What to Do With a Trillion
'Fixing Social Security' is necessary. Tax cuts would be nice. But there's a better way to handle budget surpluses.
A huge pot of money looms on the federal budget horizon. Somewhere near a trillion dollars of surpluses in the next decade.
To update Everett Dirksen's famous jibe: A trillion here, a trillion there, and pretty soon you're talking real money!
Even hermits at the beach know by now that both President Clinton and congressional Republicans have plans for that money. Mr. Clinton warns Congress to keep its hands off surpluses until the impending Social Security (SS) crunch is solved. But, he adds, it would be nice to spend some of the first year's surplus on worthy projects.
House GOP leaders want to split the trillion. They would cut the federal taxes citizens pay by $600 billion over the decade and reserve the rest to rescue SS after 2012. That's when the SS system will start to pay out more in benefits than it takes in from payroll taxes, as baby boomers start to retire.
Neither formula is satisfactory.
Saying "hands off Social Security" would make sense if SS dollars were like the grain Joseph stockpiled during the seven fat years for use in lean years. Grain can be stored. SS dollars can't. They are IOUs to be paid to retirees in future. Furthermore, Mr. Clinton's idea of celebrating the first surplus in a generation to fund worthy projects is likely to spill over to future years.
House GOP leaders are also into worthiness: the virtue of letting taxpayers keep more of what they earn. Fine, in principle. But they may not be setting aside enough to deal with both the SS problem and its twin, the even more serious Medicare problem.
We continue to believe that a solution Senator Moynihan proposed in March makes sense. The New York senator is both an expert on Social Security and ranking Democrat on the Senate Finance Committee. He would allow Americans to voluntarily use up to 15% of their SS payroll tax for personal pension accounts. By keeping the percentage small and making the program optional, Moynihan protects it against the criticism that privatization would place SS at the mercy of stock market ups and downs.
If enacted, his program would shrink the amount of payroll tax used to fund current SS retirement checks. That cut would require replacement funding - a really worthy use for some of the projected surpluses.
What about the rest of the surplus? Use it to reduce the national debt. That would shrink the huge interest drag on budgets, making it easier to rescue Medicare and SS.
Yes, we know that White House and Congress can also find ways to use reductions in interest payments on the national debt. But this approach comes closer to matching Joseph's thrift during fat years. And it might make future lean years less likely.
Social Security funds can't be stored like the grain Joseph stockpiled during seven fat years.