Discussion: (15 comments)
Comments are closed.
A public policy blog from AEI
Over at the Huffington Post, Jason Linkus and Ryan Grimm claim that media fact checkers are “sputtering” in trying to explain how Social Security might affect the deficit and debt. I examined this issue in depth at Real Clear Markets, but here’s the short story:
There are two main measures of the budget deficit and the federal debt: The “on-budget” deficit shows the balance of programs other than Social Security (and the postal service), while the “unified budget” deficit combines Social Security with the rest of the budget. Likewise, the “publicly-held” debt includes only debt sold in financial markets, while the “gross debt” includes special-issue debt held in trust funds, including Social Security’s.
If you focus on the on-budget deficit, Social Security doesn’t have any effect. Likewise, the gross public debt isn’t affected. On the other hand, Social Security does affect the unified budget deficit and the publicly-held debt. If Social Security’s financing worsens—as it has in recent years, due to the recession and the retirement of the Baby Boomers—then that affects the deficit and debt. Back when conservatives advocated investing the Social Security surplus in personal accounts, liberals endlessly cited figures on how doing so would increase the (unified) budget deficit and the (publicly held) debt.
So we know the Left is being a little inconsistent. But which measures are the most commonly used and the most important? The CBO says:
To assess how all federal activities, taken together, affect the economy and financial markets, it is useful to include the cash receipts and expenditures of trust funds in the budget totals along with the receipts and expenditures of other federal programs. Therefore, the Congressional Budget Office (CBO), the Administration’s Office of Management and Budget, and other fiscal analysts generally focus on the total deficit in that “unified budget,” which includes the transactions of trust funds.
The CBO also says that gross debt “is not useful for assessing how the Treasury’s operations affect the economy…. Because the debt issued to those [trust fund] accounts is intragovernmental in nature, it has no direct and immediate effect on the economy.” Similarly, the GAO says that “debt held by the public best represents the cumulative effect of past federal borrowing on today’s economy and on the current federal budget.”
So, by the measures that most budget analysts use and which many liberals themselves cite, Social Security’s worsening financial outlook negatively impacts the budget deficit and the debt. Why not focus on arguing about how to fix it?
Comments are closed.
1150 17th Street, N.W. Washington, D.C. 20036
© 2015 American Enterprise Institute for Public Policy Research