Social Security: Doing away with the ‘lockbox’ myth
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Even Social Security’s friends sometimes get bollixed up in the bamboozlements of its enemies. The best example of that may be the ‘lockbox’ scheme promoted by Al Gore during the 2000 presidential campaign. Gore was trying to defuse concerns that the government had ‘stolen’ Social Security’s money, but in the process he handed the bamboozlers another weapon.
The focus of the concern was the condition of the Social Security trust fund. As my Sunday column explains, this concern is wholly fabricated; the trust fund is just fine. But the idea that Social Security’s surplus should be somehow sequestered, left untouched until it’s needed to pay benefits, is foolish and dangerous.
Why? Because that money is being banked over a period of 50 years or more. Plainly, if its value is not to be utterly destroyed by inflation over that time, it must be invested. But in what? Gold bars in the basement of Ft. Knox, like the hoard James Bond saved from destruction in ‘Goldfinger?’ Towering mounds of cash? Diamonds?
The real choices are equities or interest-bearing securities. Putting the money in the stock market raises difficult questions, and has always been opposed by conservatives of the same stripe as those bemoaning the fiscal condition of Social Security today -- it would amount to a huge government ownership of private enterprise.
So the preferred alternative is to invest it in safe treasury securities. But when the government borrows money via T-bonds, it has to put the money to work, so it can generate the economic wherewithal to pay it back. And truly, the money borrowed from the Social Security trust fund -- from you and me, that is -- has gone to work building the U.S. economy.
Real gross domestic product per capita has nearly doubled over the last two decades, the period in which the Social Security surplus has been making its contribution -- and it will continue to grow. If that money were placed in a lockbox, $2.5 trillion of Americans’ savings would have been unavailable to help fuel that growth, and the fund would be devastated by inflation in the bargain. Still favor a lockbox?
The column begins below:
The annual report of the Social Security Trustees is the sort of rich compendium of facts and analysis that has something for everybody, like the Bible.In recent years, during which conservatives have intensified their efforts to destroy one of the few U.S. government programs that actually works as intended, the report’s publication has become an occasion for hand-wringing and crocodile tears over the (supposedly) parlous state of the system’s finances.This year’s report, which came out Thursday, is no exception. Within minutes of its release, some analysts were claiming that it projected a “shortfall” for Social Security this year of $41 billion.
Read the rest of the Social Security column here.
-- Michael Hiltzik
