Social Security Trust Fund Hides Size of US Deficit. TEMPTING SURPLUS
THE issue of social security comes around in Washington every few years, with the consistency of a horse on a carousel. This time around most of the attention revolves about the social security trust fund, which is building up to finance the retirement of baby-boomers, beginning early next century. Many issues are involved: economics, the size of the federal deficit, the viability of social security benefits 50 or more years from now, and the question of how much various generations should pay of the total social security tab.
Today's most frequently asked question: Is the size of the deficit masked by applying against it the trust fund's surplus, now $109 billion and growing?
A number of politicians and economists insist it is. It's ``fiscal fakery,'' says Sen. John Heinz (R) of Pennsylvania. It is ``irresponsible and fiscally the opposite of truth in budgeting,'' he adds.
Senator Heinz says the surplus should be allowed to build up for future dispersal to social security recipients, and the budget should be brought into balance without reliance on the trust-fund surplus.
Otherwise, he and others say, the actual deficit may continue to soar, hidden by the rising trust-fund surplus. When the surplus is needed to pay social security benefits to baby-boomers, in the third and fourth decades of the next century, it won't be there, and taxes will have to be raised substantially or benefits trimmed.
Heinz and several other members of Congress have introduced bills to prevent the government from counting the trust-fund surplus when reducing the budget deficit according to the Gramm-Rudman law.
Yet the Washington consensus is that despite all the discussion that is probable this year, Congress is unlikely to act to remove the trust-fund surplus from Gramm-Rudman consideration. There is a disincentive to do so because Congress would have either to make stiffer budget trims or find other sources of revenue, says Robert Helms, assistant secretary for planning and evaluation at the Department of Health and Human Services.
Henry Aaron, an economist at the Brookings Institution, favors letting the social security trust fund accumulate without applying it to balancing the budget, so there's a modest degree of surplus in the fund. That way, he and others say, ``an opportunity'' would exist to increase the current low rate of national savings, thus hopefully increasing economic expansion - as well as funding social security.
If the social security surplus is allowed to accumulate, it's projected to be nearly $12 trillion by the year 2030. That amount would be needed to finance the benefits of baby-boomers.
But many authorities say it is unlikely that Congress and future presidents could resist tapping such a huge pool of money. ``The pressures would just be overwhelming'' to raise social security benefits, says Robert Myers, former chief actuary for the Social Security Administration. He is among those who would let the trust fund grow till it held a one-year surplus. Then he would cut the social security tax rate and put social security on a pay-as-you-go basis, which most economists say would also provide sufficient funding for the baby-boomers.
Whether future social security benefits should be paid through higher taxes now or later is ``not primarily a social security question,'' says former social security commissioner Robert Ball. ``It's a value question about the extent to which the present generation ... should sacrifice'' so the next would have ``a greater pool of goods and services.'' At present nearly four workers pay social security taxes to support one social security beneficiary. Next century fewer than two workers would support each recipient.