The Trust Fund, the Surplus, and the Real Social Security Problem

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Recent discussions of Social Security'sfuture solvency have been dominated bymisleading and inaccurate portrayals of theSocial Security Trust Fund and the impact ofbudget surpluses on the program's finances.

In reality, the Social Security Trust Fund is anaccounting measure, not an accumulation ofreal assets that can be used to pay future benefits.That means current discussions of SocialSecurity "lock boxes," or whether the SocialSecurity "surplus" is being "raided," are essentially irrelevant to the program's future. Thefederal government lacks a mechanism thatwould allow it to save today against the futuredemographic and financial pressures that willmake Social Security's current structure unsustainableover the long term.

Congress should stop playing verbal gamesover what are essentially accounting gimmicksand begin the serious project of Social Securityreform. Ultimately, that reform will have toinvolve allowing workers to privately invest aportion of their Social Security taxes throughindividual accounts.

Download the Social Security Choice Paper

ssp26.pdf

June O’Neill

June O'Neill is Wollman Professor of Economics at the Zicklin School of Business and director of the Center for the Study of Business and Government at Baruch College, City University of New York. She was director of the Congressional Budget Office from 1995 to 1999.