NCPA - National Center for Policy Analysis

HILLARY'S $7 TRILLION PROMISE

September 6, 2007

Courting seniors this week at the Alliance for Retired Americans, Sen. Hillary Clinton (D-N.Y.) pledged that as president she would not cut Social Security benefits, raise the retirement age or privatize the taxpayer-funded Social Security system.  The seniors were no doubt very pleased.  Keeping Hillary's promise, however, would guarantee a catastrophic multitrillion-dollar tax hike at some point in the coming decades, to be borne by people other than the Alliance for Retired Americans, says the Washington Post.

Consider:

  • In present dollars, Social Security's projected unfunded obligations over a 75-year horizon are $4.7 trillion.
  • Considering that the U.S. Treasury must find $2 trillion to redeem the bonds presently in the Social Security trust funds, the total unfunded obligation is actually $2 trillion higher than this for a total of $6.7 trillion.
  • Over an infinite horizon, Social Security's present-dollar unfunded obligation is projected to be $15.6 trillion.

How are we to pay for this?  Via Clinton's promise, most of the answers are off the table. For a period that matters crucially if the nation is to solve this crisis, there would be no chance of cuts in benefits, no possibility of asking seniors to extend their working years nor any prospect of introducing private accounts to replace the system's present inefficient income transfers.  Barring near-miraculous economic growth, that leaves one option: an enormous tax hike, be it under a Hillary Clinton administration or under a successor, says the Times.

The amounts entailed in the Social Security crisis, of course, are trifling compared to the Medicare juggernaut staring down the future American taxpayer, says the Times:

  • For Part A alone, the 75-year unfunded liability is $11.6 trillion.
  • In total, Medicare suffers from a 75-year present-value unfunded obligation of $33.9 trillion.

Source: Editorial, "Hillary's $7 trillion promise," Washington Post, September 6, 2007.

 

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