Bill Clinton’s Phantom Surpluses Still Haunt Social Security
Investment Policy Magazine
For the second time in a decade, official Washington is spreading a bogus story about Social Security and the Federal budget. In the earlier version, the Clinton administration claimed four years of budget surpluses by pretending that the money the government borrows from the Social Security Trust Fund doesn’t count toward the Federal debt. “We are actually paying down the national debt,” Clinton boasted in his final State-Of-The-Union message in January 2000. “If we stay on this path, we can make America debt-free for the first time since Andrew Jackson was President in 1835.”
Of course there never was a surplus, nor a dollar of debt paid down. In fact, when the new administration and Congress took their seats a year later, the national debt was higher than five years earlier. Congress was soon asked to raise the legal debt limit, and it turned to the Congressional Research Service for an explanation. In June 2002 CRS produced a report with the comical title, “The Debt Limit: The Need to Raise It After Four Years of Surpluses.”
Government debt today, bloated by thirty years of deficit spending, $6 trillion of it during George W. Bush’s presidency alone, is far more troubling than it was in the Clinton years. But the bogus story circulating in Washington is similar. Changes in Social Security contributions and benefits, it is said, will help control future government deficits.
Officials like Alan Simpson, Republican co-chair of the President’s National Commission on Fiscal Responsibility and Reform, and Ben Bernanke, Chairman of the Federal Reserve System, are preparing the American people for adjustments to “entitlements,” notably Social Security and Medicare/Medicaid, that they claim will help reduce the Federal deficit.
They are right about Medicare/Medicaid; some 40% of its expenditures come out of general government revenues. Reducing medical spending will lower the deficit.
But they are wrong about Social Security. Every dollar of Social Security benefits is paid out of the Trust Fund, none out of general government revenues. The only result of raising the contribution rate or reducing benefits would be to increase the money in the Fund. It would not help the deficit at all. The government does not borrow for Social Security; it borrows from Social Security.
But myths die hard in Washington. Peter Orszag’s Office of Management and Budget still publishes historical data showing surpluses for fiscal years 1998 through 2001. And Erskine Bowles, who was Bill Clinton’s chief of staff during those years and now co-chairs the National Commission, is still praised for “orchestrating the first balanced budgets in nearly 30 years.”
If we hope to have an honest discussion of the best ways to attack today’s Federal debt, we need to bury the surplus myth – and its current version – once and for all.
Read the rest here....
http://investmentpolicy.com/2010/06/18/bill-clintons-phantom-surpluses-still-haunt-social-security/
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