Social Security Facts - #6:
Let's look at some numbers for 2004:
OASI-this is what is normally referred to as Social Security:
Assets (end of 2003) $1,355.3 billion
Income during 2004 $ 566.3 billion - payroll taxes
Outgo during 2004 $ 421.0 billion - SS payments and admin
Net increase in assets $ 145.3 billion - extra
Assets (end of 2004) $1,500.6 billion - total "bonds"
Note:
1. Excess payroll taxes (WHY DO THESE EVEN EXIST?) amount to an additional $145.3 billion (WITH A "B") for Congress to spend each year - and they don't have to talk us into paying real taxes for these expenditures. Any wonder the hesitation to touch SS?
2. The "Trust Fund" has taken $1.5 trillion (WITH A "T") out of the economy in the past - looking at the rate of increase in 2004, most of this must have come out over the last decade or two. What would that have done for our economy?
3. If we put 1/2 of deductions into personal accounts, that will add $283.15 billion directly into our economy.
4. The $137.85 billion shortfall in Outgo ($421.0 minus $283.15) would at least become part of our debt, instead of being hidden as it now is.
THIS ALL SEEMS POSITIVE TO ME!
OASI-this is what is normally referred to as Social Security:
Assets (end of 2003) $1,355.3 billion
Income during 2004 $ 566.3 billion - payroll taxes
Outgo during 2004 $ 421.0 billion - SS payments and admin
Net increase in assets $ 145.3 billion - extra
Assets (end of 2004) $1,500.6 billion - total "bonds"
Note:
1. Excess payroll taxes (WHY DO THESE EVEN EXIST?) amount to an additional $145.3 billion (WITH A "B") for Congress to spend each year - and they don't have to talk us into paying real taxes for these expenditures. Any wonder the hesitation to touch SS?
2. The "Trust Fund" has taken $1.5 trillion (WITH A "T") out of the economy in the past - looking at the rate of increase in 2004, most of this must have come out over the last decade or two. What would that have done for our economy?
3. If we put 1/2 of deductions into personal accounts, that will add $283.15 billion directly into our economy.
4. The $137.85 billion shortfall in Outgo ($421.0 minus $283.15) would at least become part of our debt, instead of being hidden as it now is.
THIS ALL SEEMS POSITIVE TO ME!
posted by Jim | 3:44 PM
2 Comments:
Always good to get to the details! Sorry this is kind of long, but I think it's worth discussing in some detail.
1. I agree with the point that it is a bad idea to use the excess payroll tax that's coming in each year without acknowledging that this is part of the government budget deficit. (Not that any President would like to correct this). In fact I think it's vital to mark this money as a debt to be paid in the future, which takes us to #2.
2. I'd argue that the money hasn't been 'taken out' of the economy - as you say, it's been spent by the government for all sorts of things. Government spending is certainly part of the economy! Now one can certainly argue that it would be better to let citizens decide how that money is used, which is a somewhat different point.
I know you think that the Trust Fund is an accounting game, but I think that we need to dig a bit deeper into it. I claim that the excess payroll tax that's been given to the federal government in return for these special Treasury Notes represent a valid claim on future government spending. (Just as a city bond represents a claim on future city spending, or a corporate bond represents a claim on future corporate profits).
So at some point around 2018, the federal government is either going to begin to honor these claims, or not. Obviously there will be other claims on government spending, such as other Treasury Bonds, military defense, etc. and those claims need to be balanced against each other.
If we say today that the Trust Fund is not an asset, we are essentially writing off that obligation (which I happen to have spent my entire working life helping to create). I think we should be clear about this. Just saying it's a fiction is making is sound like there's no decision to be made. I think there is a decision to be made, which is whether future government spending will honor the obligation or not. Let's have honest discussion about whether we as a society can afford to honor the claims.
3. Same point as above - the money is already 'in the economy' - this would put more of the money in the private sector.
4. Agree that we should reflect the money as deficit spending.
I will respond to your comments item by item:
1. Agreed - but the important thing is to realize that this is what Social Security is. And note: Presidents do not care about this at all, but Congress, who spends our money, certainly does! (Well, maybe Presidents care a little bit!)
2. Two points: a) the money is "taken out" of the economy for this reason - this money goes into the General Fund - we all know the Government is an inefficient spender of money (lots of waste) - in a $2.5 trillion dollar budget I guarantee you $145.3 billion is wasted - so this incremental input into the General Fund does not help the economy! - if left in private hands it is invested very efficiently; b) I must convince you that the Trust Fund is an accounting game, or we cannot proceed much further with the discussion - see my Social Security Facts #8 and comment; there us no question that the Government will honor its Social Security obligation - they will just tax to cover the obligaion.
3. I answered this above in 2).
4. We're in agreement.
Good exchange.
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