GOP Senate candidate Hinckley says there is no money in Social Security

How much money does the United States have on hand to pay for Social Security benefits?

That was one of the issues that Barry Hinckley, a Republican seeking the U.S. Senate seat held by Democrat Sheldon Whitehouse, touched upon during a Channel 6 interview that aired July 24.

Noting that people are living longer and there's concern about how the benefits will be financed down the road, host Vincent "Buddy" Cianci, asked Hinckley what his solution would be. The candidate said he would raise the retirement age.

He also focused on separate statements by Whitehouse during the debate over the debt ceiling. He said that Whitehouse had reported that the crisis might prevent benefit checks from going out and that the Social Security trust fund has a multi-trillion dollar surplus.

"So if there's a surplus, why are checks going to stop going out? Well, actually, there isn't" a surplus, said Hinckley. He asserted that the Johnson administration started spending Social Security money to pay for the Vietnam War and "they never looked back. They kept spending that money so that, unfortunately, there's no money in Social Security."

On his website, Hinckley doesn't say there's no money in Social Security. He's says there's no "actual money … just IOU's from the general fund."

PolitiFact has dealt with the no-money-in-Social-Security issue before. More than a year ago, Michele Bachmann, now a Republican candidate for president, was given a False on the Truth-O-Meter for insisting that "Social Security, like I told you, is out of money."

Why False?

In recent history, Social Security has been financed exclusively by payroll taxes. The amount raised in taxes was more than enough to cover the benefits it needed to pay out.

The excess went into a trust fund, which has now accumulated roughly $2.5 trillion.

Those who say the fund has no money, or that it has nothing more than a bunch of IOUs from the federal government, are referring to the fact that Social Security doesn't have $2.5 trillion in cash sitting in a vault somewhere. The federal government has loaned the money to itself, using the cash to pay for other expenses.

But these aren't IOUs, which generate no interest. The loan is in the form of special-issue Treasury bonds that earned $117.5 billion in interest in 2010, according to the latest trust fund report.

So saying that Social Security has no money is akin to saying that you're broke if you have $20 million in certificates of deposit but only 20 cents in cash.

But things are changing.

Thanks to the recession, Social Security paid out more in benefits in the last two years than it raised from the Social Security tax. That hasn't happened since 1983. Last year's shortfall was $49 billion; this year it's expected to be $46 billion.

To pay benefits last year and this year, Social Security is supplementing money from the payroll tax with interest from the bonds, according to Mark Hinkle, a spokesman for the Social Security Administration.

Unfortunately, with the U.S. population getting older, more people will be getting benefits, and fewer young people will be paying taxes to finance the program.

According to the 2011 Annual Social Security and Medicare Trust Fund Reports, interest from the treasury bonds -- combined with the ongoing revenue from the Social Security payroll tax -- will be insufficient to cover the cost of retiree checks in 2022.

Unless something is changed, the trust fund will be drained because it is under-funded.

Fourteen years later, in 2036, the trust fund itself will be depleted, according to the report. If nothing is done, the only money flowing into Social Security will be the amount raised year-to-year in taxes. That will only cover about 75 percent of what it should through 2085.

One issue driving the debate over Social Security is the realization that the federal government -- the folks promising to pay those Treasury bonds, with interest -- isn't exactly awash with cash, as the debate over the debt ceiling highlighted.

The national debt is approaching $15 trillion, a total that includes the $2.5 trillion owed to the Social Security trust fund.

So maybe a better analogy would be: Saying that Social Security has no money is akin to saying that you're broke if you have 20 cents in your pocket but $20 million in the stock of a heavily leveraged company.

You're far from broke. But you're probably lying awake at night wondering if you're ever going to see all $20 million of your investment.

When we asked Hinckley about his statement that "Social Security has no money," he said he is correct because Social Security doesn't have cash on hand. The bonds it holds, he said, are assets.

"Social Security has assets. It doesn't have money," he said. "Money is something you can immediately pay bills with. Assets are only redeemable if the government can borrow more money to pay them off. I've never said they don't have assets. The problem is, I question the integrity of the assets when you have to borrow money to redeem them."

To summarize: Hinckley said, "There's no money in Social Security."

In fact, Social Security has a $2.5-trillion trust fund with more money coming in each year. The money is "invested" in a federal government that paid out $117.5 billion in interest in 2010 but shows a risky willingness to rack up debt, raising concerns that it may someday be unable to pay that money back, with interest.

But Hinckley, in his Channel 6 comments, said Social Security has no money now.

At the time he said it, the checks were still going out.

And they still are.

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