I don’t understand why, after people have told you this dozens of times already: nothing was borrowed from the trust funds. You’re wrong.
The trust funds bought government securities. No matter how much you want it to be true, the following did not happen, has never happened, and can never happen:
ring ring
Social Security Administrator: Hello?
President: This is the President. Do you recognize my voice?
SSA: Uh, yes, I do, sir.
P: Here’s what you’re going to do. You have a lot of cash lying around. I’m going to “borrow it” use it to pay other bills. [Evil Laugh]
SSA: Well, as long as nobody will find out…
P: The only weakness in my plan is that someone who doesn’t understand the Federal budget could go on the Internet and do arithmetic… but I’m willing to take that risk.
SSA: This conspiracy to “lend” money from Social Security to the government hasn’t been revealed anywhere over the last 70 years. We’ve successfully kept this pile of debt secret by telling people that we receive non-negotiable government bonds in return. So your secret is safe with me, Mr. President. I love me some running up the debt, too!
P: Good boy. You coming to the Illuminati pancake breakfast on Saturday?
SSA: No sir, I have a scheduling conflict. As a 35th degree Mason I have to do weekly checks on the vault that holds the designs for the car engine that runs only on water. I will see you at Tuesday’s Opus Dei bake sale, though.
P: Sounds good. I’m going golfing with the guy who killed Vince Foster. I’m gonna bounce. Da Prez is Audi, yo.
It is the same “gimmick” that all other presidents use then. But somehow you only find that Clinton used it.
His budget surpluses are eating you up inside.
I will double down - his budget surpluses were the result of the Omnibus Reconciliation Bill of 1993 - a bill that NOT ONE SINGLE Republican voted for and that reduced spending the most ever of any president ever.
You are correct. Carter, Reagan, Bush I, Clinton, Bush II and Obama have used this gimmick to hide the real size of their deficits.
But Clinton is a special case because he is the only one to claim surpluses when in reality the general fund had a deficit. It spent more than it recived in revenue.
moonshot925 is technically correct. If you add in all the other trust funds Clinton never ran a surplus. But if you’re going to account for Clinton that way, you have to count every other President as well. So yes, in that case Clinton ran a very small deficit, but then George W. Bush ran HUGE GIGANTIC MONSTROUS FREAKING DEFICITS.
This is misleading. The fact is, the government raised billions in dollars in revenue that it claimed was to be ‘put aside’ in a trust fund for social security. Instead, it spent the money on current government operations, then ‘paid’ the trust fund in treasuries.
But by that logic, you could borrow 500 billion from the Chinese, pay them in Treasuries, then call that ‘revenue’ and apply it against the deficit to make the deficit look 500 billion smaller, right? In on case, you took the money from Americans, and in the other, you took it from teh Chinese. In both cases, you spent the money and gave out an IOU to pay it back. Do you think that would be honest accounting?
Look, the government can’t keep a ‘lockbox’ full of money for retirement, because there is no one else on the planet large enough to borrow all that money. When a state, a city, or a company sets up a trust fund, it can actually park the money somewhere in interest-bearing investments, by getting other people to borrow from the fund with interest. The U.S. federal government’s liabilities are too big.
But the spirit of a ‘trust fund’ is to make sure that you are setting up your fiscal balance such that when the people retire and claim their retirement money, you can afford to do so. So in fact, the trust fund money that’s spent should be added to the deficit, and it’s not.
Consider the havoc that this nonsense is playing on current government finances. Program spending was set up to use up all revenue, plus as much borrowed revenue as the government could get away with. Do you think Bush could have gotten his spending bills or tax cuts through as easily if his 2002 budget deficit had been reported as 317 billion dollars instead of 157 billion dollars? The 317 billion is a more accurate representation of how big a hole the government is digging for itself, but everyone treats the 157 billion number as the ‘real’ one for policy purposes.
And now one of the reasons Obama’s deficits look higher is because he’s lost about $100 billion of that annual SS fund money that Bush and Clinton could use to hide their own deficits. And the next president, be it Romney or Obama, is going to have an even harder time as the surplus shrinks. And then fairly soon thereafter, there will actually be a social security deficit, and money will have to be taken out of general revenues just to pay current retirees. That’s when the crap really hits the fan.
As usual, politicians found a clever way to push their own liabilities off on future generations. If a private fund manager tried that, he’d be in jail. Unfortunately, that shell game is about to end, as the era of big SS benefits comes to a close. And now the check is due.
If Social Security Trust Fund revenues are supposed to be excluded from the government ledgers today, then it is only fair that future government expenditures to pay off the bonds be excluded from the government ledgers of tomorrow.
These assets are supposed to cover future payments of Social Security to senior citizens, so it is not valid to subtract the holdings of the Social Security trust fund, or any other intragovernmental holding that represents similar external liabilities, from the government debt.
The money that purchases the trust fund instruments goes into the general fund and is immediately spent. That’s the flaw in your logic. In your analogy, if there were a $10 surplus as a result of SSN, $10 worth of trust fund instruments would be “purchased,” the $10 would be spent, and there would be an IOU in the trust fund, which will need to be funded when it’s due (including any interest) from any then-current surplus or, more likely, by issuing additional debt.
So, to play out this particular scenario, you received $100, spent $100 and in the only meaningful sense, you assumed a $10 debt. A corporation that issues bonds holds a debt for those bonds. A corporation that purchases bonds has an asset. The same corporation can’t realistically call it both, which is the accounting hocus pocus Sam pointed out. The $10 is spent and gone, and you now owe $10 plus interest in the future. That’s all there is to it.