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Bill Clinton has announced that, thanks to the thriving economy, Washington will collect $1 trillion in additional surplus tax revenues over the next 15 years. This brings the total projected tax surpluses to $5.9 trillion – equal to a tax overpayment of $49,166 for every taxpayer in America.
The government is also expected to close FY 1999 with a $99 billion surplus (equal to $825 for every taxpayer) and run a $142 billion surplus in FY 2000 (equal to nearly $1,200 for every taxpayer). These new projections are the strongest argument yet for giving Americans a massive tax cut – in income taxes, Social Security payroll taxes, or both.
But Clinton wants to use Social Security’s surplus revenues to reduce the national debt. He argues that reducing the debt and filling the Social Security trust fund with another $3.7 trillion in IOUs will extend the program’s life beyond 2050. He’s wrong. Buying down debt may make us feel better, but it does nothing to help us cover Social Security’s long-term liabilities.
Buying down debt will not prevent Social Security’s cash shortfall from beginning in 2014. Without making structural reforms to the system, we simply face the prospect of running up $8 trillion in new debt to cover the program’s shortfalls between 2014 and 2034;
Buying down debt will not reduce Social Security’s $122 trillion ($19 trillion after adjusting for inflation) cumulative cash shortfall through 2075;
Even if we could "bank" the $3.7 trillion in Social Security surpluses by using those surpluses than buy down debt, it would cover just 3 percent of the program’s long-term liability;
Even if we eliminated the entire national debt today, saving ourselves $230 billion in interest payments each and every year for 75 years, the accumulated savings would cover just 14 percent of Social Security’s long-term liability.