Surplus Argument Continues

September 6, 2001

The Congressional Budget Office has released new economic forecasts that will suggest that the Bush Administration may be forced to tap $9 billion of this year's Social Security surplus, and as much as $18 billion next year, to fund proposed spending. Not surprisingly this has set off yet another round of finger pointing over that has "raided" the Social Security Trust Fund. Democrats, who routinely spent Social Security surplus funds between 1983 and 1999, and who only a few weeks ago were saying that the Social Security Trust Fund "guaranteed" benefits until 2038, now warn that checks might not go out because the Trust Fund has been "raided". At the same time, Republicans are reaping the well-deserved rewards of their own rhetoric about "lock boxes" and "never touching" the Social Security surplus.

Once again, columnist Charles Krauthammer got it right, pointing out that "It's not that the Social Security surplus can be put in a bank somewhere--a lock box--and saved for the baby boomers' retirement; it doesn't work that way."

The government is structurally unable to save money. Every cent that comes in, from Social Security payroll taxes or anywhere else, is spent. The debate is really over whether the money should be spent to fund operating expenses of the government or to pay down the national debt. But as far as Social Security is concerned it makes no difference--the same IOUs will be in the so-called Trust Fund no matter what the government spends the money on.

All this posturing over the Social Security surplus only serves to illustrate two points: 1) If money is left in Washington, it will be spent; and 2) therefore, the only real way to save money for Social Security is to get that money out of Washington, by letting individuals save it in the form of individual accounts.

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