One of the many meme’s going around on the left is that Social Security isn’t really in crisis. These are the same people who claimed that the current budget deficit would ruin the country. I think this is most interesting.
Consider this: The Social Security Trust Fund is entirely comprised of US Treasury Bonds. Meaning, of course, that the surplus revenues from years of Social Security bringing in more than it sent outliabilities were used to buy US Bonds, and then became part of the General Fund the way that all bond revenues do. The money was spent, as General Fund revenues are. This means that the Social Security Trust Fund consists of promises by the US Government to pay the principle plus interest. In the future, there is a point at which liabilities will exceed assets due to the structure of the program. The lefties have been saying not to worry about this because the trust fund is US Bonds.
Now, this wouldn’t be so interesting, if the current budget deficit weren’t funded with exactly the same thing. The government has sold bonds to gain cash in the short term, promising to repay in the future. The only difference that I can see is that the bonds in the SS trust fund were sold to one branch of government by another branch of government whereas the bonds making up the deficit were sold to private citizens (and businesses, etc). Don’t get me wrong, I think the large deficit is a problem, but I fail to see any distinction between one future liability and another. I suppose the way in which SS-owned bonds are contributing to problem of wanton government excess is probably worse: present and past taxes were used to buy the bonds, and future taxes will have to be raised to repay them.
I think there’s also a basic Keynesian argument to be made for running short-term government deficit during economic downturn. Of course, Keynesianism is basically economics for socialists, doesn’t account for the long-run properly, and is mute on the deleterious effects of crowding-out due to interest rate preassures. But at least there’s an argument to be made for this sort of deficit spending.
Can anyone explain to me why another massive, unfunded future liability that’ll be used essentially to throw a party for old people isn’t a structural problem?
