he Impact of Social Security on the National Debt >
By James D. Agresti
September 1, 2001
As of December 2000, more than a trillion dollars of the U.S. national debt is owed to the Social Security program.[1][2] This amounts to $3,600 for every man, woman, and child living in the United States.[3] By 2015, this figure is projected to reach $9,000 per person, burdening young people with a debt that they had no part in creating.[4][5] To make matters worse, some politicians are pushing a proposal to "save Social Security" that would increase this figure dramatically.
This essay will explain and substantiate the following points:
1.
Citizens are being misled about the national debt.
2.
Despite what you've been told, the budget has not been balanced for the past 3 years.
3.
Every dollar in the Social Security Trust Fund is matched by a corresponding dollar of national debt.
4.
What is referred to as "raiding the Social Security Trust Fund" has no effect on the Social Security Trust Fund. Its real effect is to raise the national debt.
5.
What is referred to as "putting Social Security into a lockbox" has no effect on Social Security.
6.
Some politicians are promoting a plan to "save Social Security" that could add 9 trillion dollars to the national debt.
7.
Privatization would block politicians from using Social Security as a smokescreen to run up debt behind the backs of citizens.
Citizens are being misled about the national debt
More often than not, when a politician or reporter uses the term "national debt," they are not really referring to national debt. They are only referring to a portion of it. The United States government divides the national debt into two categories:
1.
Money that it owes to federal entities such as the Social Security program.
2.
Money that it owes to non-federal entities such as individuals who have purchased U.S. Savings Bonds.[6]
As of December 31, 2000, the national debt looks like this:
Debt owed to federal entities
2.7 trillion
Debt owed to non-federal entities
3.0 trillion
National debt (total)
5.7 trillion
[7]
The debt owed to federal entities accounts for more than 45% of the national debt, yet it is often dismissed or ignored. The excuses that people use to justify disregarding this portion of the national debt generally run along the lines of, "This is just money that the federal government owes to itself. It's only a bookkeeping device. It's as if you owed money to yourself." This line of reasoning ignores the fact that U.S. taxpayers have to pay for this debt. The federal law that governs the payment of the national debt draws no distinction between money owed to federal versus non-federal entities. Both must be paid with interest.[8]
A prime example of downplaying the debt owed to federal entities appears in a 207 page economic plan published by the Bush administration. Not until page 201 is there any mention of the full national debt. This plan states that Bush will retire "$2 trillion in debt over the next ten years."[9] The problem is that this figure only applies to the debt owed to non-federal entities.[10] What about the rest of the debt? Buried in a table on page 201, we find that the debt owed to federal entities increases by 3.8 trillion dollars, and the overall national debt increases by 1.5 trillion dollars.[11]
Worse than this, some people completely ignore the debt owed to federal entities, but have no problem with including it in the assets of the federal programs to which the money is owed. During the 2000 presidential race, the Gore-Liebermann campaign released a 192 page economic plan that contained over 150 uses of the word "debt." This plan does not mention or even acknowledge any of the debt owed to federal entities.[12] Yet, the plan states that the Social Security program will remain solvent until 2037.[13] Contrast this assertion with the fact that in 2015, the Social Security program is projected to start spending more money that it collects in taxes.[14] This is a 22 year discrepancy. How does Social Security stay solvent for 22 years while spending exceeds tax revenue? It collects on the money that it has loaned to the federal government; i.e. the debt owed to federal entities. If Gore and Liebermann want to dismiss the debt that the federal government owes to Social Security, to be consistent, they would also have to state that the program would become insolvent in 2015. But they don't do this. They pretend as if the federal government doesn't have to repay the money that it has borrowed from Social Security while simultaneously including this money in the assets of the Social Security program.