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What Social Security Promises -- and Doesn't

Thursday, February 24, 2005; Page A20

Charles Krauthammer [op-ed, Feb. 18] suggested rolling cigars with the "pieces of paper" cre- ated when funds collected through Social Security are lent to the federal Treasury.

Those pieces of paper have a proper name -- U.S. Treasury bonds -- and they are backed by the full faith and credit of the U.S. government and are considered to be one of the safest investments in the world. I doubt that investors could be persuaded to send their investments up in flames, even if accompanied by the joy of smoking a cigar.

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Social Security

The real trouble with the president's Social Security reform proposal does not hinge on the years 2018, 2042 or 2052. The fundamental flaw with his proposal is that private accounts are, as the column noted, "irrelevant to the solvency problem."



Charles Krauthammer hit the solvency nail on the head but did not fully address the reason for Social Security's looming problem. Shortly after Social Security was enacted, Congress amended the law to enable dipping into the surplus that hadn't been paid to that year's recipients and leaving an IOU in the place of the surplus, thus subverting President Franklin D. Roosevelt's intent that all of the money in the fund be used for Social Security. Had that original intent been honored, Social Security would be solvent today.

If the Bush administration, Congress and the media pundits were truly interested in fixing Social Security, they would push to lift the $90,000 cap on wages subject to the payroll tax and repeal the provision that allows the government to "borrow" from Social Security.


San Diego

Robert J. Samuelson said that because we have no legal right to our Social Security benefits, claims about an unfunded liability ring false ["Lots of Pain and No Gain," op-ed, Feb. 16]. But whether or not the government plans to give us our money back as scheduled, the surpluses have been converted into Treasury bonds and represent real debt that the government owes to the Social Security system.

Mr. Samuelson said that the government could cut benefits when- ever necessary, yet he didn't arrive at the logical conclusion that personal retirement accounts would make the results of those changes less devastating to working Americans. If benefit cuts are inevitable, as he suggested, then why not give Americans a leg up with personal accounts?

Mr. Samuelson's column contained one of the most deceptive arguments against private accounts yet: The government could stop providing benefits and poof -- no unfunded liability, no problem. That was an attempt to put a silver lining around the fact that Americans don't have a property right to their Social Security contributions.


Research Assistant

Cato Institute


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