To watch the interview, go to the video and fast-forward to the 28 minute mark. Discussion of the Social Security surplus occurs around the 30 minutes mark.

Following is my transcript of the interview. (Note: I've highlighted in bold the discussion of the Social Security surplus.)

SWAIN: Let me turn from that to the thesis of your cover story, which is "Why the Debt Crisis is Even Worse Than You Think." It's accompanied by this chart or graphic which I'd like to put on the screen which is the debt deluge in which you show what everyone is talking about and what everyone should be talking about which is the fiscal gap what's this all about

COY: Fiscal gap is a different way of measuring out problems Everyone focuses on the national debt..which of course is important to focus on but, the national debt is backward looking it tells you what's obligations have already accumulated
What it doesn't tell you fully is the debt to come..or the obligations we are incurring now based on the way we've created formulas for social security, medicare and medicaid. If you look at those and you go out into the indefinite make sure that there's not some kind of accounting problem on the distant find that the gap...between everything we expect to receive --tax revenue-- and everything we expect to spend is $211 trillion ...trillion dollars...stated in today's dollars

SWAIN: So, what does Washington do with that?

COY: Well, what you do is what people have been talking about doing. You've got to tackle the entitlements because that's by far the bulk of the problem. Entitlements of course being social security and medicare. You also have to tackle medicaid. You also have to deal with the outlying years. You have to create formulas that will be sustainable. And you have to figure out how to something about with healthcare costs which are rising at a rate that's unsustainable, presumably by changing the incentives. This has been said on C-Span and elsehwere but it's not just talk it's like the economists that look at the longterm future say if that doesn't happen things just kind of blow up. Even 212 trillion wouldn't be enough.

SWAIN: Well one thing just to you're saying Social Security is part of the solution....In this illustration you have security...taxes... let's side is revenue and one side is debt. It shows social security in a surplus. Right. 132 in what is receives versus 110 trillion? Am I reading that correctly? [Coy responds, "Yeah."] So, people who social security be set aside we've paid into it it's really solvent for right now. Why should that be part of the discussion?

[Transcriber's note: The left side of the chart (debt) reads, "Social Security $110 tn." The right side (receipts) reads "Social Security taxes $132 tn."]

COY: That 's a good point. The social security numbers...the trust fund is not the crucial issue. That's why people say that medicare is where the bigger problem...but, social[is] probably going to have to have a age..but, you know...funny thing...I think that's a good point you're making there. I'm going to go back and look at that more closely for next week's story.

SWAIN: Well, thank you very much for outlining the concerns of the financial market, which you say right now are more muted than you expected, and for giving us some background on your cover story, "Why the Debt Crisis is Even Worse Than You Think," as Washington continues to find a solution for the debt ceiling. Peter Coy, joining us for Bloomberg Business Week, thanks for your time.

[end of interview]

Of course, next week will likely be too late for Peter Coy's re-evaluation of the fiscal gap data to have any impact on the Congressional debate that proposes to make Social Security cuts by Tuesday...unless, Americans hurry to point this out to Congress ourselves.

If Bloomberg's analysis of the "fiscal gap" is correct, any cuts to Social Security benefits will simply increase the already projected surplus of $22 trillion. That surplus is highly vulnerable in a "debt crisis" to being purloined to cover the $212 trillion gap resulting from other government expenditures. That would make Social Security, at least in part, a regressive tax program for general expenditures, because lower income workers pay a higher rate than those with high incomes.

The content of Bloomberg Businessweek's cover article goes beyond coming to an erroneous conclusion, as it does here.

[C]uts in benefit formulas for Medicare and Social Security are painful but necessary. And they should apply at least in part to current beneficiaries. Given how hard-pressed young workers are, it’s unfair to put all the adjustment on them while completely insulating today’s elderly.

Bloomberg engages in unseemly fear mongering about the fiscal clout of the nation's elderly, described in the article as "the gray deluge."

The U.S. is in danger of reaching a generational tipping point at which older Americans have the clout to vote themselves benefits that sap the strength of the younger generation—benefits that can never be repeated. Kotlikoff argues that we may have reached that point already. He worries that the U.S. could become Argentina, which went from one of the world’s richest to lower-middle income in a century of chronic mismanagement.

Senior citizens are being told by their own lobbyists, repeatedly, that any attempt to rein in the cost of Social Security and Medicare is an unjust attack on earned benefits. “Stop the liberals from raiding the Social Security Trust Fund once and for all!” says a recent mailing from the National Retirement Security Task Force. Similar messages aimed at Democratic voters make the same charge against Republicans. No wonder Obama and Boehner were rebuffed by their own parties for putting entitlements on the table. In the end neither the House nor the Senate debt-ceiling proposals touched Social Security or Medicare. Not pretty.

Pitting young people against their grandparents would be distasteful in any case, but to do so based on information that, in fact, argues the opposite is despicable. Thank goodness for C-SPAN and its eagle-eyed journalist Susan Swain.