 billion surplus for this year.

"It represents a prying open of what was supposed to be a rock-solid, government fiscal tightfistedness," said Hans Riemer, senior policy analyst for the Institute for America's Future, a liberal policy group in Washington. "As to how much it will open and whether it will stay open very long, it's not clear yet."

To understand the debate, one must also come to terms with the lockbox idea that was talked about so much during last year's presidential campaign. It's a sham. There is no untouchable Social Security account full of money that is just sitting there, piling up interest for future generations of retirees.

As White House budget director Mitch Daniels put it, the lockbox is "symbolic."

It's also political. Republicans and Democrats want to be on record as staunch defenders of a program that serves nearly 46 million Americans, many of them senior citizens who turn out in large numbers on Election Day.

Social Security itself remains on solid financial ground under the new projections, running surpluses in each of the next 10 years for a total of $2.5 trillion.

In very basic terms, this is how the Social Security trust fund works:

--Money from payroll taxes is collected. Payments are made to current beneficiaries, and money is left over.

--By law, treasury bonds must be purchased with that remaining money.

--Social Security will redeem these bonds in future decades to meet benefit obligations.

--When a treasury bond is purchased with leftover Social Security revenue, that money goes to the federal government.

--Congress in the past has spent that money. But the lockbox idea emerged with the understanding that the money instead would be used to reduce the federal debt.

--Under that theory, federal debt is reduced and the national economy is stronger. So when it's time to redeem the bonds in the trust fund, the government is in better financial shape to do so.

Dipping into the surplus could have eventual consequences if politicians continue to reach in for more. Escalating spending could put the government in a pinch when the time comes to redeem the bonds in the Social Security trust fund, Riemer said.

"This is important if the outcome of putting the money back on the table is to further deteriorate the government's finances to the point that it has trouble meeting its basic obligations."

Politicians have led many Americans to think that a hands-off approach to the Social Security surplus would strengthen the retirement program, and so the political cost of reversing course could be high, John said.

"This is a case where the president needs to show some very good political skills in the next six weeks or so to show that what's happening here is a matter of softening of the economy than anything else," he said.