LIMBAUGH COMMENTARY: SOCIAL SECURITY IS IN CRISIS

NOTE: This is David Limbaugh's premier column as a syndicated columnist for Creators Syndicate, which also provides columns from Mona Charen and Walter Williams. Limbaugh is replacing Pat Buchanan, who is again running for president, in the Creators lineup. Limbaugh is a Cape Girardeau lawyer in the Limbaugh, Russell, Payne & Howard law firm. He has been writing a commentary for WorldNetDaily, an online newspaper, and the Washington Times. He is the brother of radio talk-show host Rush Limbaugh.

Our Social Security system is in crisis.

Daniel Mitchell of the Heritage Foundation reports that "Social Security benefit payments soon will exceed payroll tax revenues. Beginning in about a dozen years, these annual cash-flow deficits will begin to climb rapidly, soaring to $100 billion in 2015 and $500 billion in 2025." Even more staggering is his conclusion that "promised benefits exceed projected revenues over the next 75 years by an astounding $20 trillion -- and that is after adjusting for inflation."

If you think this is intended to alarm, you are correct. We have a catastrophic problem threatening the very solvency of our children's generation, and we have barely begun to address it. Carrie Lips of the Cato Institute tells us: "When today's first-graders enter the work force in 2015, Social Security revenue will not be enough to pay all legislated benefits. At that time, the Social Security Administration will have to redeem bonds by pulling $42 billion from general revenue. By 2035, Social Security will require $786 billion from general revenue -- almost twice what the government spends on Social Security today."

From its inception, Social Security revenues from payroll taxes have not been invested, as is the case with private funds, but commingled with general revenue and spent as soon as received. The Social Security fund is a phantom fund. The only assets it contains are IOUs (bonds) issued by the government when it borrows from the fund.

As interest accrues on those bonds, the government simply issues more bonds to the fund. But as Mitchell points out, the IOUs are not real assets. Even the Congressional Budget Office admits, "Trust funds have no particular economic significance; they function primarily as accounting mechanisms."

The problem lies in the fact that all of the IOUs in the Social Security fund are offset by equal liabilities from the general revenue fund. When one arm of government borrows from another and immediately spends the money, the government's net worth is not increased. It would be like a husband continually borrowing from his wife and claiming he was thereby enriching their marital estate.

The IOUs are virtually worthless because they are owed by another arm of government that has already spent the money. To pay back the fund, it will have to raise taxes, borrow money from the public or reduce other federal expenditures. So, as Mitchell notes, "The best possible interpretation of the Trust Fund is that the IOUs are a measure of how much taxes will have to be raised in the future."

Clinton's plan purports to prolong the solvency of Social Security by channeling the lion's share of the budget surplus to the Social Security fund. For the record, if revenues from Social Security are factored out, there is no surplus but rather an estimated deficit of $19 billion this year. Besides, the plan is just smoke and mirrors because it does not propose to place any actual money from the "surplus" into the fund, but merely to issue more IOUs to it.

But even if it did, Ronald Utt of Heritage notes that "the large budget surpluses projected by the CBO ($1.6 trillion over the next 10 years) would make only a small dent in Social Security's unfunded liability, which amounts to $18 trillion in today's dollars."

Many scholars agree that one of the best ways to solve the problem is to privatize all or part of Social Security by allowing workers to divert a portion of their payroll taxes into private retirement accounts, which would be actually invested and available upon retirement.

According to Peter Ferrara of Americans for Tax Reform, with partial privatization, "at even below average stock market returns, workers of all income levels would retire with large trust funds paying them several times the benefits promised by Social Security." Plus, it would erase the "$9.5 trillion unfunded liabilities of Social Security, eliminating more real government debt than paying off the national debt." Ferrara also predicts that privatization would result in dramatic reductions in payroll taxes and government spending.

President Clinton's plan to save Social Security is a ruse. Rather than solving the problem, it exacerbates it by diverting our attention from working on real solutions. Republicans will shoulder equal blame for this problem unless they muster the political courage to challenge Clinton on his illusory plan and advance a meaningful one of their own.

~David Limbaugh of Cape Girardeau is a columnist for Creators Syndicate.