WSJ: $2.2 Trillion Down

The Wall Street Journal

Editorial

$2.2 Trillion Down
March 25, 2005; Page A8

Everyone in Washington has now used this week's Social Security and Medicare Trustees' report to justify his or her political program. We suppose that's better than ignoring it. But as we look at the details, the most important figure in the report has received almost no attention.

That number is $2.2 trillion, which is the difference between the current size of the Social Security "Trust Fund" ($1.7 trillion) and what it will grow to become over merely a decade through 2014 ($3.9 trillion). More precisely, that is the amount of payroll tax revenue that workers will pay between now and 2014 that exceeds what will be spent over that same period on retiree benefits. The Trustees predict the payroll tax will continue to exceed benefits through 2017, but their report breaks out the numbers in detail only through 2014. In any case, $2.2 trillion is a lot of money, even in Washington.

And what will happen to that surplus cash during these next 10 years? Every dime of it will be spent by politicians on current government. Not a nickel will be saved; nothing will be invested in accounts with anyone's name on it. Instead of building assets, or contributing to an increase in net national saving and thus investment, all of it will finance current government consumption.

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But what's up with Republicans? Some of them may fear that if this secret gets out to enough voters, they'll have to stop using that excess revenue to make the budget deficit look smaller than it is. But if they believe in smaller government, they should consider this $2.2 trillion revelation to be truth-in-advertising that shows just how spendthrift Washington is.

(snip)

URL for this article:
http://online.wsj.com/article/0,,SB111171810501889530,00.html

This might actually speak poorly of *.

that this $2.2 trillion should be invested by the Social Security administration in a single government account holding stock and bond index funds. When republicans howl with rage in response to that argument, the democrats then should argue that at least the money should be segregated so that Bush and the republican Congress can not spend it. This is a huge opportunity for democrats.

Recognize that we, as progressive society - ha! - is obligated to support seniors and the disabled and widows among us.

Remove the SS tax that is very regressive and increase each level of income tax by that amount of 7.25%. And these should go to the general fund.

Then have a line item in the general fund to provide for widows and disabled and senior citizens on as needed basis.

Yes, I know, many would abuse the system by not bothering to provide for themselves for rainy days, however I don't think that, what, $800 a month, is something to aspire. Most of us would still prefer to save for our own with IRA and 401K - if we are lucky to have one provided - and other plans.

Besides, there are abuses in every system; there are always some who take advantage of a system. I don't think that these select even hundred of thousands would break the bank.

But, of course, no one likes to talk about "new taxes" and practically everyone, even those opposing the "reform" look at their taxes and benefits as "my money" - which it is not.

And the government has substituted its own bonds for that money. The funds being paid out of social security right this very second were actually paid in years and years ago, but that money has been gone for just as long. What's being paid out is money recouped from redeemed bonds. That's part of the ongoing expense of the government: interst on the national debt. It's being paid to social security recipients and other holders of government paper.

It's highly disingenuous of the Wall Street Journal at this late date to be shocked (shocked!) to find out that the government is financing its ongoing obligations through its own bonds, or painting a rosier deficit scenario by using the offset of social security money against the government's revenue shortfall.

It's also pretty brazen of them to pretend that this is some kind of a "secret" or to imply that those bonds aren't backed by the full faith and credit of the federal government. If the U.S. government suddenly starts defaulting on its bonds, social security will be far down the list of our fiscal worries.