To begin with Social Security is off budget.
By Dr. Merrill Matthews
Texas Insider Report: DALLAS Texas Numerous politicians & pundits claim that the country cannot get control of its exploding federal debt without entitlement reform which includes Social Security Medicare & Medicaid. That assertion is certainly true of Medicare &
Medicaid which consume billions of dollars in current federal revenues but not Social Security at least not in a way the left will admit.
To begin with Social Security is off budget. Thus the federal debt that has increased by nearly 50 under President Obama from $10.7 trillion to $14.5 trillion and climbing doesnt include Social Securitys long-term unfunded obligations.
Indeed defenders of the current system claim the Social Security Trust Fund supplied by the 12.4 Social Security payroll tax has a surplus of $2.6 trillion and can pay 100 of retirees benefits until 2036.
However with a 9.1 unemployment rate millions of workers arent paying into the system.
So last year Social Security for the first time had to draw on the trust fund to pay current retirees. The dirty little secret is that since the government has borrowed all of that $2.6 trillion in the trust fund it needs to draw on current revenues or borrow the money so the trust fund can give the money back to Social Security.
But the need to borrow from the trust fund was temporary we hope.
If and when the economy revives and the unemployment rate declines payroll tax receipts should rise to meet current obligations.
The point is that Social Security needs to be reformed preferably by moving to a system of pre-funded personal accounts. But reform wont fix the short-term debt crisis.
The fact that politicians and pundits keep pointing to it makes you wonder if these people know what theyre doing.
This PolicyByte was written by Dr. Merrill Matthews a resident scholar with the Institute for Policy Innovation in Dallas.
