:: 2.26.2004 ::
Greenspan: We have to cut social security.
Taxpayers and Democrats: WTF?
Republicans: No idea what you're talking about. Who are you again?
He said projections show the country will go from having just over three workers supporting each retiree to 2.25 workers for every retiree by 2025.
One of his suggestions was raising the retirement age - a move many think is reasonable, given the increase in average life expectancy for Americans since SSI was first introduced.
"This dramatic demographic change is certain to place enormous demands on our nation's resources — demands we will almost surely be unable to meet unless action is taken," Greenspan said. "For a variety of reasons, that action is better taken as soon as possible."
Here's the thing: "Social Security is currently running a large surplus and is projected to continue to run annual surpluses for more than two decades into the future." That's a quote from economist Dean Baker, co-director of the Center for Economic and Policy Research. But wait, there's more! Mr Greenspan himself chaired the 1982 commissioned that proposed SS tax increases to produce just such a surplus to help offset the added cost of supporting retiring Baby Boomers. Here's the fun part:
The Social Security tax is highly regressive because it only applies to wage income and it is capped at approximately $85,000, so that wage income above this level is not subject to the tax. It is extremely unlikely Congress ever would have approved such a regressive tax to support the general budget. It would have been appropriate to note, in describing Mr. Greenspan's proposal, that the cumulative surplus in the trust fund is now approaching $2 trillion. This should give readers an idea of the extraordinary deception involved in proposing to cut Social Security benefits as a way of reducing the federal budget deficit. [emphasis added] So what's Mr Greenspan on about, then?
So I've been doing more research on this, and boy is it a mess. First of all the money that is "set aside" for Social Security is not, really. It is simply displayed separately in budget documents - both revenues and outlays. I'm assuming that the surplus Mr Baker mentioned above is the difference between those two amounts, this year. And we've been spending some of the surplus each year on other things, as you can read in this transcript of testimony Greenspan gave in 1998 before the Senate Budget Committee: "What we've been doing, Mr. Chairman, in all reality, is taken a hundred billion out of the Social Security Trust Fund, transferring it over to the spending column, and spending it.... We owe Social Security 736 billion right this minute." Now I'm no longer sure whether we're in great shape, or terrible shape.
Obviously, SS spending is going to increase as time passes, what with inflation, and increases in population and in life expectancy. Plus we've got that balloon of Baby Boomers coming up on retirement in the near future: "The Congressional Budget Office (CBO) projects that spending for Social Security, adjusted for inflation, will rise from $483 billion in 2003 to $2.5 trillion in 2075. Those estimates are based on CBO's 10-year baseline budget outlook and the "intermediate" long-range assumptions of the trustees of the Social Security system."
It's true that the SS trust fund is running a surplus at the moment - but according to the CBO it's only about $76 billion for 2003, not counting intergovernmental transfers from the General Fund (an additional $95 billion).
In summary, although trust fund accounting, which is required by law and established by convention, accurately reflects the spending authority of trust fund programs by crediting their accounts with intragovernmental transfers, it distorts the effects that those programs have on the budget overall. When budget accounting separates trust funds from all other categories of spending, it presents an unclear picture of the source of budget deficits or surpluses. Indeed, although trust fund programs may appear to be running a surplus when viewed in isolation, once one considers the intragovernmental transfers to those funds, they are already running a deficit--and they will do so to an even greater extent in the coming decades. Kind of a bleak picture, much as Greenspan claimed in his testimony.
[added to over the course of the day]
:: Deb 12:04 PM :: permalink ::
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