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March 11, 2005

Social Security Ostriches: Richard C. Leone and Greg Anrig, Jr.

Richard C. Leone, president of the Century Foundation, and Greg Anrig, Jr., its vice president of programs, penned a response to a recent New York Times article about the trust fund—an article that for once got it mostly right. Here is their award-winning passage:

It's true that the government borrows and uses the proceeds for other expenses. Under the Clinton administration, the Social Security surpluses put the government in the black and enabled it to pay down debt. Today, with the overall budget in much worse shape, Social Security's surplus reduces the size of the federal budget deficit, which in turn helps to keep interest rates lower than they would otherwise be. Even after 2018, when Social Security's trustees forecast that payroll taxes will no longer exceed payments owed to beneficiaries, the trust fund's interest will be more than enough to cover the gap. Under the trustees' conservative projections, the trust fund will continue growing for another 10 years, from $5.3 trillion in 2018 to $6.6 trillion by 2028.

That’s all technically accurate, but misses the main point about the problem with the trust fund that is encapsulated in this paragraph from the Times article:

The government has made promises to retirees it cannot keep without raising taxes, imposing deep cuts in other programs or borrowing loads of money; but raising taxes, cutting spending or borrowing to meet Social Security promises is no different from doing so to pay for troops or prescription drugs under Medicare or any other government expense.

In other words, it is going to be very costly to pay off the bonds in the trust fund. The bonds are not free money. Ironically, Leone and Anrig titled their response “Misunderstanding Social Security's Trust Fund.” For misunderstanding it themselves, they win a Social Security Ostrich Award. Congrats gents!

Posted by David Hogberg at March 11, 2005 10:15 AM | Print

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