Social Security: Whats Hot; Whats Not; Whats NotchPart II: The Lock-Box is Neither

This is part two of a threepart series on Social Security. Last week, I presented the hot buttonissue for Social Security reform: Privatization. I discussed thepotential problems presented for African Americans as a result of the PresidentialCommission's three competing plans for privatizing the Social Securitysystem. While the solvency of Social Security is the fuel of thedebate, an under-current argument looms about how much responsibility shouldthe government assume in providing for retirement.

The hysteria around Social Security reformhas been driven, primarily, by two precepts: a) the numberof beneficiaries entitled to benefits will expand exponentially as thebaby boomers retire; and, 2) the current system, based on a formula ofrevenue income and benefit -cost outlays, may fail to render SocialSecurity solvent in years to come. With the world's older populationgrowing by an unprecedented 800,000 a month, and the United States ranking32nd on the list of countries with high proportions of people age 65 andolder, the worries are not completely without foundation.

The United States has experienced large budgetsurpluses over the last few years and in addition to proposals to pay downthe debt or provide tax relief, many members of the House and Senate believethat we should set-aside an amount equal to Social Security and MedicareHospital Insurance trust fund surpluses.

Currently, Social Security taxes aremore 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 wherethe taxes are insufficient to pay benefits.

In spite of the surplus and the "lockbox" promises, the perception that Social Security will face long termsolvency issues has ratcheted up the debate to a screaming pitch. Public opinion polls show that fewer than 50% of respondents are confidentthat Social Security can meet its long-term commitments. Centralto the reform debate and the public's perception that Social Security needsprotection, is the "lock box" phenomenon. The "lock box" is an imaginarysafe- guarding the surplus funds necessary for Social Security and Medicareto meet its financial obligations.

Beginning during the 106th Congress,Members sought to articulate their desire to secure the surplus funds whichrepresented the left over tax revenue from Social Security. Thesemeasures were designed to impose procedural obstacles on bills attemptingto use the Social Security and, in some cases, Hospital insurance set asidesfor purposes other than Social Security or Medicare. As we beginthe second session of the 107th Congress, "lock-box" measures continueto surface; On February13, 2001, the House approved H.R.2, The Social Securityand Medicare Lock-box Act of 2001.

As Social Security and Medicare are entitlementprograms and classified as mandatory spending, they are not subject tothe annual appropriations process. Only a law can prevent theraiding of existing surplus funds. To date, that law still eludesus. While we conveniently tout the sanctity of the "lock box" andvow ---ad infinitum-- not to violate it, we are not bound by lawto construct or respect a financial barricade around those funds.

There have been several measures introducedand passed in the House to construct a proverbial lock box, however, nonehave survived the legislative process. The "lock box" is anillusion. It is important to note that even if we passed lock boxlegislation, the solvency of the program depends solely on a change tothe systems income or out-go; in other words only measures which eitherincrease the in-coming revenue that pays for the benefits or revisedownward the cost of the benefits will really matter.

I fully expect the debate to center aroundtwo issues: should we retain the current system- binding ourselves to thecurrent pay now - collect later formula; or, should we allow current contributorsto risk the benefits of current enrollees with personal market orientedaccounts. Equally important to the debate is the question: "Do wepermit the consistent and reckless raiding of social security surplus dollarsto fund special interest initiatives?"

Essentially, the lock-box phenomenonprevents the rich and retirement-secured Americans from gambling away TODAY,the funding for the sole safety net of many minority, elderly and historicallyeconomically disadvantaged Americans of tomorrow.

Often times, the very projectsand programs - and corporate tax cuts- benefitting from the use of socialsecurity and medicare surplus funds are those interests who will most likelyfund their own retirement. One can argue that the Bush tax cut wasa reward package for all Americans, however, the bulk of the relief wentto the upper income brackets and corporate coffers.

Perhaps we need legislation to protectand secure the future of Social Security. Why we cannot pass a "lock-box"measure this Congress is still a mystery to me. The magnitude ofreform becomes less the central point if the future solvency of the surplusfunds are subject to nickel and dime budgeting. And even more scandalous-- if we permit those hard won surplus entitlement gains to go to those whowould not have relied on the system for their retirement funds in the firstplace.

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 yourrequest.