One complaint commonly lodged by Social Security reform opponents is the so-called “transition cost.” “It will cost up to $2 trillion in just the first decade to transition to a system of personal accounts,” they often complain, “where will find the money?” Actually, that’s easy. Indeed, we can finance the transition without adding a cent to the projected future national debt.
We can start with the Social Security system itself. In his book How Social Security Picks Your Pocket: A Story of Waste, Fraud, and Inequities, Joseph Fried estimates that “$71 billion per year, in the form of spousal and survivor benefits, will be transferred to people with career wages above 70% of the career wage earnings of all other retirees.” You can read more about how this works here, but the bottom line is that because of a flawed spousal and survivor benefits system, Social Security wastes money by redistributing it upward. Fix it and we have $71 billion to put into personal accounts.
Then there is what the government spends on corporate welfare. This includes programs like the Agriculture Department’s Market Access Program that, according to the Cato Institute, “gives taxpayer dollars to exporters of agricultural products to pay for their overseas advertising.” It also includes the Advanced Technology Programs that “gives research grants to high-tech companies,” and Amtrak (no explanation needed). All told, it amounts to $93 billion annually.
According to the Financial Report of the U.S. Government, the feds can’t account for $3.4 billion in last year’s budget. Brian M. Riedl of the Heritage Foundation states that the government knows the money “was spent by someone, somewhere, on something, but auditors do not know who spent it, where it was spent, or on what it was spent.” Put that $3.4 billion in personal accounts and we will know exactly where it is.
Riedl also notes that there is colossal amount of waste in Medicare. For example, “Basic payment errors–the result of deliberate fraud and administrative errors–cost $12.3 billion.” There are plenty other areas of the federal government where money could be saved by preventing such waste, but we’ll be happy to start with Medicare.
There is also the $5 billion the taxpayers shell out each year for the boondoggle known as Community Development Block Grants. For over thirty years this program has spent gobs of money on the inner cities with little to show for it. We’ll have plenty to show if that money is redirected to personal accounts.
And we mustn’t forget budget earmarks–a.k.a. “pork.” This includes delectable little items like the D.C. Commission on the Arts, the International Fertilizer Development Center, and the Go For Broke Education Foundation’s course on segregated military units in World War II. Citizens Against Government Waste estimates that for Fiscal Year 2005 this cost the taxpayer $27.3 billion.
Assuming I did my math right (I only attended public school for a few years so the odds are good), that amounts to $212 billion. Extend that out over a decade, and you come up with over $2.1 trillion, more than enough to finance the transition costs.
Of course, finding the money is easy. Getting Congress to put it into personal accounts is another matter. For example, the Bush Administration proposed cutting Community Development Block Grants by over $1 billion this year. Earlier this month the Senate voted 68-31 to restore the funding.
But next time you get into an argument with liberals about transition costs, you can tell them you know exactly where the money can be found. Let them defend the way Congress spends it.
David Hogberg is a senior research associate at Capital Research Center.