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Jewish World Review May 23, 2002 / 12 Sivan, 5762

Michael Barone

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If dipping into the Social Security surplus is so terrible, why did Democrats do it every chance they got for 24 years? |
Before September 11 and, less frequently, since, Democrats have attacked the Bush administration and Republicans for dipping into the "Social Security surplus." The phrase is a new one, coined in the late 1990s by Democrats to make a novel political argument. The Social Security surplus is the amount by which revenue from the payroll tax exceeds the amount of Social Security benefits paid out. The Democrats have been arguing that unless the overall federal surplus is larger than the Social Security surplus, the government is dipping into money that should be saved to pay for Social Security benefits.

There are two things wrong with this argument.

The first is that the Social Security surplus is not money put on a shelf somewhere so it can be used later to pay for Social Security benefits. The so-called Social Security trust fund is a bookkeeping device that consists of federal bonds. These are not the same as cash: In order to pay for benefits, the government must redeem the bonds–that is, it must use either revenues or borrowings to pay them off. Future Social Security benefits, like current benefits, are paid not out of money squirreled away on some shelf but from money the government collects that year in revenues or borrows from bond-buyers. Not spending the Social Security surplus does not put any money into the government's hands in some future years, except to the very minor extent that by not increasing the national debt it reduces marginally the cost of future debt service.

The second thing wrong with the Social Security surplus argument is that a Democratic Congress has never produced a Social Security surplus. Never.

The numbers below tell the story. They cover every budget passed by a Democratic Congress since Social Security was counted as part of the federal budget in the 1960s. They are taken from the "Economic Report of the President 2002," Page 415. Note that in every fiscal year but one (1969) the overall federal budget was in deficit. Note that in every year there was a Social Security surplus. Note that in the one year the federal budget was in surplus, the Social Security surplus was higher.

In other words, in all 24 years in which they had control of Congress, the Democrats did what they attack the Republicans now for doing–they used the Social Security surplus for current spending. Every single year. If dipping into the Social Security surplus is so terrible, why did Democrats do it every chance they got for 24 years?

The real problem with Social Security is not that we're using up the Social Security surplus. The real problem is that, with fewer workers per retiree in years ahead, promised Social Security benefits are sure to eat up a larger part of the overall economy, even as they provide a poor return on money paid in by beneficiaries.

Fiscal year Budget surplus (or deficit)* Social Security receipts minus outlays*
1995 -164.0 148.7
1993 -255.1 123.7
1992 -290.4 126.1
1991 -269.4 127.0
1990 -221.2 131.4
1989 -152.5 126.9
1988 -155.2 115.0
1981 - 79.0 43.1
1980 - 73.8 39.3
1979 - 40.7 34.8
1978 - 59.2 27.1
1977 - 53.7 21.4
Trans.Qtr. - 14.7 5.4
1976 - 73.7 16.9
1975 - 53.2 19.8
1974 - 6.1 19.2
1973 - 14.9 14.0
1972 - 23.4 12.4
1971 - 23.0 11.4
1970 - 2.8 14.1
1969 3.2 11.7
1968 - 25.2 10.0
1967 - 8.6 10.9
1966 - 3.7 4.8
*In billions of dollars

Michael Barone Archives

JWR contributor Michael Barone is a columnist at U.S. News & World Report and the author of, most recently, "The New Americans." He also edits the biennial "Almanac of American Politics". Send your comments to him by clicking here.


©2002, Michael Barone