The 2002 Report of the Social Security Trustees, released on March 26, provides valuable ammunition for those concerned about the future of Social Security. In addition, it helps clarify what happens when the system runs a surplus, which it did last year and for many years before.
But first things first. Even though they are predicated on unrealistically pessimistic projections on where the economy will go in the next 75 years, the report says the Social Security Trust Fund will not be exhausted until 2041, three years later than predicted last year. The report sets all other doomsday dates back as well: Social Security benefits will not exceed revenue from payroll taxes until 2017 (instead of 2016) and total income – tax revenues and interest income – will not exceed expenditures until 2027 (rather than 2025).
And wonder of wonders: The report says the assets (last year Treasury Secretary Paul O’Neill said it had no assets) of the Social Security Trust Fund grew by $163.1 billion in 2001 and now exceed $1.2 trillion – and this despite all the hoopla about “spending the Social Security surplus.” All of which prompts a question: “What’s going on – who’s kidding who?” And the answer is … but first a brief departure.
Budgets either run surpluses or deficits – a surplus when income exceeds outgo, a deficit when it doesn’t. So, too, with the Social Security Trust Fund, where total income in 2001 was $163.1 billion greater than total expenditure. Federal law prohibits the trustees from burying that money in the White House lawn and requires, instead, that the surplus be invested in U.S. government securities – thus the $163.1 billion increase in the Social Security Trust Fund.
Now to what is called the “unified budget,” whose main sources of income are individual and corporate income taxes, licenses and user fees – and you guessed it – the sale of those securities to the Social Security Trust Fund.
As is said in the song, “there’s plenty of time for countin’ when the dealin’s done” – and so it is when the overall federal budget is finally adopted: there’s either a surplus or a deficit. If a surplus, the question becomes what to do with it. In 2001 most of it went to the rich in tax breaks, but there still was a small amount that went to pay down the debt. This year a big hunk goes for increased military spending and the budget will end with a deficit, meaning that the $163.1 billion that once belonged to the Social Security System will be spent along with all the other dollars.
And then the chorus: “They’ve spent the Social Security surplus!” or “They’re raiding Social Security!”
The hue and cry about the Social Security Trust Fund has its roots in President Clinton’s 1998 State of the Union address, where he invented the idea of “saving Social Security first” – a concept that later became a top issue of the Democrats in the 2000 presidential election, as they called for paying down the national debt as the sure way to save the system. But the idea that federal surpluses or deficits somehow impact on the future health of the Social Security Trust Fund – and therefore, on your benefits and my benefits – is a phony argument trotted out by both sides as they think it politically advantageous
Nor does it make any difference to the health of the Trust Fund whether the money is used to finance expanded social programs (not on anybody’s radar these days), to pay down the debt (the favorite of Democrats before Sept. 11) or for increased military spending (now everybody’s priority).
The myth of the disappearing Social Security surplus has done much to confuse the system’s defenders, with even the AFL-CIO buying into what has become conventional wisdom. And like all myths, it does nothing to clarify the issues in the struggle against the right-wing drive to privatize Social Security. Rather, it adds further confusion to an already confusing situation. As such it aids the enemies of Social Security.
The author can be reached at fgab708@aol.com
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