From
Paul Krugman, writing about the argument that the Social Security trust funds are a myth:
The bigger problem for those who want to see a crisis in Social Security’s future is this: if Social Security is just part of the federal budget, with no budget or trust fund of its own, then, well, it’s just part of the federal budget: there can’t be a Social Security crisis. All you can have is a general budget crisis. Rising Social Security benefit payments might be one reason for that crisis, but it’s hard to make the case that it will be central.
There are basically 2 perspectives written about in several papers, including the Treasury, which Krugman is referring to.
ReplyDeleteThe trust fund perspective and the budget perspective.
The trust fund perspective considers government commitments to always be funded in the future.
The budget perspective says, okay, let's assume that is true, what is the impact on the budget?
For example from a trust fund perspective, Part D is always fully funded.
This is because 25% of the premiums are paid by the beneficiaries and 75% by the government. Whether these premiums are affordable for the individual or the government is a moot point. The funding is always potentially there, so, from a trust fund perspective, it is fully funded.
From the budget perspective, the 75% funded by general revenues is a direct budget expense, and increases our deficits.
The budget perspective is a lot more realistic, in my opinion, and Part D is a good example of how unrealistic the trust fund perspective is.
Don Levit
There is a budget crisis. Hasn't Mr. Krugman noticed?
ReplyDeletePart D isn't the issue. It clearly contributes to annual budget deficits. The argument is over whether SS benefits add to the deficits/debt. The answer to that question is that as a matter of law SS benefits are not included in deficit calculations. Period. As to Part D, well, what do you expect from a means-tested Republican scheme to subsidize already rich HI carriers?
ReplyDeleteA 6:34A, see above.
Actually Nancy, Social Security "surpluses" all these years were used for current government expenses and reduced the deficits.
ReplyDeleteThe other side - the liability side to the Treasury - had no impact for many years, until the trust fund outgo exceeded the income (excluding the "interest").
That is enough "float" to lift all boats!
Now, that that is a reality, the intragovernmental debt magically transforms into debt held by the public.
Debt held by the public is considered the more serious type of debt, but, thank God, the total debt doesn't increase when this occurs.
Don Levit