Saving Social Security Requires Reform, not Accounting Tricks

In recent days, President Clinton has endorsed the House Republican leadership plan to repeal the unfair Social Security "earnings limit" that penalizes seniors who work. Under current law, seniors who earn more than $17,000 lose a big chunk of their Social Security benefits. But there remains a sharp disagreement between Congress and the president on the need to address Social Security's long-term financial woes.

The demographic problems facing Social Security are hard, inexpungeable fact: Within 30 years, the number of Americans older than 65 will increase by 90%. Today's unfunded future Social Security benefits are estimated by the Social Security trustees at $20 trillion.

This impending retirement of the Baby Boom generation requires fundamental reform, not accounting gimmicks. Yet through both Democratic and Republican Congresses, Clinton has done nothing to reform Social Security. Having failed to submit legislation for seven years, he finally has submitted to Congress a sham plan that leaves the pay-as-you-go Social Security system just as it is: completely unfunded.

The Clinton proposal (HR 3165), introduced by Minority Leader Richard Gephardt and the rest of the Democratic leadership of the House, expressly guarantees that for the next 15 years, not a penny from the Social Security surplus, or any other source, will be spent to bolster Social Security. Instead, the Clinton-Gephardt plan merely adds $7 trillion in IOUs to the existing mountain of debt in the Social Security trust fund--bookkeeping transactions that the president admits do nothing to bolster Social Security's solvency.

As Clinton's budget proposal this year stated: "[Trust fund] balances . . . do not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the treasury that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures."

The only effect of these bookkeeping gimmicks would be to inflate the Social Security trust fund artificially. According to the U.S. General Accounting Office, the Clinton-Gephardt Social Security proposal would have "the same effect on the economy and the federal budget as a policy of no action." It would, the GAO says, make "no change in Social Security."