Monday, March 07, 2005

Letter to Ann Althouse...

I Write so seldom that I have decided to post whatever I have got: Here is a comment I sent to popular blogress Ann Althouse in response to her call for good clear reasons why 'personal accounts' will help make the Social Security system more solvent:
Hi Ann, Regarding explanations for why personal accounts will help the long-term solvency of Social Security: For the past few years, I have been thinking about the Social Security Trust Fund and reading about it, but have never heard a take on it like the one I have. I know, I know! Now comes the bizarre fringy ‘take’ on it. The Trust Fund is supposedly for the purpose of making up funds needed for beneficiaries once outlays begin to exceed the money coming into the system. (This is expected to begin in about 9 years) The problem is that the trust fund doesn’t contain any assets, only obligations. Personal accounts divert money from the trust fund; but for each dollar diverted, a dollar of future liability is removed. This will not help the overall financial situation if nothing else changes because, each dollar diverted from the trust fund will be added to the deficit. Currently, the federal deficit is calculated by subtracting the surplus of Social Security funds from the actual deficit, thus hiding the true state of deficit spending. It is hoped that by ‘unmasking’ the true deficit, this will cause downward pressure on government spending. If the government can reduce its debt load, then the future ability to add debt will be increased. I hope this is a clear answer. I am not a politician, so I at least try to write clearly! Best regards, David
Note: I did some editing on the letter to Prof Althouse in Hotmail, so what I sent her is a bit different from what is presented here.

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