[Congressional Record Volume 140, Number 83 (Monday, June 27, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: June 27, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
                        SOCIAL SECURITY AT RISK

                                 ______


                          HON. JAMES M. TALENT

                              of missouri

                    in the house of representatives

                         Monday, June 27, 1994

  Mr. TALENT. Mr. Speaker, I rise today to share with my colleagues a 
thoughtful article on the Social Security Program written by Mr. 
Charles W. Disbrow, a constituent of mine from St. Louis, MO:

       Social Security is at risk. It has certain, fundamental 
     weaknesses built into it. To begin with, it is not based upon 
     the whole truth. It is misrepresented, and we should be clear 
     about how. In these financially strapped times, Social 
     Security is sure to change along with the society it serves. 
     If we understand it for what it is, we can make sure that it 
     is changed for the better.
       We are told that Social Security is not welfare, because we 
     pay for it. It is there for us. We have a right to it. This 
     is the beginning of the misrepresentation. It sounds like a 
     savings plan, but it is not. The taxes we pay into it are not 
     saved. They are spent immediately. We are told that Social 
     Security is in surplus. There is no surplus. We are told that 
     Social Security is preserved by a trust fund. The so-called 
     trust fund is an empty account. All of this should be 
     explained.
       Social Security was set up to be preserved as a separate 
     entity from the Government. It was to be managed off budget. 
     While its funds were to be collected and disbursed by the 
     Government, its financial standing was not to be compromised 
     by other governmental functions.
       Oddly, in the budget prepared by the Government, Social 
     Security receipts and expenditures are commingled with 
     Government operations, exactly the opposite of what was 
     intended by law. Receipts are sometimes identified as being 
     simply ``off budget'' funds. Since Social Security is running 
     a surplus of almost $100 billion every year, these off budget 
     funds make a significant contribution to our on budget 
     spending excesses. In 1993, $92 billion in revenues were 
     diverted from Social Security to other uses, reducing the 
     deficit from $414 billion to $322 billion. Under present law, 
     those ``off budget'' revenues were explicitly raised as 
     Social Security taxes to pay for future retirement benefits. 
     They should have been clearly labeled ``diverted'' funds, not 
     ``off budget'' funds.
       ``Wait a minute,'' one might protest. ``Our surplus 
     contributions to Social Security were not spent by Congress; 
     they were deposited in the Social Security trust fund. Our 
     money was invested in U.S. Treasury bonds, the safest 
     investment on the face of the Earth.
       It is true that our taxes were invested in Government debt. 
     The budget shows this debt as ``trust fund surplus.'' This is 
     an unconscionable misrepresentation. The proceeds from the 
     sale of the debt--which come from our taxes--were spent, 
     exactly as outlined above. Realistically, instead of showing 
     a surplus in the trust fund for 1993, the budget should more 
     honestly show a deficit. Technically, such honesty could be 
     avoided, because, after swapping our cash for bonds, the 
     Government still had $92 billion in certificates that it had 
     just printed. Purely in theory, and the theory is wrong, 
     these certificates offset the disappearance of the diverted 
     cash.
       To account for these new bonds, the budget shows an 
     adjustment in the Federal Funds deficit from $322 billion 
     back up to $414 billion. The implication that any normal 
     person would draw from such accounting is that the Social 
     Security surplus made the debt go up. In fact, had Social 
     Security not been taxed in excess, the Federal funds deficit 
     would have been $414 billion. But because Social Security 
     taxes were excessive, and because the money could be used to 
     pay bills, the deficit was actually only $322 billion. 
     Technically, however, since the Government has chosen to keep 
     track of the Social Security excesses, and since it can 
     stomach calling a debt a surplus, the printing of bonds is 
     required to make the accounts balance. In this sense, the 
     surplus did make the deficit go back up to $414 billion.
       The bond certificate had to be deposited as an asset in the 
     trust fund. These assets were obtained simply by increasing 
     the national debt. The bond certificates have no value. They 
     are much like Treasury stock in a corporation, something 
     authorized to be sold at a later date. Until the bonds are 
     sold on the open market, they are a meaningless accounting 
     double-entry of no economic consequence whatever. The asset 
     which the bonds represent is offset by the liability which 
     they also represent. Our Government economists know that it 
     is absurd to think of these bonds as savings.
       The simple truth is this: Our Government may be able to 
     deficit spend, but there is no way in the world that it can 
     deficit save. To some, the present method of book-entry bond 
     accounting may have a very worthwhile function: It lets us 
     know how much we were supposed to have saved, but didn't. 
     This is exactly what the Social Security trust fund tells us. 
     They bear little or no relationship to our future Social 
     Security obligations. They are a history of past spending. 
     Today, this trust fund totals $1.104 trillion.
       In 1982, Congress increased Social Security taxes to 
     prevent the bankruptcy of the trust fund and to ensure future 
     benefits. This was a cynical deception. Social Security is 
     vulnerable to the truth. Congress will surely face up to it 
     soon. This will put Social Security in play.
       In 1994, the essential prize is this: The congressional 
     limit on the national debt is about $4.4 trillion. Congress 
     has reached its limit. Putting Social Security on budget 
     would make it possible to eliminate $1.104 trillion of bogus 
     trust fund accounting, reducing the national debt to $3.3 
     trillion. Such a move would give Congress another $1.1 
     trillion for health care, which is within the legislative 
     purview of Social Security as it was originally conceived.

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