"Holtz Eakin" + "Social Security"
Since John McCain has yet to make a detailed and concrete statement of his views on Social Security and since the ladies and gentlemen of the Main Stream Media have yet to give him any detailed questions on this issue, Wonks Anonymous decided to do a little research on the position of John McCain's chief economic advisor on Social Security.
It's not all that hard people. Just type the title of this post, literally, into your Google search bar. Go to the third item or so.
It is a report from The Congressional Budget Office dated 2004. This would be at the time when the nation was blessed with an honest and conscientious Republican President and a frugal and highly intelligent Republican Congress - who, by the by, chose Mr. Holtz-Eakin as their chief economic advisor.
In an earlier post on this blog Wonks Anonymous divided analysts of Social Security into two groups: Those who think that the system is in trouble in about a decade because pension payments will exceed payroll tax revenues and those who see some problems in the more distant future when the trust fund may be exhausted without paying all promised pensions.
Mr. Holtz-Eakin is clearly of the "panic now" school of thought. One can see this from the graph printed on the cover of the report and from the preface of the report.
Without even so much as a mention of the trust fund Mr Holtz-Eakin launches directly into a discussion of the gap between Social Security's cash in and its cash out:
CBO’s projection of a widening gap between outlays and revenues is consistent with other analyses of the outlook for Social Security. That gap is the key economic indication of the shortfall between the program’s spending commitments and dedicated revenues.
Which means that the doubled payroll taxes that we have been paying for the past twenty plus years to build up the trust fund, seem to have vanished. And just a note to you kids out there, Gen X or Gen Y: You too have been paying those taxes and your contributions are just as gone. For a discussion of this interesting history click here.
For to the clear and penetrating mind of Mr. Holtz-Eakin:
Social Security’s finances are often discussed in terms of the trust funds that are used in the federal budget to track outlays and revenues over the life of the program. Those trust funds are mainly accounting mechanisms and contain no economic resources. But they are important from a policy perspective, because Social Security’s legal spending authority each year is limited to the total balance ofthe trust funds.
I am waiting to try this on my credit card company next month. Those credit card statements are mainly accounting mechanisms and contain no economic resources. Somehow I think that I will not get far.
Now the assets of the Social Security Trust Fund are US Government Debt and, barring national bankruptcy or some special Congressional repudiation, US Government Debt represents specific economic resources. It is backed by: The good faith of the US Government and the Government's ability to raise revenues through taxation.
In order to cover all bases Mr. Holtz-Eakin goes through possible fixes: Reduce benefits is number one in his book but he will allow for increases in the payroll tax - he never mentions increases in taxes on investment income or such - and reduction of other spending. Finally he allows that we might borrow to fund Social Security payments but:
That borrowing would need to be repaid by future generations, however, either through increased taxes or reduced federal spending.
It would appear that debt held by major investors or the Chinese is sacred and must be repaid but the trust fund is a mere "accounting mechanism".
When the Reagan administration was growing the national debt in the 1980's 'conservative' economists told us not to worry because "we owe it to ourselves." I think that I finally understand what they mean.
The Social Security Trust Fund is a general obligation of the Federal Government and it should be paid out of the general revenues. Until he hears otherwise Wonks Anonymous believes that John McCain's Social Security Reform is simply another corporate raid on the pension fund.
So you folks in the press: Are you ever going to ask him these questions or do McCain and Holtz-Eakin get a pass on this one?