Jewish World Review August 24, 2001/ 8 Elul, 5761
http://www.jewishworldreview.com -- BUDGET debates in Washington are always semi-fictional. But the great debate about "raiding Social Security" is twilight-zone surreal.
Democrats accuse the administration of taking bread from the mouths of seniors; Republicans are fudging numbers and spinning rosy scenarios to fend off charges that they are raiding the Social Security trust fund. The reason this debate is so delusional is this: The Social Security trust fund is a meaningless fiction.
You would have thought that after Al Gore's hilariously hyperbolic "lockbox" claims in the presidential debates, the idea would never be taken seriously again. Well, it is. Democrats are charging that, to pay for the Bush tax cut, the Social Security lockbox has been picked.
The fact is this: There is no box and it has no lock. Social Security is pay-as-you-go. Every year the government collects Social Security taxes, together with other sources of revenue (income taxes, corporate taxes, customs duties, etc.), and then pays out all its expenditures, including Social Security for seniors.
The Democrats are pretending that there is a box somewhere where all your hard-earned Social Security tax dollars go, and sit, until you retire -- at which time the box is opened and all those $20s and $50s and $100s that you long ago sent in are returned to you.
Here is what really happens to your Social Security tax dollars. They are sent to the "Social Security trust fund" -- and then are, by law, immediately withdrawn and given to the Treasury to spend as it sees fit. The Treasury completes the transaction by depositing IOUs in the trust fund. The IOUs basically say: "The government (in the guise of the Treasury) promises to pay itself (in the guise of the Social Security Administration) enough money when needed to pay its costs in the future. Cross my heart."
What you and I pay in Social Security taxes this year is irrelevant to the money you and I will draw out when we retire. That money will come from the taxes paid by the workers of that year in that year. And whether that will be enough to cover your Social Security and mine will depend entirely on the size and health of the economy in that year -- and not at all on the number, size, volume and color of the meaningless pieces of paper that constitute the "Social Security trust fund."
So what is the debate about? The federal government is running a huge surplus, the second largest in American history. The Office of Management and Budget estimates it at $158 billion. Social Security taxes alone, it estimates, will exceed outlays by $157 billion. (The precision is comical, but don't blame me. I just report the news. I don't make it up.) Democrats are saying that the $157 billion surplus generated by Social Security must be left inviolable or we will be stealing from seniors.
The stealing part is a joke and a hoax. (See above: no lockbox.) Moreover, for decades, both Democratic and Republican presidents alike made no distinction between the Social Security surplus and the rest of the government budget. They simply, sensibly, put all the dollars together.
When did the Social Security part of the surplus become sacrosanct? In 1998 Bill Clinton, realizing that the federal budget was about to go into surplus, wanted to prevent the Republicans from passing a tax cut. So in his 1998 State of the Union Address he declared that to "save Social Security" he would not permit a penny of the Social Security surplus to be touched.
Of course, by that very logic, Clinton had for five years been counting on -- and thus "raiding" -- the Social Security trust fund to offset his deficits.
No matter. He had found a political winner. The "raiding" ploy so spooked the Republicans that in 2000 they dared not challenge it. George W. Bush locked himself in the box by saying that he would not touch the trust fund either.
The administration is therefore making all kinds of budget pirouettes to keep the total federal surplus slightly above the $157 billion Social Security surplus -- lest it, too, be accused of "raiding."
But why not cross the line? In boom times, you want to run a huge surplus to slow down the economy and pay off national debt. But today the economy is tanking. We are flirting with recession. It is lunacy for the government to siphon off tens of billions of dollars, almost 2 percent of GDP, depressing the private sector just when the private sector desperately needs the money.
But that is exactly what the Democrats are trying to enforce today -- under cover of "saving Social Security." The administration, ensnared in the same fiction, concurs. Result? That Washington specialty: folie a deux