President Bush has sent Congress a $2.12 trillion budget. It might appropriately be titled, “We’re All Big Spenders Now.”
Of course, neither President Bush nor members of Congress are the least bit alarmed by the size of the budget. All the attention is focused on the supposed disappearance of those wonderful budget surpluses. Congressmen who have never given a thought to fiscal prudence are suddenly distressed that the government will be squandering trillions of dollars of surpluses it was supposed to enjoy over the next 10 years.
But they needn’t get so exercised. In reality, there hasn’t been a true federal surplus since the Eisenhower administration – nor a surplus large enough to be worthy of its name since the 1920s.
Since its inception, Social Security has taken in more money every year than it’s paid out to Social Security recipients.
So the Social Security administration lends the excess money to the U.S. Treasury to cover the Treasury’s budget deficits. The reasoning is that it’s better to keep those reserves in Treasury bonds than to play the horses with them.
For the first 30 years of Social Security, its accounting was kept separate from the regular federal budget. But in the late 1960s, the politicians decided the chronic budget deficits wouldn’t look so large if they counted the excess of Social Security receipts as regular budget receipts.
(Have you noticed how upset politicians get when some private company dips into its employees’ pension funds? Well, they’ve been dipping into the retirement funds of their “employee” taxpayers since the 1960s.)
Even with this shell game, the budget deficits persisted, but they were no longer so huge.
And, lo and behold, as of 1998 this creative accounting finally produced a series of budget “surpluses.”
In the process, the politicians claimed that two contradictory events were occurring at the same time:
- The federal budget was finally in surplus.
- The Social Security trust fund was absolutely safe – stashed away in a “lock box,” in Al Gore’s immortal words.
However, any householder knows that if you run a surplus, your debt diminishes. If your debt is rising, you must be running a deficit.
And here’s what’s happened to the federal debt over the past 5 years:
- In 1997, the federal debt was $5.370 trillion.
- In 1998, it increased by $109 billion to $5.479 trillion.
- In 1999, it increased by $127 billion to $5.606 trillion.
- In 2000, it increased by $23 billion to $5.629 trillion.
- In 2001 it increased by $141 billion to $5.770 trillion.
How could there be surpluses if the debt is rising every year?
(These statistics are available at the website for Economic Indicators, a government publication produced by the Joint Economic Committee of Congress.)
Can’t have it both ways
Perhaps the politicians should count excess Social Security receipts as regular budget receipts. But if so, they can’t say that Social Security is safe – because the trust fund is being squandered. And when the Baby Boomers retire, they will quickly run through the remaining Social Security reserves – leaving later generations with nothing for all the money they’ve put into Social Security.
Or maybe it’s OK to say that Social Security is safe. After all, the Social Security administration gets Treasury bonds in exchange for those excess receipts. But if so, then it’s obvious that there are no budget surpluses – just more and more deficits.
Whichever way you choose to count things, the politicians are lying – either about the surpluses or about the safety of Social Security.
You’d think the politicians’ creative accounting constitutes an interesting fiscal scandal, but who in politics or the press is interested in calling attention to it? Do you know of a single politician who hasn’t joined in the self-congratulation about the “budget surpluses”? Do you know of a single journalist who’s pointed out that the Emperor’s budget has no clothes?
And, oh yes, these politicians who have been lying about the federal budget and Social Security for so many years?
They’re the same ones on whom we rely for news about the progress of the War on Terrorism.