Social Security Still in Trouble

Article excerpt


A new report by Congress' official budget shop, the Congressional Budget Office, sent the Social Security universe into a tizzy. The CBO report says Social Security's long-term debt is slightly smaller than the $10.4 trillion price tag estimated by Social Security's trustees back in March.

Critics of President Bush's proposal to strengthen Social Security with personal retirement accounts immediately seized the new report as evidence that when it comes to Social Security - to borrow a line from Mark Twain - reports of its imminent death are greatly exaggerated.

"The CBO report shows just how tentative estimates about the problems of Social Security are, and how absurd it would be for policy-makers to dramatically alter the program based on those numbers," said Barbara Kennelly, president of the National Committee to Preserve Social Security and Medicare.

"The CBO's findings reinforce previous indicators that Social Security is continuing a decade-long trend of stability and even improvement in the long-range health of the system," said Rep. Bob Matsui of California, ranking Democrat on the House Ways and Means Committee.

Perhaps Ms. Kennelly and Mr. Matsui are reading a different CBO report than I am. The version I saw says Social Security's finances run short in 2019 - only 15 years away. From that point on, all the money the Social Security Trust Fund has been loaning to the federal budget over the years will have to be paid back. "In effect," says the CBO report, "cash will be transferred from the government's general fund to Social Security," either through higher taxes, lower spending on other programs or higher debt.

Between 2019 and 2052, when the CBO report says the Social Security Trust Fund will run dry, the government will have already transferred several trillion dollars from the general fund. It will be like the trust fund never existed. Thus, it doesn't matter if the trust fund is exhausted in 2042 - as the Social Security trustees suggest - or 2052, as the CBO report projects.

Basically, CBO's numbers are slightly different than the Social Security trustees because of different assumptions about wage growth, inflation and other assumptions, but in the end, whether Social Security is promising $10. …