On Budget, Off Budget

op-ed by Dale Coberly
Is It or Isn’t It
(And what is a “budget” anyway)

There have been a number of comments and counter-comments on the subject of the definition of “on budget.”

I may have contributed to this “debate” by referring to Social Security as “off budget.” I knew what I meant, and I thought I was using the words the way I had seen them used by “experts.” Then CoRev and MG found “definitions” that seemed to contradict my usage. It has seemed to me that these commenters didn’t really understand the definitions they were citing, but I think we both have been guilty of a kind of laziness and stubbornness that make it impossible to resolve the dispute.

I do not offer the following out of any claim to authority, but as an appeal to common sense.

Words don’t “mean” anything. They point the way to shared ideas. Just as a picture of a horse is not a horse, nevertheless the picture can remind anyone who sees it of their own experiences with real horses, or movie horses, or story horses. Words are the same way, they point us to experiences we might, or might not, share with the person we are trying to communicate with. But sometimes the experiences are not so well shared as we thought.

There are two concepts here that need clarifying. “Social Security” and “budget.”

The first is the legal, historical, practical, and moral status of Social Security.

Even before looking at that, it needs to be understood that Congress can change the legal status of anything at any time. [Subject only to the Constitution. But the Supreme Court can change the Constitutional Status of anything at any time subject only to what it thinks the people will put up with before they lose faith that the law means anything at all — other than the whim of the current resident.]

We know that. We do not argue that Social Security IS, and always will be, X. We argue that it was created as X, has always operated as X, and we think it should continue to operate as X. X in this case is that Social Security is funded by a special tax dedicated to pay for the retirement and insurance benefits of the taxpayer himself according to a formula based on his own direct contributions.

“Tax” is another word we need to be careful about: The SS tax is actually an insurance contribution. It is also a tax in that it is a non voluntary payment collected by a government, but it doesn’t act like a tax. It acts like an enforced savings “deposit,” which is dedicated to a fund which will be used to provide the taxpayer with essentially his own money (plus interest) back under certain well defined and all but certain conditions. Social Security taxes are legally separate from those taxes which are collected for the usual purposes of government, and they are accounted for separately.

They may be LENT to the government, quite formally, with an obligation of the government to repay the loan with interest. But they are not “fungible” or so mixed with government funds that they lose their identity. They always carry a “tag” telling everyone where they came from and where they must return to.

“Budget” is the other term we need to clarify. We ought to have learned from ENRON and Arthur Anderson that accounting can be used to conceal facts as well as to provide an honest record of where money comes from, and how it is owed, and to whom. A budget is created by an entity for its own purposes and does not necessarily reflect a larger reality. Thus, if you are operating an agency of the government, and you have always been able to count on money borrowed from Social Security to pay for part of your activities, you might just enter that money on your books as revenue. And if you have no expectation, or responsibility, to repay it, you might leave it at that.

But if you do have a responsibility to repay it, and you don’t properly account for that, a time will come when you are ‘surprised’ to learn that there is a call on the money you have spent and you are unprepared to repay. There may be an honest reason to keep books this way, or prepare a “budget” this way, but unless your purpose is dishonest… you wish to deceive or confuse your creditors, or auditors, you really need to enter the borrowed money on your books as borrowed money. that is, as a debt that you owe.

This is the case with Social Security. The government knows and legally acts as if it owes TO Social Security the money it has borrowed FROM Social Security. Whether or not it always notes that on any given “budget” does not change the legal… and moral… obligation.

My own feeling is that the decision to keep Social Security debt “off the books,” and to write the various “briefs” that we have seen quoted by CoRev and MG was a decision made more for the purpose of confusing the public… and the press… than for any good or honest reason… even that of convenience.

Sometimes they give themselves away, as when the author of a certain CBO “brief” attempted to convince us that Social Security was no different from any other tax because the money went into the Treasury just like other taxes. This would be like a bank telling you that your money was no different from Joe Smith’s because the same Teller took it in… and therefore the Bank can give it to Joe Smith if it wants, instead of to you.

Honest people can resolve these semantic confusions in a few minutes. When it’s harder than that you can suspect that at least one of the parties is not being honest. Try to look behind the word at the reality it is pointing at.

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