The Social Security Surplus is Real

[National Dialogue Moderator <moderator>]

The Social Security Surplus is Real

I would like to briefly respond toRRand98163's questions.

1. Raising taxes.  H.R. 1043 does not raise tax rates and does not require
any increase in general revenues.  This is not an indirect tax rate
increase. No new general fund taxes are required to fund the transfer of
funds to Social Security from general revenues.

2. You are correct.  H.R. 1043 does not raise the retirement age in line
with increases in life expectancies.  Raising the retirement age is not
necessary to maintain a viable Social Security system, and is cruel and
unwarranted for many of today's workers, especially those who work in
dangerous or manually intensive fields.

3. I disagree with you that there is no Social Security surplus.  According
to the Trustees in 1999, Social Security (OASI and DI) will take in $518
billion and spend $394 billion.  That means there will be more than $120
billion surplus for Social Security.  In 1998, the income was $489.2
billion, and the outgo was $382.2 billion, for a surplus of 107 billion.
That is a very real surplus.

Now, when Social Security has a surplus it is required by law to invest that
surplus in government bonds, the safest investment in the world.  So Social
Security buys bonds.  The Treasury issues bonds to Social Security, that
means the Treasury receives cash which is reflected in the overall budget.
That cash is used to fund other programs and to pay down the debt.  If
Treasury did not have cash from Social Security it would have to borrow
money (by issuing bonds) from someone else to pay for other government
programs and treasury would eventually have to pay that person back.  Now,
most people who have U.S. Treasury bonds feel they have a very safe
investment since the U.S. government has never, ever defaulted on its bonds.
For some reason, those who seek to privatize Social Security don't think
Treasury bonds are worth anything, and therefore refer to them as IOUs.
This is a gross mischaracterization and has greatly altered the debate.  

Under H.R. 1043, those bonds will be repaid with interest when they come
due, and it will not burden the general revenues seventy five years from now
based on current law.  Now, if we alter current law and enact huge tax cuts,
as some privatizers advocate, that would create a huge hole in the future
budget and threaten needed federal spending now and in the future.  It would
also put Social Security in jeopardy.  If that money is used to pay down the
debt, as the President suggests, it would so limit future spending on
interest, that those unspent funds could, and would have to be, spent on
Social Security.

I hope that is helpful.

Thank you.

Representative Jerrold Nadler