MyDD :: A brand new Lock Box

A brand new Lock Box

by Gary Boatwright, Sat Dec 18, 2004 at 11:21:51 PM EST

On January 9, 2004, Daniel Gross over at Slate had an article about Gore's Social Security lock box The Unlocked Box: How Bush is plundering Social Security to close the deficit

I'm trying to understand why a prominant Democrat has not mentioned Gore's lockbox. I would like to suggest that since Social Security is the most successful program ever created by the United States government, the only reform we need is to actually implement the lock box that Presidential candidates Gore and Bush both promised the American people.

(there's more)

In the 2000 campaign, Vice President Al Gore said we should sequester the Social Security surpluses in a "lockbox" to prevent appropriators from spending them. Bush agreed in principle. But that commitment went out the window soon after the inauguration. In his first three budgets, Bush (who had the good fortune to take office at a time when the surpluses were growing rapidly) and Congress used $480 billion in excess Social Security payroll taxes to fund basic government operations--about $160 billion per year!

The Social Security crisis is phony on many levels, but two big holes in the theory are Bush's insistence on continuing to cut taxes while privatizing Social Security and the Bush administration's cynical use of the Social Security surplus to mask historically high deficits.

By so doing, Washington spenders have masked the size of the deficit. For Fiscal 2004--which began in October 2003--if you factor out the $164 billion Social Security surplus, the on-budget deficit will be at least $639 billion, rather close to the modern peak of 6 percent of GDP.

In 1982 Alan Greenspan signed on to legislation that was designed to correct the unfunded liability problem that Social Security had developed.

Back in 1983, as part of a deal to save Social Security from impending demographic doom, Congress enacted legislation to essentially increase payroll taxes and reduce benefits. As a result, the government began to collect more Social Security payroll taxes than it paid out to beneficiaries each year. The theory was that the government would use these surpluses to pay down the national debt. That way, when baby boomers retire--and comparatively more people are collecting benefits while comparatively fewer people are working--the government would be in a better position to borrow the necessary funds to provide the promised benefits.

So much for theory. The reality? For the first 15 years, every penny of the surplus was spent, first by Republican presidents and then by a Democratic president. According to figures provided by the Committee for a Responsible Federal Budget, the surpluses were relatively insignificant for much of this period. Between 1983 and 2001 a total of $667 billion in excess Social Security payroll taxes was spent--about $35 billion per year. It was only in fiscal 1999 and 2000, when the government ran so-called on-budget surpluses, that excess Social Security funds were actually used to retire debt.

The only problem with the Social Security trust fund is that President Bush and the Republican Congress have refused to honor candidate Bush's promise to protect the retirement assets of the America people with a lock box. Since 1994, the estimated date when the Social Security Trust Fund begins running a deficit has actually increased from thirty five years out to thirty eight years out. Horror stories of Social Security not being able to pay full benefits are based on forty year economic projections. There is universal agreement that economic forecasts about the budget and the U.S. deficit are extremely unreliable more than ten years out. Look at what has happened to deficit forecasts in the last four years. Why is the media punditocracy so blindly accepting of economic forecasts of doom forty years out?

The only reform that Social Security needs is a lock box to keep the grubby hands of politicians out of the trust fund. The shell game politicians play with the trust fund to finance deficits, is that they give the trust fund I.O.U.'s in the form of Treasury Bonds. Stopping this duplicitous practice is the only reform Social Security requires.

I am completely baffled why Democrats have not raised hari kari over Republican deficits and pork barrel spending. We all know that there were over 3,000 earmarks in the deficit busting budget bill Republicans just passed. Did you hear a single Democrat complain or play Senator Proxmire? Remember the Golden Fleece Award? Proxmire got fantastic free press with this simple gimmick and one single Democrat could easily reprise The Golden Fleece Award. Democrats should demand that Bush and the Republican party stop raiding the Social Security trust fund. Democrats should demand a Social Security lock box as a substitute for Republican plans to dismantle Social Security.

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