An Interesting Interview

The President's debt commission has been meeting in secret. Alex Lawson of Social Security Works has been standing outside the closed doors and trying to record interviews with Commission members as they enter and leave. Here is a small excerpt from an interview that Lawson did with former Senator Alan Simpson, co-chair of the Commission, that gets at a fundamental difference in the way that people look at the Social Security trust funds.

SIMPSON: There is no surplus in there [the Social Security trust funds]. It’s a bunch of IOUs.

LAWSON: That’s what I wanted to actually get at.

SIMPSON: Listen. Listen. It’s 2.5 trillion bucks in IOUs which have been used to build the interstate highway system and all of the things people have enjoyed since it has been setup.

LAWSON: Two wars, tax cuts for the wealthy.

SIMPSON: Whatever, whatever. You pick your crap and I’ll pick the real stuff. ...

Since more than 90% of the costs of the interstate highways comes from gasoline taxes, I think that one would have to say that Lawson was much closer to the truth.

By the way, the rest of the interview shows that both Lawson and Simpson suffer from important misconceptions. Lawson thinks that the Social Security trust funds are still growing. Due to the recession they are contracting slightly at this time. They might grow a little for a short time if we make a rapid recovery from the recession but they are destined to start contracting in a few years under even the most optimistic forecasts. For his part, Simpson is unaware that Social Security actuaries predicted fairly accurately the increases in life expectancy that have occurred over the nearly 75 years that have passed since the creation of Social Security in the U.S. Increases in life expectancy are not the reason for Social Security's long term funding problems. The blame goes mostly to benefit increases without corresponding tax increases.

I have always wondered what we ought to invest the Social Security trust funds in if not U.S. government bonds. If the trust funds were invested in stocks and bonds they would own a good part of the U.S. economy. I do not think that either conservatives or liberals would be comfortable with that idea. Those who claim that the Social Security trust funds are meaningless abstractions do not want the trust fund monies invested in something other than U.S. government bonds. They want the trust funds and all of Social Security to cease to exist. They are just afraid to say so.