The Illusory Budget Surplus
December 15, 1998
President Clinton has argued this year's budget surplus provides an historic opportunity to "save Social Security." However, Northwestern University economist Robert Eisner has pointed out that Clinton's request is "a great political play...but it's economic nonsense."
In fact, the federal budget only appears to be in surplus because the Social Security program collects more in payroll taxes than it pays out in benefits.
- Removing Social Security's surplus from the books shows that the government ran a $29 billion deficit in fiscal year 1998, not a $70 billion surplus.
- Excluding Social Security, the most recent forecast by the Congressional Budget Office projects the budget won't record a noticeable surplus until 2006 -- a situation which will last only a few years.
- The cumulative "budget surplus" over the next 10 years will amount to $1.5 trillion, almost entirely due to the projected surplus in Social Security.
Even though Social Security payroll taxes have outpaced benefit payments for years, only recently has the government had any money left over after covering the current spending deficit. But total government debt -- the sum of the debt held by the public and the Social Security trust funds -- continues to grow.
And these obligations can only be met by raising taxes, cutting spending or issuing more debt.
Source: Max R. Lyons, "The Advantages of Social Security Privatization," Fact & Fallacy, December 1998, Employment Policy Foundation, 1015 15th Street, N.W., Suite 1200, Washington D.C. 20005, (202) 789-8685.
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