Social Security Still Pay-as-You-Go

October 27, 1999

In Tuesday's Los Angeles Times, economist Martin Mayer writes that all the political posturing over the Social Security Trust Fund going on in Washington today is just that -- posturing. But Mayer goes on to make a larger point about the federal budget.

Mayer does a service in once again reminding Congress and the President that the Social Security Trust Fund has next to nothing to do with the overall health of Social Security. "The same money will have to be appropriated whether or not the bookkeeping still shows money in the trust fund. These appropriations will increase government expenditures, enlarging the deficit if there is a deficit or diminishing the surplus if there is a surplus. The fact is, Social Security remains a pay-as-you-go retirement scheme under which a steadily growing number of retirees will be supported by a stable or shrinking cadre of income-producers."

Mayer proposes moving away from the traditional budgeting process toward what is called "generational accounting," in which the budget would more accurately reflect "the inevitable, relentless accrual of Social Security obligations as more people approach retirement."

Mayer concludes that, "the Social Security trust fund should enter into the debate only as a proxy for the future national debt. Our arguments would be wiser--and perhaps more fruitful--if both sides erased the words 'trust fund' from our political vocabulary." We concur.

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