In trying to find ways to cut the horrendous federal budget deficit, President Clinton has correctly em-pha-sized the need to reduce ex-pen-di-tures, including the huge entitlement programs. One of the trial balloons floated this past week focused on Social Security.
Certainly, no program should be exempt from possible cuts and some of the ideas involving Social Security do not appear terribly painful. For example, one proposal would eliminate for one year the annual cost-of-living, or COLA, increase for beneficiaries.That would save an estimated $10 billion in payments in 1994. Nobody's Social Security would be reduced from present levels; it's just that the monthly checks going to 41 million people would stay at 1993 levels in 1994. That does not seem like too much sacrifice, although the poorest undoubtedly would feel it the most.
Other options being explored include paying COLAs but holding them below the inflation rate or increasing the taxes the most well-to-do pay for their benefits.
Predictably, such suggestions already are drawing fire, but if Social Security is exempted from budget cuts, beneficiaries of every other entitlement program will demand the same treatment - and the budget deficit will continue to soar.
Such philosophical issues aside, there is one vital, fundamental question about cutting Social Security benefits: Just how does this reduce the federal deficit?
Social Security taxes go into a trust fund earmarked for Social Security payments. Since the trust fund has been running a hefty surplus each year, Congress keeps borrowing the surplus for all the other things it does - leaving behind IOUs in the form of interest-bearing U.S. Treasury notes. This makes the budget deficit look smaller, but it is only an illusion.
If no Social Security COLA is paid in 1994, that will add $10 billion to the trust fund surplus. If Congress borrows that extra money and spends it on infrastructure repairs, aid to cities, health programs or whatever, how is the debt reduced?
Even if the $10 billion goes directly to debt reduction, no money has actually been saved. All Congress has done is borrow money from A to pay a debt owed to B. Now the money is owed to A.
When millions of baby boomers start to retire early in the 21st century those billions borrowed from the trust fund will be needed. Where are they going to come from? Reducing the federal deficit is going to take more pain and sacrifice than merely shuffling accounts. There has been too much use of smoke and mirrors already in the federal budget.