Letter to the Editor
The Wall St. Journal
March 18, 1999

Double Delusion

Your March 9 editorial, "Debt Delusion," only touches on the biggest federal debt delusion of all. The accompanying chart shows "Federal Debt as a Percent of GDP." Because these "unified" figures net out assets held by the Social Security Trust Fund, the ratio declines briskly from its current value of 41.9% to under 10% by 2009.

The big delusion in these figures is that if Social Security assets are to be counted as belonging to the government, so, as you mention, should Social Security obligations. The CBO should be computing the annual growth in the actuarial value of Social Security obligations to future retirees, and netting these against the fund's accumulation of assets. If this were done, it would be seen that Social Security is not running a $97 billion annual surplus, as the pundits tell us, but is deeply in deficit. The true unified federal debt is growing, not falling, and could now easily exceed 100% of GDP. Congress and the public should demand to see these numbers.

J. Huston McCulloch
Professor of Economics and Finance
Ohio State University

Columbus, Ohio

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