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Lindsey on Social Security Privatization, the Economy, and the Trust Fund
September 7, 2001
During an interview on Fox News Sunday, Lawrence Lindsey, the
White House's top economic advisor, said the privatizing of a portion of
Social Security would improve economic growth.
Lindsey noted that "one of the things the President hopes to do is
reform Social Security, to make it a 21st Century program and not a 1930s
program…What we hope happens is that, for those people who want it, they
are able to invest [a portion of their Social Security taxes] for their own
retirement." Lindsey went on to point out that allowing workers to invest
their Social Security taxes "would really help this economy. It would help
the markets. It would help business confidence."
Several studies have shown that by increasing national savings and labor incentives,
privatization would indeed offer a significant boost to economic growth. In
particular, Martin Feldstein has suggested that Social Security privatization
would provide the economy with a present value gain of $10-20 trillion, the
equivalent of a permanent 5 percent increase in GDP. (Martin Feldstein, "Privatizing
Social Security: The $10 Trillion Opportunity," Cato Institute Social Security
Paper no. 7, January 31, 2001.)
Later, correspondent Brit Hume questioned Lindsey about the nature
of the Social Security surplus and the Trust Fund. Hume belittled the idea
of an untouchable Social Security "lock box," asking Lindsey, "Isn't it the
case that [the Social Security surplus] will be very much touched, and it will
in fact be loaned back to the government? Social Security will get IOUs or
government securities, and what will happen is that the money will be used
to pay down other government debt?"
Lindsey replied that the government was simply "rearranging the
money, in a sense, to pay down some of its own debt." But Hume pressed,
"So, in fact, [the surplus] will be gone as surely as if it had been kept by the
taxpayers." Lindsey agreed, "There's no mattress out there."
Speaking of the Trust Fund, Hume then asked, "In fact, the money
will not be there. Its just IOUs." And Lindsey, cutting to the essence of the
Trust fund debate, admitted, "The only way for the government to get the
money to pay benefits in the future will be to redeem the debt. And to do
so, it's got to cut other spending or raise taxes…or borrow."
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