Shrinking Surplus Revives Lock Box Debate
August 31, 2001
Revised budget estimates showing a shrinking federal budget surplus
have revived the debate over the Social Security "lock box" and the nature
of the Social Security Trust Fund. The new projections, released by the
White House Office of Management and Budget (OMB) projects a budget
surplus of nearly $157.5 billion this year. However, roughly $157 billion of
this results from surplus Social Security taxes. Outside of the Social
Security system, the federal surplus could be as little as $600 million.
Democrats immediately charged that the administration was close to
"raiding" the Social Security surplus. The administration countered by declaring their continued support for a Social Security lock box, saying that
under no circumstances would they dip into Social Security funds. In fact,
however, the administration would indeed have tapped the Social Security
surplus if it had not changed the procedures by which the government
accounts for Social Security revenues.
All the huffing and puffing about lock boxes and Social Security Trust
funds obscures a basic point. All the revenue received by the federal
government--from whatever source--is simply federal revenue, to be spent
by the government in whatever way it chooses. Lock boxes or Trust Funds
are simply accounting gimmicks that have no meaning in the real world.
A rare voice of reason was provided in an editorial by The
Washington Post, which pointed out:
Whenever there is a Social Security--or
Medicare--surplus, the government "taps" it in the
sense that the money is used for other purposes and
IOUs are put in the Trust Funds. The question is,
which purposes. Will the money be used to pay
down debt…or will some of it be used in the year
collected to help pay for defense, law enforcement,
the parks, etc? The Trust Funds are in the same
shape either way; they have the IOUs. Social
Security and Medicare are in that sense unaffected.
This latest budget contretemps should make one thing perfectly clear:
if tax money--including Social Security taxes--stays in Washington, the
politicians will spend it. The only true lock box is an individual account
that workers own and control.
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