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Charles Blahous says I misquoted him. The record disagrees.

Conservative Charles Blahous says he's been misquoted about Social Security. He's wrong.
Does Social Security contribute to the deficit? The answer is no.

Charles Blahous, one of the public trustees of Social Security, has been on the warpath over how I reported his views on the burning question of whether Social Security contributes to the federal deficit.

This is an important question, because the assertion that the program does add to the deficit is a foundation stone of the conservative argument that it needs to be "reformed" to reduce its impact on the economy, typically by cutting benefits.

Blahous is one of those conservatives. 

I quoted Blahous this week in the course of explaining why Social Security legally cannot and does not contribute to the federal deficit. I wrote that although Blahous had stated (in another piece) that I was wrong, he in fact had agreed with my position during congressional testimony in 2011. To be absolutely precise, I wrote that he agreed with Social Security advocate Nancy Altman, whose viewpoint is identical to mine. 

Blahous has insisted in two emails to The Times that he didn't say that. He demanded a correction, which my bosses deemed unwarranted.

I don't think he's going to be happy with my explanation. First, his complaint.

"Michael Hiltzik misrepresented my congressional testimony in a recent column and a correction is in order," he wrote The Times. "Seeking to substantiate his own erroneous argument that Social Security cannot add to the federal deficit, he asserted that I took this position during 2011 testimony before the Senate Finance Committee. However, as the hearing transcript clearly shows, I was instead agreeing with a different, narrowly technical point (that cutting Social Security benefits does not reduce the federal debt subject to statutory limit, because of the way that debt is defined for purposes of the statute). In fact, during that same series of questions I stated specifically that 'it (Social Security) is adding to the federal deficit.'"

The full hearing transcript, which I linked to in my earlier post, is here. An excerpt covering only the Altman/Blahous exchange is here

So Blahous contends that when he told the Senate Finance Committee, "I do agree with that," as I quoted him, he meant he agreed only with Altman's "narrowly technical point" about how Social Security affected the federal debt subject to the debt limit. 

The problem is that Altman wasn't making a "narrowly technical point." She was making the broad, factual point that Social Security cannot by law contribute to the federal deficit. Period. It's not allowed to spend more than it takes in, and it can't demand that the Treasury cover any deficit in its own accounts.

Altman's words that cutting Social Security doesn't reduce the federal debt wasn't a "technical point," but an illustration of how the law works in practice. She stated:

"The law is unambiguous. So let me read it: Social Security 'shall not be counted for purposes of the congressional budget.'" She mentioned that Blahous talked in his own testimony about a "unified [federal] budget," but she pointed out that there's no such thing when it comes to Social Security, because the program by law is held separate from the rest of the federal budget.

As soon as she finished, Finance Committee Chairman Max Baucus said, "All right. Do you agree with that, Dr. Blahous?" Blahous replied, "I do agree with that."

It doesn't actually matter that Blahous says now he meant merely that he agreed that cutting Social Security doesn't reduce the federal debt subject to the debt limit, rather than with Altman saying that Social Security can't contribute to the deficit, because both points essentially are the same. He's trying to redefine the federal deficit and federal debt to support his claim, which is his privilege, but that's a debating maneuver, not an expression of fact. In the real world, all roads lead back to the law. And the law, as Altman said, is "unambiguous."

Indeed, Blahous agrees with Altman elsewhere in the same Congressional hearing, according to the transcript. Again, anyone is free to follow this link to read it. 

Asked by Baucus to respond to Altman's statement that "one penny saved in Social Security does not reduce our national deficit by one penny," Blahous replied, "There was actually much that Ms. Altman said that I agree with from a technical perspective, even though I am coming to different conclusions." (The technicalities always seem to fall in Blahous' favor, don't they?)

He explained that the present value of the surpluses Social Security had run since 1983 were larger than the deficit it was running in 2011, so over that time the program had "not added net, on average, to our national deficit and debt....So I agree on that point."  

He asserted, however, that 2011 was different, because Social Security ran a deficit that year. But there's some sleight-of-hand involved in that assertion, which Baucus caught immediately: It's based on subtracting from the program's income the interest paid on its holdings of nearly $3 trillion in Treasury bonds. Those payments came to $114 billion in 2011.

Anti-Social Security conservatives commonly employ the stunt of ruling those interest payments out of existence, because doing so makes the program's accounts look worse. But it's not reality. Millions of Americans receive interest payments from fixed-income assets of all kinds, and no one that I know of thinks the money is imaginary. Why Social Security should treat it differently is never explained.

To restate the original point, Social Security does not, and cannot, contribute to the federal deficit. 

Copyright © 2015, Los Angeles Times
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