Reality CheckPaul Magnusson
THE SOCIAL SECURITY TRUST FUND is sacred, or so say key opponents of the balanced budget amendment. The amendment failed to win sufficient votes for passage on Mar. 2, in part because Senator Byron Dorgan (D-N.D.) and others insist on including a provision protecting the trust fund. Certainly, you will hear this debate again. Dorgan and his colleagues argue that the amendment would force Congress to loot the trust fund for the money needed to bring the overall federal budget into balance.
IN REALITY, the trust fund is already used to mask the real deficit. Social Security now collects $27 billion a year or so in payroll taxes over the amount paid out in benefits. That surplus is effectively used to meet the government's other operating expenses. This trust fund is a fiction: The surplus is carried on the government's books as an IOU. As the first baby boomers begin to retire, around 2013, Social Security will run a cash-flow deficit. Then, with no savings cushion, the feds will have to slash benefits, raise the payroll tax, or borrow to meet increasing retirement payments.