AL GORE'S PLAN TO PAY DOWN DEBT
SAVE SOCIAL SECURITY
© William Larsen
September 9, 2000
Al Gore's states in his 192 page outline, Section 3, page 38:
Increasing our national saving and strengthening our economy by
America debt free by 2012.
Increasing our national saving and strengthening our economy by making America debt free by 2012.
Based on current projections, that would result in a transfer of over $100 billion in 2011. The interest savings and the transfers would grow to a projected $250 billion in 2016. From 2016 to 2050 transfers would stay at this level. In total, Al Gore's plan would add- in Net Present Value terms - an additional $1.4 trillion to the Social Security trust fund.
This is a general revenue transfer from federal income taxes, corporate taxes, inheritance tax, etc. in addition to the projected Old Age Survivors Insurance (OASI) surpluses through 2017.
Does Al Gore's plan make America debt free by 2012? Al Gore has divided the national debt into two categories, Private and Public. Private debt he defines as US debt owned by individuals, banks, mutual funds, etc. Public debt is debt owned by Social Security and Government agencies. The national debt stands at about $5.9 Trillion of which Al states $3.9 Trillion is private debt. It is this $3.9 Trillion Al Gore intends to pay down. If the general revenue side of the budget spends no more than the general expense side of the budget, then Social Security's OASI tax surpluses of $1.9 Trillion in surpluses will pay down and reduce the $3.9 Trillion to $1 Trillion. If you add in the interest credited to OASI, it will pay down the additional debt. In essence Social Security is buying the private debt and in 2012 will own most if not all the national debt.
Besides paying down the private debt, Al Gore wants to transfer additional revenue from the general fund to Social Security. If there is no deficits, I am not sure what investments he plans to purchase with the up to $250 Billion per year. Does he plan to stash the cash in a safe where it earns no interest?
But let us say Al Gore's plan has a place for all the surplus money and it earns interest, what is the outcome?
First Al Gore's plan can push the insolvency date for Social Security's OASI program out to 2058. Al says he saves Social Security till 2054, but this is with the Disability portion of Social Security included.
Al does reduce the private debt to zero in 2012. However, let us look at what happens when all these US Treasury notes now owned by Social Security have to be redeemed. Starting in 2017, Al's plan must redeem $19.97 billion. Does this start the private debt all over again? By 2058, Al's plan will have sold off every US Treasury Note its owned. What happened to these notes? Were they redeemed by the US Treasury with cash or did the US Treasury borrow the money on the open markets? In 2037, Social Security will be have to redeem $1 Trillion in US treasuries and multiple trillions each year there after. By 2058 Social Security will have sold off its entire fund and if the Treasury has had to borrow money on the open markets, created a new private debt of $104.169 Trillion!
In essence Al moves the debt around, but never eliminates it. He hides it in the Social Security Trust fund to begin its resurrection in 2017.
Social Security's current cash flow
|General Revenue Transfers|
|Projected Interest Credited|
|Projected Social Security OASI fund balance|
|US Treasury debt Sales|
|US Treasury Debt Interest|
|US National Debt|
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