SOCIAL SECURITY REFORM ENDS EMBEZZLEMENT OF "LOCK BOX"
March 29, 2005
President Bush's proposal to reform Social Security will effectively end the embezzlement of the trust fund, writes William Tucker of the American Enterprise.
When Social Security was first enacted, surplus funds were put into a separate account. But in 1968, President Lyndon Johnson convinced lawmakers to combine the Social Security Trust Fund with the federal ledger, thus opening the door to raiding the "lock box" to pay for other government programs.
Private retirement accounts, as proposed by President Bush, would have the following effects:
- The Social Security Trust Fund will start to belong to individual owners rather than the federal government, thus ending the embezzlement of the program's surplus revenues.
- Government borrowing, such as through selling interest-bearing bonds, will now have to proceed at arm's length, rather than through issuing IOUs to the Social Security Trust Fund that pay less than one percent interest.
- Many private account owners won't buy low-yielding government bonds but instead put their retirement money in mutual funds or corporate bonds and stock, thus putting resources to more productive uses in the private economy.
By 2050, if there is no Social Security reform, tax rates will approach 50 percent and more than half the tax revenues will be transfer payments to people over 65, says Tucker.
Source: William Tucker, "The Great Social Security Embezzlement," American Enterprise, March 2005.
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