Solvency

By James Schaefer

Two points are missing in Mr Barnes’ otherwise excellent opinion piece (Obama’s Entitlement Opportunity) in today’s Wall Street Journal (July 12, 2010):  None of the proposed changes to make Social Security solvent would be necessary if Congress had simply left the Social Security trust fund alone.

Instead, government has spent all $2.5 trillion of it, starting back in the 1970s and continuing over the past thirty years or so, thus making FICA taxes over that time a de facto income tax surcharge.  The money was paid by taxpayers and employers, and it was supposed to have been held “in trust” — literally — by the government, for its citizens.

Now America’s citizens will have to pay a second time to provide the same benefits that they have already paid for.

Secondly, any future means-testing for Social Security recipients will punish those who have worked hard, saved diligently, invested wisely, planned for their retirements, and did not spend profligately during their working years, thus punishing the fiscally prudent, and thereby rewarding the wrong behavior.

Lastly, as to the “liberal bloggers who frown on tinkering with Social Security”: apparently the irony escapes the bloggers.  Government’s liberal spenders, of both stripes, have tinkered with Social Security to such an extent that the $2.5 trillion trust fund is now down to zero, leaving only a binder full of IOUs — treasury bonds, actually — that will have to be paid for, again, from future taxes on America’s citizens.

Observation: the Social Security trust fund, which is for all American citizens, has been drawn down to zero, and will need to be paid for again.

However, in California, when a comparable discussion was broached suggesting using the giant CalPERS pension fund to help cover California’s perennial budget shortfalls, the idea was quickly shelved.

CalPERS, by the by, is the public employees’ pension fund.

Mid-term exam question: “The Social Security trust fund should have the same protections from use by government to cover annual operating expense shortfalls as a public employee pension fund”.  Discuss.

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1 Comment
  1. Michael Smith says:

    Maybe the difference is the political value of the pension holders. Only about half the enrollees in Social Security can be counted on to vote for whichever party is in power. Practically all the public employees union members are Democrats; that makes them virtually untouchable to Democratic politicians.

    Reply
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