The Social Security Trust Fund
- I’ve found the entire debate over what – if anything – to do about Social Security endlessly frustrating. That is not because we can’t agree on a solution; it’s a hard problem that requires sacrifice somewhere, and judgments about where those sacrifices should fall involve fundamental and disputed values. We may end up with an allocation, and perhaps (unlikely) a consensus, but there will never be unanimity and the losers will never be happy.
What has been frustrating is the apparent blindness on the part of some supporters of the status quo, their inability even to acknowledge that the “Trust Fund” on which their claims of solvency depend is nothing more than an accounting gimmick.
I’ve finally figured out where their blindness comes from. That doesn’t make it any less frustrating, but at least it makes me feel like I might be able to convince a few of them to see. This was my attempt. Since I feel passionate about trying to restore that sight it has been shopped around a bit – to The New York Times, to The Boston Globe, to Charles Krauthammer at The Washington Post, and to The Weekly Standard. With each submittal I’ve requested that, should they not find it suitable for their needs, they at least consider assigning one of their own writers to cover the same material. So far it has been neither published nor emulated.
- 3 February 2005
The current debate over reform of the Social Security system has taken on all the qualities of an argument between 6-year-olds, reduced in essence to the intellectual content of the classic “Is not!”, “Is so!”. In the arena of solutions this at least has some justification: much of the argument is over values and preference rather than over facts. Privatization is either “too risky” or not, reflecting judgment on risk tolerance not on returns; reform of the Cost of Living Adjustment (COLA) formula is either “a benefit cut” or not, depending on whether you view projections of benefit level increases as moral pledges of future obligation or merely as neutral accommodations to inflation; extending the payroll tax cutoff upward in income is either “fair” or not, depending on whether you view the program as insurance or investment and on how you view the obligations of the “rich” for the welfare of the “poor”.
But on the issue of the Social Security trust fund – “secured investment” or “accounting fiction” – we should be able to avoid those value judgments and look at numbers: will the trust fund provide the resources we need to cover shortfalls or not? Unfortunately even in that realm value judgments abound, and the shorthand language we use to discuss it – “full faith and credit” vs. “IOUs” – engages the emotions rather than assists the intellect.
I come down on the side of “accounting fiction”, but rather than merely assert that and assume it is self-evident to every right-thinking person, I want to exhibit my reasoning for anyone to examine.