That's the point. If we fetishize the SS surplus to the point of insisting it be segregated, we are left with the non-SS budget (which isn't really an 'operating' budget in any meaningful sense), and we are back in the bag of "we can't do such and such because of the deficit."
The 'on-budget' deficit is a meaningless concept, but it is on the point of being elevated to our new standard for fiscal prudence. Then of course we will be deluged with, "Save medicare next," and any budget flexibility will be hostage to fixing the Medicare trust fund (rather more difficult, incidentally, than the SS fund).
There is no end to this. Under current principles, we ought to run surpluses to pay down the debt so we can "save money" (sic) later from lower interest payments.
We're looking at two generations more of complete constipation in the growth of the public sector.
>Balancing the budget seems to have had a pretty small fiscal drag. What
Keynesian would have predicted the last 5 years in the U.S. economy? High
real rates and deficit reduction have come with low unemployment and rising
real wages at every level of the distribution. Will this continue as the
surplus grows? Can private debt continue to expand enough to counter the
continuing fiscal squeeze? Or doesn't that matter anymore?>
One needs to distinguish between the full-employment surplus and observed ones, and one also needs to ask someone else who knows more about it. I share your skepticism about any 'drag' effects. The explicit drag is on public sector growth, which is more of an allocation issue than a growth one in the short run.
MBS