What is the Treasury Department Saying About Raiding the Lock Box?

The Treasury Department has released its Social Security. Issue Brief No. 4 is entitled Social Security Reform: Mechanisms for Achieving True Pre-Funding with this statement:

there is nothing currently in place to prevent current contributions in excess of current benefits from being unwound by larger deficits in the non-Social Security portion of the federal budget … Many analysts believe that Social Security surpluses under the present system do not increase the government’s capacity to pay future Social Security benefits. Under this view, Social Security surpluses are offset in the rest of the federal budget by some combination of higher non-Social Security spending and/or lower non-Social Security taxes. To the extent that this is true, Social Security’s surpluses do not increase the government’s capacity to pay future Social Security benefits. The future benefit payments that would have been financed with public debt issuance had Social Security surpluses truly been saved must instead be financed with lower non-Social Security spending and/or higher non-Social Security taxes. In this case, the existence of the near-term Social Security surplus causes the non-Social Security budget to be more profligate, and the future Social Security cash deficit will require future non-Social Security budgets to have either higher taxes or lower spending than would have been the case had today’s surpluses resulted in true pre-funding. Under this scenario, an attempt to make Social Security fair to future generations by accumulating near-term surpluses in the trust fund would be undone by a non-Social Security policy that is less fair to future generations. Rather than resulting in resources that provide future benefits, running a Social Security surplus today would instead lead to more debt outside the trust fund that must be paid off by future generations, leaving them with no net gain.

Translation – we at the Treasury are sort of excusing the massive General Fund deficits of the Bush Administration because those assets in the Social Security Trust Fund were just too easy to raid for political gain by our GOP hacks that “lead” us. But the real gall comes here:

In order for Social Security surpluses to be saved, taxes and spending in the non-Social Security portion of the budget must be set with the recognition that the special-issue government securities held by the trust fund represent liabilities that are every bit as real and important as debt held by the public. While the non-Social Security budget must ultimately redeem those special-issue securities in any case, it is only when they are recognized as equivalent to publicly held debt that the non-Social Security budget will plan in advance for their redemption by using Social Security surpluses to reduce public debt issuance. When used to lower publicly held debt today, the surpluses increase the government’s capacity to issue publicly held debt to pay for Social Security benefits in the future. Otherwise, those future benefits must be financed with lower non-Social Security spending or higher non-Social Security revenues.

Oh my – those of us who have been allowed to pay less in income taxes over the past generation than what has been spent by the General Fund during this same period might actually have to pay more in income taxes in the future. What do we tell the children? Oh yea – get used to high employment taxes that were never intended for your retirement. I have to say – our Treasury Department has certainly come up with some fancy language for good old fashion grand larceny.