Social Security

Max Sawicky sawicky at epinet.org
Wed Jan 20 09:44:43 PST 1999



>
> When Clinton proposed to use 62% of the budget surplus to "save" Social
> Security, and another 15% to "save" Medicare, I thought - isn't
> the surplus now 100% the result of SS/Medicare premiums? So wouldn't using
just 77% represent a lesser amount for the rescue than just perpetuating the status quo? Am I missing something?>

Almost all of the unified budget surplus is due to the Trust Fund surplus over the next ten years. The qualifier is that a small "on-budget" surplus pops up several years out. (New numbers will be coming out imminently and I can tell you the exact new year.)

"Saving Medicare" means part of the surplus going to one of two destinations: part covers current Medicare spending, at the point when the program runs a cash deficit; the other part, by going into the Medicare Trust Fund, is simply money that is lent back to the Federal govt and used to pay down debt.

The portion of the surplus for "new" spending is theoretically $400 billion, but spread over 15 years. Of that, it's been said that $125 b is slated for defense increases over the next five years. Depending on how the rest is split up, the domestic add-on can't be more than $20 b a year. Note that exactly what we are adding on to -- the baseline -- is critical. If the baseline is current law, then the baseline is a fixed dollar amount in nominal terms. If you add $20b to that, next year, the implication is still of domestic discretionary spending declining relative to GDP and the total budget in the future.

Of course Clinton ain't going to be around for 15 years, maybe not 15 days. There is no way to lock discretionary spending into law. All such spending is subject to frequent, if not annual, review and reaffirmation, so to speak, by Congress.

At worst the domestic add-on is stagnant business as usual. At best it is an empty promise.

Bottom line is the Govt is going to do what they wanted to do in the first place -- run budget surpluses and pay down debt. The new part is increased military spending, though I'd like to emphasize that the latter is much the smaller part of the resource leakage -- something less than 11 percent of the surplus.

mbs



More information about the lbo-talk mailing list