Social Security Off-Budget: Expensive Idea
One of the more important deficit-reducing events of the 1980s was the Social Security reform of 1983. The Social Security system is now running sizable surpluses that are being used to help meet federal deficit targets under Gramm-Rudman-Hollings. The Social Security surplus thus masks the seriousness of the deficit problem in the rest of government.</br></br>For this reason, many propose that deficit targeting be altered. They would target the rest of the government's deficit and move Social Security completely off-budget. While I am in strong agreement with the goals of the reformers, I worry that they are pursuing their goals with a highly risky mechanism.</br></br>Following such a change, increases in Social Security benefits would no longer count against the official budget deficit. Given the strong political support for Social Security, the removal of budget discipline from the system would create an enormous temptation for politicians to spend some of the accumulated surplus. There is a long list of claimants and many expensive proposals have been made to correct perceived inequities in the system.</br></br>Having allowed Social Security completely off-budget, it would be hard not to extend the same privilege to other trust funds. For example, the Medicare and civil-service pension trust funds would have a particularly strong claim to off-budget status. Both programs have contributed significantly to deficit reduction in the recent past. But if allowed off-budget, they are unlikely to do so in the future.</br></br>More important, the Social Security benefit structure itself should not be allowed to escape budget scrutiny forever. Formidable political forces are now arrayed against any restraint on benefit growth, and Social Security is far from the political bargaining table. But that has not always been true, and there are reasonable options that would save many billions of dollars in the long run.