Yesterday's hearings on Capitol Hill (No, no--the other hearings!)

November 20, 1998

The House Judiciary Committee may have gotten the most media attention Thursday, but when it comes to the country's long-term future, the important hearing was being held by the Ways and Means Committee. Following are comments on the other hearing, from Michael Tanner, director of Cato's Project on Social Security Privatization:

"Bill Archer was quite right to emphasize the need for reaching a bipartisan agreement to move forward on Social Security reform.

"Unfortunately, he appears to be misinformed about the nature of the so-called Social Security Trust Fund. Since 1983, Social Security has indeed run a surplus, but the income not immediately paid out in benefits is lent to the federal government in return for specially issued government bonds. The government then uses the borrowed surplus funds to finance its general operations, from roads and bridges to welfare and foreign aid.

"About half of the trust fund consists of those bonds. The other half consists of an accounting entry that 'attributes' interest to the bonds. But there is no actual money in the fund.

"Most of us are accustomed to thinking of the trust fund as an asset. That's what it would be if we had one. But in the case of Social Security, the trust fund is really a liability - it's an accounting of the money the government owes to future retirees. In 2013, the government will have to start redeeming its bonds in order to pay promised benefits. To redeem the bonds and actually pay the interest, it will have to raise taxes, cut spending or increase the debt."

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