Letter to the Editor: Clarifying Thoughts on the Deficit, Debt and Social Security

In the May 6-13 edition of the Peninsula Pulse, Carol Jensen-Olson praised Biden and the Democrats for reducing the deficit. 

She, like many citizens, probably doesn’t understand the difference between the deficit and the debt. The deficit is the year-to-year issue of the government spending more than it receives in revenue. The debt is the accumulation of borrowings to fund those “losses.” They are not the same.

When Biden recently bragged that he had reduced the deficit, it was reminiscent of when one of my clients told me that things were much better this month: He lost only $95,000, whereas the preceding month he had lost $100,000. Time to celebrate! 

We are still bleeding “red” at a very minimally reduced rate. Of course, timing is everything. Biden made those comments prior to recognizing the expense of the aid to Ukraine. The last budget surplus was under a Republican: George W. Bush in 2001.

Social Security is a separate issue. It is a line item in the budget, and for now, it takes in more than it pays out. That is projected to change during the next decade. In the meantime, this “excess” is loaned to the other branches of government. This myth about a “trust fund” is just that: a myth. It is full of IOUs from the federal government. 

The Democrats got behind the legislation that created IRAs and 401(k)s and have also gotten behind legislation that would mandate employer participation in the latter. Why? They recognize that Social Security in its present form is not sustainable given the changing demographics. 

However, that doesn’t stop them from debating a “wealth tax” to include those balances. This legislation has not happened yet. I believe any fix will involve increasing employee and employer taxes, adjusting benefit timing and potentially reducing benefits. New entrants to the workforce should plan accordingly.

Dick Pigeon

De Pere, Wisconsin