Trust Fund Truths

October 12, 1999

Quoting Cato Institute Chairman William A. Niskanen, George Hager in Monday's Washington Post highlights a Social Security fact that President and Congressional Republicans seem to forget: current battles over "who spent the Trust Fund" have next to nothing to do with the long-term soundness of the Social Security system. Niskanen correctly points out that, "It is no great tragedy if they exceed it by a little bit." But equally, it is no great gain if they do not.

The central misunderstanding, as Hager argues, is that the Trust Fund can "save" for Social Security. Current payroll tax surpluses are regularly spent on general expenditures, leaving nothing but government IOUs in their stead. "When Social Security Social Security needs the money, the government will have to make good--by drawing on non-Social Security surpluses, cutting other spending, raising taxes or running budget deficits again. Indeed, under current law, there is no way for Social Security to 'save' its excess cash except by reducing the national debt, which will essentially put the government in a better position to run up deficits again if that becomes necessary."

The real issues determining Social Security's fate have nothing to do with the Trust Fund. It is about time the politicians moved away from the Trust Fund sideshow and started confronting on them.

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