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July 06, 2005

Why Oh Why Are We Ruled by These Very Strange People? (Social Security Edition)

Stan Collender is once again bemused by the Republicans in Congress:

BUDGET BATTLES: Budget Buffet: By secollender@nationaljournal.com Stan Collender, NationalJournal.com: You have to admire the audacity of the latest Social Security proposal. After months of the White House saying that there is nothing but worthless IOUs in the Social Security trust fund, the latest congressional Republican plan proposes to use those worthless IOUs to pay for the private investment accounts.... In other words, there is no trust fund surplus -- but we're going to use it to pay for the trillions of dollars in Social Security changes we are seeking....

This latest Social Security proposal also makes it clear that the White House's insistence that its plan will not increase the deficit, federal spending, or government borrowing is wrong. Using the Social Security trust fund to pay for private accounts will increase the spending in that program, reduce the surplus it was projected to run in the coming years and increase the unified federal budget deficit.

The Office of Management and Budget projected in the most recent Bush budget that the overall deficit in fiscal 2006 would be $390 billion. That included a $560 billion "on-budget" deficit and about a $170 billion "off-budget" surplus. Almost all of that surplus is in Social Security. But if some of the fiscal 2006 trust fund surplus is used to pay for anything... the unified budget deficit increases.... [I]f the private accounts require $100 billion... the 2006 federal [unified] budget deficit would be $490 billion instead of $390 billion. This would be financed with additional borrowing from the private sector....

The problem with funding Social Security private accounts is... due to the Bush administration's own choices. Back in 2001, the White House used what it said was a $5.6 trillion budget surplus over the coming decade to pay for the tax cuts the president wanted.... [W]hen the administration and Congress repeatedly chose tax cuts over Social Security, that choice was eliminated and the die was cast...

Posted by DeLong at July 6, 2005 02:18 PM