RE: The Social Security Surplus is Real

[Reed Davis <rdavis2@ix.netcom.com>]

Representative Jerrold Nadler wrote:
>
> 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.
>
However, it should also be noted that the gross federal debt increased by
$109 billion in 1998 and is projected to increase by $136 billion in 1999
(see http://people.delphi.com/rd100/deficits.html ).  These are very real
deficits.
>
> 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.
>
This assumes (incorrectly, I believe) that government spending is totally
unaffected by the perceived size of the surplus or deficit.  You couldn't
propose to bail out Social Security with 62% of the surplus if there was
no surplus.  Would you then propose to bail out Social Security by borrowing
an additional $2.7 trillion from the public?
>
> 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.
>
To Social Security, the Treasury bonds are worth something.  To the
government as a whole, they serve as little more than a bookkeeping device.
How much is an IOU that you make out to yourself worth?
>
> 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.
>
Clinton's Plan to pay down the debt is preferable to wasting the surplus.
However, current law already assumes that the surplus will be used to pay
down the public debt.  Clinton is simply proposing that, instead of paying
down the debt directly, we give a portion of the surplus to Social Security,
borrow it back, and then pay down the debt.  The only effect of this is to
increase the government's debt to Social Security.  This, in turn, commits
future taxpayers to paying off the additional debt starting in 2034, when
Social Security is projected to have redeemed all of its other bonds.  The
increase in the debt can be seen from Clinton's own numbers from the most
recent U.S. Budget (see http://people.delphi.com/rd100/ssreform.html ).

Since you propose to implement Clinton's proposal to transfer 62 percent
of the projected budget surplus to Social Security, I assume that your bill
will result in a similar increase in the debt.  Following are the projected
levels of debt under current law and the Clinton Plan.  I would appreciate
it if you could provide the projected debt levels under your plan, for 2004
and/or later.  Thank you.

Projected debt in    Gross   Gov't  Public
2004 ($billions)      Debt    Debt    Debt
------------------  ------  ------  ------
Under current law   5874.4  2947.9  2926.4
Under Clinton Plan  6776.0  3486.3  3289.6

Reed Davis