Tuesday, February 08, 2005

The Bush Plan to Make Social Security Worse Off

WSJ (sub. req.):

The year's budget writing will be complicated by the parallel debate over Social Security. While Mr. Bush last week acknowledged that private accounts, by themselves, wouldn't help Social Security's long-term financial outlook, now the Social Security Administration's chief actuary has informed the White House that its plan would hasten to 2012 from 2018 the date when Social Security will begin taking in less in payroll-tax revenues than it is paying out in benefits.

The actuary, Stephen Goss , wrote White House adviser Charles Blahous that the costs to Social Security of workers diverting some payroll taxes to their personal accounts will exceed the amounts by which the government would reduce payments from the accounts to retired workers or their survivors to offset the initial payroll-tax diversion. "Annual cash-flow deficits (negative annual balances) appear in 2012, or six years earlier than under current law," Mr. Goss wrote.

Actually, the 2018 (or 2012) date is meaningless with respect to the Trust Fund, though it isn't meaningless with respect to the overall fiscal health of the government.