Social Security: What’s New; What’s Not; and, What’s Notch? Part Two: The ‘Lock-Box’ is neither!
Social Security: What’s New; What’s Not; and, What’s Notch?
Part Two: The ‘Lock-Box’ is neither!
By Congressman Gregory W. Meeks (NY)
This is part two of a three part series on Social Security. Last week, I presented the hot button issue for Social Security reform: Privatization. I discussed the potential problems presented for African-Americans as a result of the Presidential Commission’s three competing plans for privatizing the Social Security system. While the solvency of Social Security is the fuel of the debate, an under-current argument looms about how much responsibility should the government assume in providing for retirement.
The hysteria around Social Security reform has been driven, primarily, by two precepts: a) the number of beneficiaries entitled to benefits will expand exponentially as the baby boomers retire; and, 2) the current system, based on a formula of revenue income and benefit-cost outlays, may fail to render Social Security solvent in years to come. With the world’s older population growing by an unprecedented 800,000 a month, and the United States ranking 32nd on the list of countries with high proportions of people age 65 and older, the worries are not completely without foundation.
The United States has experienced large budget surpluses over the last few years and in addition to proposals to pay down the debt or provide tax relief, many members of the House and Senate believe that we should set-aside an amount equal to Social Security and Medicare Hospital Insurance trust fund surpluses.
Currently, Social Security taxes are more than what is needed to pay benefits. Left over tax revenue (the difference between the amount collected and the amount paid out), is paid into the Treasury and maintained in a trust fund: thus the "surplus." We maintain a surplus to cover the cost of benefits during years where the taxes are insufficient to pay benefits.
In spite of the surplus and the "lock box" promises, the perception that Social Security will face long-term solvency issues has ratcheted up the debate to a screaming pitch. Public opinion polls show that fewer than 50% of respondents are confident that Social Security can meet its long-term commitments. Central to the reform debate and the public’s perception that Social Security needs protection, is the "lock box" phenomenon. The "lock box" is an imaginary safe– guarding the surplus funds necessary for Social Security and Medicare to meet its financial obligations.
Beginning during the 106th Congress, Members sought to articulate their desire to secure the surplus funds, which represented the left over tax revenue from Social Security. These measures were designed to impose procedural obstacles on bills attempting to use the Social Security and, in some cases, Hospital insurance set asides for purposes other than Social Security or Medicare. As we begin the second session of the 107th Congress, "lock-box" measures continue to surface; On February13, 2001, the House approved H.R.2, The Social Security and Medicare Lock-box Act of 2001.
As Social Security and Medicare are entitlement programs and classified as mandatory spending, they are not subject to the annual appropriations process. Only a law can prevent the raiding of existing surplus funds. To date, that law still eludes us. While we conveniently tout the sanctity of the "lock box" and vow---ad infinitum-- not to violate it, we are not bound by law to construct or respect a financial barricade around those funds.
There have been several measures introduced and passed in the House to construct a proverbial lock box, however, none have survived the legislative process. The "lock box" is an illusion. It is important to note that even if we passed lock box legislation, the solvency of the program depends solely on a change to the systems income or out-go; in other words only measures, which either increase the in-coming revenue that pays for the benefits or revise downward the cost of the benefits will really matter.
I fully expect the debate to center around two issues: should we retain the current system–binding ourselves to the current pay now- collect later formula; or, should we allow current contributors to risk the benefits of current enrollees with personal market oriented accounts. Equally important to the debate is the question: "Do we permit the consistent and reckless raiding of social security surplus dollars to fund special interest initiatives?"
Essentially, the lock-box phenomenon prevents the rich and retirement-secured Americans from gambling away TODAY, the funding for the sole safety net of many minority, elderly and historically economically disadvantaged Americans of tomorrow.
Often times, the very projects and programs – and corporate tax cuts– benefiting from the use of social security and Medicare surplus funds are those interests who will most likely fund their own retirement. One can argue that the Bush tax cut was a reward package for all Americans; however, the bulk of the relief went to the upper income brackets and corporate coffers.
Perhaps we need legislation to protect and secure the future of Social Security. Why we cannot pass a "lock-box" measure this Congress is still a mystery to me. The magnitude of reform becomes less the central point if the future solvency of the surplus funds are subject to nickel and dime budgeting. And even more scandalous--if we permit those hard won surplus entitlement gains to go to those who would not have relied on the system for their retirement funds in the first place.
For more information on the "lock-box" issue and the 107th Congress, please call any one of my offices in Queens, Rockaway or Washington, DC and staff will provide information as per your request.