The Trust Fund, the Surplus, and the Real Social Security Problem
by June O'Neill
June O'Neill is Wollman Professor of Economics at the Zicklin School of Business and director of the Center for the Study of Business and Government at Baruch College, City University of New York. She was director of the Congressional Budget Office from 1995 to 1999.
Executive Summary
Recent discussions of Social Security's
future solvency have been dominated by
misleading and inaccurate portrayals of the
Social Security Trust Fund and the impact of
budget surpluses on the program's finances.
In reality, the Social Security Trust Fund is an
accounting measure, not an accumulation of
real assets that can be used to pay future benefits.
That means current discussions of Social
Security "lock boxes," or whether the Social
Security "surplus" is being "raided," are essentially irrelevant to the program's future. The
federal government lacks a mechanism that
would allow it to save today against the future
demographic and financial pressures that will
make Social Security's current structure unsustainable
over the long term.
Congress should stop playing verbal games
over what are essentially accounting gimmicks
and begin the serious project of Social Security
reform. Ultimately, that reform will have to
involve allowing workers to privately invest a
portion of their Social Security taxes through
individual accounts.
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