The Committee for a Responsible Federal Budget released a statement on the FY 2018 Senate Budget which reveals that Congress is starting to wake to the issue of Social Security.
In its release, the CRFB indicated that Congress would shift the official measure of the spending deficit from the “Unified Deficit” to the “On Budget Deficit.” While this may sound like accounting mumbo-jumbo, it is an unshakeable sign that Social Security is broken, and isn't apt to show improvement in the near future.
So What Is the Sign Here?
Like most businesses, the government maintains multiple sets of books. It only makes sense that lawmakers would present the finances of the government to the voters in the best light possible. For the past 30 years, that meant following the “Unified Budget” which treats the excess revenue in Social Security as tax revenue. Going forward, they plan on applying the budget measure that excludes the revenue and expense of the program.
To illustrate the difference, Social Security collected about $30 billion more than spent over the course of 2016. The “unified” budget treated this excess cash as though it were general revenue indistinguishable from other taxes. The resulting budget deficit was $585 billion, roughly $30 billion less than any other tally.
Assuming that Congress wants to put its financial position in the best possible view, the exclusion of Social Security signals that Congress finally believes that the days of surplus are done. The Trustees of the Social Security Trust Fund have warned us for years that this day was coming. At this point, excess cash is supposed to disappear in 2022, and rapidly fall into the red.
If Congress is planning on dropping the revenue and expense of the system, it is a fairly high probability that expenses will overwhelm the money collected for a long time.
Why Is a Budget Important?
A budget is just a simple snapshot which reduces many financial transactions into a single number that can fit on Twitter. Budgets do not move money. They tell busy people how money flowed.
These figures should answer questions in simplified terms. Was the money stolen for example? Or, does Social Security contribute to the deficit? Unfortunately, the government keeps multiple sets of books so we get arguments instead of answers.
Which Budget Is Best?
The Trustees weigh in annually on the question to defend the “Trust Fund Accounting,” saying that the “Unified Budget” does not conform to current law, meaning that it is a hypothetical case rather than useful information.
What is the hypothetical case that is tracked by our current numbers? The numbers approximate a world in which the money for Social Security was stolen from the program. Of course, the money wasn’t stolen, but we produce numbers as though the theft actually took place.
This question has historical roots dating back to the last major reform of the program. (See the Social Security Administration’s detailed history).
In 1983, Congress specifically removed the revenue and expense of Social Security from the budget process specifically so that the excess cash would not be mistaken as general tax revenue. Yes, we calculate those numbers, but they aren’t used much.
Prior to 1983, the program’s pay-as-you-go financing generated very little excess cash, so no one cared whether the program was in the budget or not.
The transition from budget to budget isn’t about providing the public with a more accurate measure of the government’s finances. The point seems to be distancing the government from the financial imbalances of the nation’s pension. Maybe the hope is that if we do not tell voters that the system is losing money, then no one will ask.
According to CRFB’s note, the government will no longer show $149 billion in deficits because it is a short-term outlook. Longer term, the problem grows into substantially. Over a 10 year period, the program will need to refinance more than $3 trillion of government securities. So $149 billion is basically chump change.
Instead of ignoring the growing financial imbalances by habit, Congress will do so by law. Instead of waking to the alarm, Congress is hitting the snooze button.
Brenton Smith writes on all aspects of Social Security reform, translating the numbers and jargon of the issue into terms that everyone can understand. His work has appeared in Forbes, MarketWatch, Fox Business, The Hill, and a number of regional newspapers. To read more of his reports — Click Here Now.
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