Accounting For The Social Security Trust Fund
April 27, 1999
President Clinton has proposed that a significant share of projected budget surpluses be diverted to the Social Security Trust Fund, claiming this would allow benefits to be fully financed through 2049 without a tax increase.
But the Comptroller General of the United States recently testified, "Without the President's proposal, payroll tax receipts will fall short of benefit payments in 2013; with the President's proposal, payroll tax receipts also fall short of benefit payments in 2013."
In 2013, say defenders of the current Social Security system, the money in the Social Security Trust Fund can be used to finance all promised benefits through 2032.
The Social Security Trust Fund is a deception. It contains no genuine assets, only government bonds -- IOUs with no value beyond a promise to impose higher taxes on future workers. The only way to solve Social Security's financial woes while increasing retirement income for today's workers is through privatization.
As a 1998 U.S. General Accounting Office (GAO) study explains, "While the Trust Funds' Treasury Securities [bonds] are assets of the Social Security program, they are also liabilities for the rest of the federal government that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing other federal expenditures."
A particularly odd feature of the White House proposal is that the President is creating $2 of IOUs for every $1 of Social Security surplus that is spent on other government programs. The first IOU is created when extra Social Security revenues are "lent" to the Treasury. Then, when this extra money is used by the Treasury to reduce the national debt, the Trust Fund would get another set of bonds.
Source: Daniel J. Mitchell, "The Social Security Trust Fund Fraud," Backgrounder No. 1256, February 22, 1999, Heritage Foundation, 214 Massachusetts Avenue, N.E., Washington D.C. 20002, (202) 546-4400.
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