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In this year’s budget, Bill Clinton proposed a “Social Security solvency lock-box” to set aside more than $3 trillion in budget surpluses over the next fifteen years to build up Social Security’s reserves before the Baby Boom retires. In effect, the idea of the Clinton plan is to use Social Security’s surpluses to reduce the federal debt over the next fifteen years so that the government can increase its borrowing again in 2015, when the costs of the program begin to exceed its income. Clinton argues that this plan will extend the life of the trust fund beyond 2037, the year it is now expected to be depleted.
Although this approach has received praise from many lawmakers and members of the press, the government’s own analysts – including Clinton’s own budget analysts – say that filling the trust fund with trillions of dollars in IOUs will do absolutely nothing to produce cash benefits to the Baby Boom in retirement. According to these government experts:
“These balances are available to finance future benefit payments and other trust fund expenditures – but only in a bookkeeping sense. Unlike the assets of private pension plans, [government trust funds] do not consist of real economic assets that can be drawn down in the future to fund benefits.” Thus, “the existence of large trust fund balances…does not, by itself, make it easier for the government to pay benefits.”
-- Clinton Administration’s 1999 Budget, Analytical Perspectives, page 328
“We are not accumulating a true fund and are instead merely accumulating a right to future government revenues. The expected trust fund buildup will not (1) lower future costs, (2) lower total future taxes, or (3) generate faster economic growth…Under these circumstances, the public is, at the minimum, gaining a false impression about the ability to prepare in advance for the financial effects of the baby boom’s retirement.”
--Memo by government actuaries to American Academy of Actuaries, published in the Social Security Trustee’s Report, March 30, 1988.
“…there will be no ‘real’ trust fund available to be tapped decades from now…redeeming trust fund securities to pay benefits is only an intermediate accounting step – in practice, the cash is obtained from current tax revenues or borrowing. Current surpluses, together with the trust-fund accounting structure, service to place an important claim on future government revenue. But in the more relevant area of actually obtaining cash to pay promised benefits in the future, the trust funds accomplish nothing directly.”
-- Steven F. McKay, Office of the Actuary, Social Security Administration, February 6, 1990.