FROM ISSUE NUMBER 27 ~ SPRING 2016 GO TO TABLE OF CONTENTS

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Trust-Fund Budgeting

JACOB RESES

Policymaking always requires a level of creativity, both to come up with new solutions to problems and to find ways to pay for those solutions. Oftentimes, however, this creativity results in fictions that we adopt for convenience and are then bound to perpetuate for the sake of politics. Such fictions ultimately constrain our policy options and lead to misinformed, sometimes damaging policy choices. Few such fictions have thrown a bigger wrench into the policymaking process than the existence of supposedly massive trust-fund reserves financing Social Security and Medicare, the very programs that threaten to drive our country into a debt crisis.

According to the most recent annual reports by the programs' trustees, the trust funds for Social Security Old-Age and Survivors Insurance and Medicare Hospital Insurance held $3 trillion in assets at the end of 2014. While this sounds impressive, the massive annual cost of these programs means that they are not solvent for the long run. These funds do, however, allow opponents of reform to point to the existence of these assets, and to dates of insolvency seemingly far off in the future, as evidence that budget hawks have overstated the urgency of the need for reform. Beneficiaries, meanwhile, have been told they are paid up, that these programs have been funded by them fully, and that the benefits are therefore theirs to receive, without program modification or reforms to eligibility. The prospect of reform, in their minds, is a threat to something they have earned through their hard work and contributions over decades as taxpayers, and the trust-fund balances are the embodiment of government's commitment to that understanding.

It's easy to understand this misguided assumption; after all, $3 trillion is a very large cushion. Unfortunately, the programs' deficits are even larger. Projections of solvency vary, but according to the Congressional Budget Office, Medicare's Hospital Insurance Trust Fund is set to run aground in 2026 and will that year run a deficit of $68 billion. CBO's long-term outlook projects that Social Security's Old-Age and Survivors Insurance Trust Fund will run out of assets shortly thereafter, in 2030, facing a deficit that year of half a trillion dollars.

These numbers will force policymakers to confront a difficult choice on the day of reckoning for each trust fund between sudden programmatic changes to close these shortfalls or expensive general-fund transfers. But the situation looks worse when one considers the budgetary impact of the programs prior to the depletion of their trust funds. The decade preceding each program's insolvency will see cumulative, non-interest deficits of $299 billion and $3.3 trillion for the HI and OASI trust funds, respectively.

It would be one thing if the trust funds represented real savings by government on behalf of the programs for which they are dedicated. At least then, inaction over the next several decades would not doom the government to insolvency. But the trust funds' assets are mere IOUs, and our long-term fiscal outlook promises unsustainable deficits for the foreseeable future, compounding the already-massive debt accumulated in recent years. With the Census Bureau reporting a low fertility rate and a major increase in the old-age dependency ratio looming, the unfortunate reality is that those trust-fund "assets," which have soothed us into thinking we have nothing to worry about, represent obligations that are rapidly maturing into major liabilities even before the hypothetical trust-fund assets disappear. That means we can't afford to wait for the assets in the trust funds to deplete to take action — not just for the sake of their associated programs' beneficiaries but also for the fiscal health of our nation.

The trust-fund financed programs have not played a passive role in bringing us to this point. The budgetary gymnastics and resulting budget-solvency fictions enabled by our system of trust-fund accounting have done more than merely obscure the coming budget crisis. A closer inspection suggests that those fictions have in some measure created the crisis. For that we can blame the unified federal budget, which since fiscal year 1969 has credited the surpluses meant to shore up trust-fund reserves for the long term as reducing the federal deficit in the short term. During boom years for the trust funds, the unified budget has given Congress leeway to spend more elsewhere in the budget. And even with the bust years imminent, it still gives politicians the opportunity to double-speak in the service of expanding bloated entitlements we cannot afford, claiming that they are "saving" these programs in the course of raiding their supposed "trust funds" to finance other new expansions of the welfare state.

As Congress considers how best to reform a budget process that in so many ways tilts the scales toward the expansion of government, it would do well to recognize that we have had in place for decades a flawed system of trust-fund accounting within the unified federal budget that has undermined the stated goals of the trust funds. Left with the results of that failure, this budget concept has generated political constraints limiting our options for addressing the fiscal problems it has created. The perpetuation of that budget concept is now serving to facilitate the very expansion of government that its own failures have rendered unaffordable.

Rejecting the fundamental premises of that budget concept can be an important means to the end of restraining the growth of government. But realigning our policy options with our fiscal reality by rethinking our approach to trust funds can also be viewed as an end in and of itself.

A HISTORY OF THE UNIFIED BUDGET

The problems with our current accounting for trust funds in the unified federal budget can best be understood in the context of the trust funds' purposes and history.

Trust funds can, in theory, fulfill two valuable goals. The first is to ensure that, year-to-year, the receipts (from user fees or taxes) specified to cover the operating expenses or outlays of a given program match those costs as intended by lawmakers. When trust funds face shortfalls, typically the programs they finance will be unable to continue normal operations unless Congress reforms them or restructures their funding mechanisms. In some cases, such as the federal highway trust fund, imbalances occur frequently, generating some pressure for Congress to consider changes on a somewhat regular basis. In this sense, the trust funds act as an alarm signaling that a program has diverged from its initial design, and while Congress can bail such programs out — as it often does with highways — that alarm signal is important in generating momentum behind reform.

Second and more significant, trust funds can be designed to cover long-term expenses for programs like Social Security and Medicare by pre-funding in the short-term to cover higher outlays in the future. Not all programs of this nature are old-age retirement programs; even the unemployment trust fund can be understood as a mechanism to build up limited countercyclical pre-funding for its beneficiaries, building reserves in economic booms to ensure adequate funds to disperse during busts when unemployment spikes.

In some cases, trust-fund programs have been designed or reformed with an eye toward actuarial balance over a specific period. For example, the 1983 reforms to Social Security were heralded as bringing the program into 75-year balance, by reducing benefits and raising taxes to build up a substantial trust fund over the first half of that period in preparation for the retirement of the baby boomers in the second half. By aiming for long-term balance, these trust funds, like the aforementioned non-pre-funded trust funds, can help policymakers assess whether the government is on track to meet the long-term obligations represented by the short-term buildup of trust-fund assets. That said, not all trust-fund financed retirement programs are properly pre-funded. The Civil Service Retirement and Disability trust fund, for example, was consciously designed as part of a pay-as-you-go program, though over time, the government has reformed the program to account for more long-term obligations than under the system's initial design.

Today, most of the trust funds are accounted for in the so-called unified federal budget. Their surpluses therefore have for years decreased the apparent size of the federal deficit. And while Social Security, the largest trust fund, has been designated as an off-budget program since the reforms of the 1980s, its balances are usually counted in the aggregated budget totals presented by scorekeepers at OMB and CBO and were largely responsible for the unified budget surplus that informed the fiscal policy decisions of the 1990s.

On the surface, this arrangement may seem to make sense. The programs financed by trust funds are indeed federal programs, and counting them in the federal budget gives a more accurate picture of the federal government's annual spending. But we have not always accounted for the trust funds in this manner, and for good reason.

The fiscal year 1932 budget, for example, reformed the way the Bureau of the Budget (the precursor to the OMB) treated trust funds to separate their revenues and outlays from the rest of the federal balance sheet. While the budget included some comprehensive tables incorporating trust funds for the sake of comparison to past years in which the trust funds had been included, the main numbers emphasized in the document excluded the funds. As President Hoover explained in his budget message, "This has been done for the reason that trust funds do not belong to the Federal Government but to the beneficiaries of the trusts; and, in summarizing the financial condition of the Government, trust funds should therefore be excluded."

In the Roosevelt administration, the separation only increased, with the consolidated trust- and general-fund statements eliminated from the main budget tables in fiscal year 1935. This was fitting given that the Roosevelt administration shortly thereafter introduced the most significant trust-fund financed program, which depended more than other programs on having an appropriate degree of separation between its books and the rest of the government's: Social Security. The program was initially financed not directly by payroll taxes but indirectly, with Congress appropriating the necessary amount of payroll receipts to the Old-Age Reserve Account, whose assets were treated by the Roosevelt administration as a trust fund and therefore were not counted within the rest of the federal budget. As a result, the annual appropriation was justly treated as a net cost to government despite the fact that the government held on to the funds, a practice that continued with the initial shift to the modern Old-Age and Survivors Insurance Trust Fund and automatic earmarking of payroll receipts to the fund.

The simple theory behind this budgetary scheme is this: If the costs of pre-funding programs are accounted for as genuine costs in the short term regardless of the fact that the money always remains in Washington's hands, lawmakers will budget accordingly, spending less or taxing more to address general-fund shortfalls and ensure that the long-term obligations are provided for when the time comes to pay beneficiaries.

In a Harvard Law School briefing paper titled "Reconsidering the President's Commission on Budget Concepts of 1967," Michelle Rodgers and Dan Sullivan, offer a history of the federal budget beginning in the 1920s that explains how the simplicity of this early 20th-century model was overtaken by the emergence of modern macroeconomic analysis and the development of new budget concepts reflecting the needs of the discipline. The federal budget swelled over several decades with new metrics competing with the budget model of the Hoover-Roosevelt era, foremost among them a consolidated cash budget, including both general and trust funds, and a National Incomes Account budget that also included the trust funds. No longer was federal budgeting merely a scheme for proper accounting. It was now a tool to track key metrics of government's economic impact.

The budget documents that resulted from the proliferation of these concepts were a mess, rendering meaningful budget debate unintelligible. Policymakers debating the specifics of the federal budget could easily find themselves talking past each other, referring to different budget concepts starting from different accounting assumptions. Ellsworth Morse, Jr., then-director of the Office of Policy and Special Studies at the General Accounting Office, noted, "In public discussion of the budget some speakers would use one concept and some another. The choice often depended on which would advance the point of view of the speaker most effectively at that particular time. This [multi-budget] approach probably sparked more criticism than any of the other concepts guiding budget presentation."

President Lyndon Johnson agreed. While "[t]radition and precedent have played an important role over the years in the shaping of our budgetary rules and presentation," he explained, "[t]he fact is that today all are agreed that some of our traditional budget concepts do not adequately portray how the Federal Government's activities affect the health of the American economy and the lives of the American people."

To address the issue, Johnson convened the President's Commission on Budget Concepts to issue recommendations for reform. In recommending simplification, the commission acknowledged that, "[i]n theory, trust funds do not belong to the Federal Government; the Federal Government acts only as a trustee for them." But the commission was partial to the view that tracking the year-to-year reality of government's scale outweighed concerns about proper accounting for long-term obligations. Thus the massive trust funds could not be ignored in the federal budget. As the commission report asserted, "It is clear to the Commission that the current surpluses of trust funds must be considered in calculating the effect of Federal Government activities on the level of income and employment, in managing Treasury cash balances, in deciding on Treasury cash borrowing needs, and in program evaluation." Proponents of a unified budget concept didn't merely attest to its utility; they outright dismissed the tradeoffs of accounting for trust funds in such a manner. As one article in the Journal of Accountancy put it at the time (emphasis added), "Trust funds are a part of total government activity. The government is more than a passive trustee....Accordingly, since these funds have significant fiscal impact and are in fact a governmental activity, there is no reason to exclude them from the budget."

RAIDING THE TRUST FUNDS

The record in subsequent years has tested that assertion. Since its implementation in fiscal year 1969, the unified budget has indeed worked well at giving policy analysts a sense of government's scale in the short term. But it appears simultaneously to have wreaked havoc on our ability to save for programs with long-term obligations.

In a 2004 NBER working paper aiming to assess whether the unified budget had undermined trust-fund-financed programs' savings, particularly in the wake of the 1980s-era reforms to Social Security and the military and civil-service employee retirement programs, Stanford University economist John Shoven and Sita Nataraj hypothesize:

In order for the trust funds to actually assist future generations of workers, they must increase national saving, presumably by raising government saving....However, current federal budget policies treat the surplus of trust fund revenues over expenditures, and the interest received by the trust funds, as part of the unified surplus. The focus on balancing the unified surplus may serve as an invitation for the rest of government (referred to as the federal funds) to offset the trust fund surplus through increased government spending and the reduction in other taxes. Thus, the budget process may undermine the attempt to raise government saving and build resources for future workers.

The numbers have borne out these concerns, suggesting that the pre-funding reforms of the Reagan era didn't save a dime, whatever the nominal trust-fund balances that resulted.

Shoven and Nataraj find that, prior to the implementation of the unified budget, there was a statistically insignificant relationship between federal-funds deficits and trust-fund surpluses. But in the unified-budget era, controlling for factors like interest rates and GDP, each dollar of trust-fund net savings appears to have been more than completely offset by additional federal-fund spending. The import of their result given the monumental nature of the reforms of the 1980s was striking:

Overall, our results suggest that government saving has not increased despite the almost $3 trillion accumulated in trust funds since 1985. Future generations may have lower payroll taxes than they otherwise would have, but they will not have more resources. They themselves will have to finance their lower payroll taxes with higher income taxes (or lower government spending). The intergenerational burden sharing envisioned by the Greenspan Commission has been thwarted.

The economic literature isn't unanimous on this point. Similarly, more recent analysis by Randall Mariger of the Department of Treasury finds only weak support for the claim that trust-fund savings incentivize federal-funds spending, while analysis by Thomas Hungerford finds no correlation.

It appears the statistical link between the trust-fund surpluses and federal-funds spending frayed in the post-Clinton era, as unprecedented deficits emerged while trust-fund savings remained relatively stagnant and then declined. But we would assume too much to assert from a breakdown in the statistical link that there is no longer or has never been an important causal relationship between trust-fund surpluses and federal-fund deficits due to the unified budget. No set of controlling variables can perfectly account for the changes in political circumstance that feed the deficit-sensitivity of any era in our politics. Moreover, there is good reason to believe that there is a causal link between the unified budget's treatment of the federal trust funds and the emergence of these recent deficits, even if the year-to-year relationship between the figures seems to have broken down in the Bush years.

From the second Reagan term through the Clinton years, budget deficits were restrained by a number of norms and procedures designed to force policy discipline, from the deficit targets of the Balanced Budget and Emergency Deficit Control Act of 1985 (known more commonly as Gramm-Rudman-Hollings) to the Budget Enforcement Act of 1990's spending caps and pay-as-you-go (PAYGO) procedures. But during the 1990s, because the surpluses of the trust-fund programs, particularly Social Security, papered over federal-fund deficits to produce the much-heralded balanced budgets of the period, the will to extend such mechanisms into the new millennium eroded. The establishment of new formal budget-enforcement mechanisms such as the Budget Control Act has helped draw down deficits from their Obama-era peak, but the debt accumulated in the intervening period, in part thanks to the misleading lull in deficits of the Clinton years, remains on the books.

Regression analysis and theories to explain general trends are important in understanding the unified budget's role in driving deficits. But any general account has its limits. When it comes to determining causality for federal deficits, driven as they are by innumerable political, social, and economic factors, there is no substitute for examining specific cases. And that examination should leave little doubt: Politicians are shameless about manipulating the rules of trust-fund accounting to justify new spending.

The passage of Obamacare is perhaps the most important recent example. By CBO's 2010 estimates, Obamacare authorized $940 billion in new spending to expand insurance coverage over its first ten years. Congress partly offset these costs with provisions for new revenue like the medical-device tax and the so-called "Cadillac tax" on expensive employer-sponsored plans. To make up the remaining difference, it relied on Medicare changes similar to proposals that had been considered previously in the Senate Finance Committee's earlier draft of the legislation: changes to physician payments, cuts to Medicare Advantage, and new Hospital Insurance revenues. All told, the actuaries credited Obamacare with $575 billion in net Medicare savings — even as those savings were used to paper over the law's new spending. These ten-year estimates have changed over time, as the law's schedule did not provide for full implementation until several years into the initial ten-year budget window.

The result of all of these offsets was that, technically, Medicare's solvency was extended. Although the Supplemental Medical Insurance trust fund had been in no immediate danger of running out of assets, the 2009 Medicare trustees' report had indicated that the Hospital Insurance trust fund was set to run out of assets in 2017. Obamacare pushed that date well into the next decade.

Critics of the bill seized on the so-called "double-count" enabled by official scorekeeping rules under the unified budget. During one hearing, Representative John Shimkus asked Secretary of Health and Human Services Kathleen Sebelius, "So is it Medicare — is it using [the Medicare savings] to save Medicare or are you using it to fund health care reform?" Secretary Sebelius, clearly exasperated, responded: "both."

And while Medicare's actuaries were forced by law to score the law favorably on technical grounds, they made clear that they were not fooled by the maneuvering. Rick Foster, then-chief actuary of the Centers for Medicare and Medicaid Services, explained at the time:

The combination of lower Part A costs and higher tax revenues results in a lower Federal deficit based on budget accounting rules. However, trust fund accounting considers the same lower expenditures and additional revenues as extending the exhaustion date of the HI trust fund. In practice, the improved HI financing cannot be simultaneously used to finance other Federal outlays (such as the coverage expansions) and to extend the trust fund, despite the appearance of this result from the respective accounting conventions.

Though Medicare experts and Republican critics of the bill succeeded in raising the issue of the double-count, an amendment offered to address the issue by Senator Judd Gregg failed to land in the final bill. The end result was more new spending commitments adding to the deficit, and less fat left to trim from Medicare in the service of genuinely improving the nation's fiscal outlook.

But Obamacare is only one example of the way in which the unified budget allows policymakers to claim credit for fiscal discipline while actively undermining it. More recently, Republicans have been complicit in playing the shell game, crediting Social Security payroll receipts resulting from the Senate's comprehensive immigration-reform bill in 2013 as cost offsets while simultaneously boosting the bill as shoring up the Social Security trust fund. Under the unified federal budget, fiscal double-speak is a bipartisan game.

TOWARD A BETTER BUDGET

For conservatives who have long been skeptical of the federal government's direct management of the old-age retirement programs that are largely driving our long-term obligations, the impact these accounting practices have had on our fiscal outlook is one more vindication of their concerns. Thus it has been easy for them to draw the connection between solving the narrow trust-fund accounting issue and addressing the broader priority of reducing government's role in administering these programs more generally. It's no accident that Social Security reform plans like former-senator Jim DeMint's "Stop the Raid on Social Security" proposal promoting private accounts have been framed in the language of protecting the trust funds.

That those plans have faced opposition due to their transition cost speaks less to some inherent flaw in privatization than to the nature of the problem the trust funds have created. A truly pre-funded program would involve no transition cost because its current beneficiaries would already be provided for. Unfortunately, that's not true of our existing Social Security system.

In the shorter term, policymakers attuned to the problems caused by the unified budget might be tempted to draw from the example of the Reagan-era change to Social Security's budget status. When the 1983 Greenspan Commission proposed a series of reforms to shore up the program's finances, the question of how to account for the savings achieved through the reforms was of paramount concern. The commission noted that some of its members felt "the situation would be adequately handled if the operations of the Social Security program were displayed within the present unified Federal budget as a separate budget function, apart from other income security programs." But the commissioners ultimately rejected this perspective, opting instead to take the program entirely off-budget, ostensibly to address head-on the fundamental flaw of unified budgeting.

The plan did not quite work out as intended. For all the initial emphasis on the sanctity of Social Security's off-budget status, CBO and OMB quickly took to emphasizing combined on- and off-budget deficit totals, decreasing the apparent size of the deficit and rendering Social Security's surpluses off-budget in name only. The decision to use the combined totals was not entirely in service of a particular agenda; under Gramm-Rudman-Hollings, which accelerated the initial timing of Social Security's transition to off-budget status, the program's surpluses could not be ignored because they were factored into the deficit targets mandated under the law. But even once the initial Gramm-Rudman-Hollings targets were replaced with discretionary-budget caps, the practice of consolidating on- and off-budget surpluses and deficits generally remained in place.

Whatever the merits of those reforms that took trust funds off-budget to generate and protect surpluses, they could not be recreated today, as the trust funds' circumstances have changed. The Greenspan Commission-generated savings that the trust funds' off-budget status was meant to protect have no modern analogue. Though our trust funds still record assets, they have become more or less meaningless; our massive structural deficit is all the evidence needed to prove our failure to account for those assets' corollary obligations.

Moreover, we are approaching a turning point in the history of the trust funds. For the entire history of modern federal budgeting, the trust funds have run combined surpluses, driven largely by Social Security. It's clear given the outlook for Social Security and Medicare that this will soon change.

The unified budget's treatment of trust-fund surpluses will no longer serve to hide federal-funds deficits. That does not mean, however, that we are bound to enter a period of more realistic debate about our fiscal policy. The expectation should be the reverse. Those who seek to expand government will now shift their focus from the once-smaller unified deficits to the soon-to-be smaller federal-funds deficits, justifying their change in emphasis on the rationale that our non-existent trust-fund savings make the programs they finance sacrosanct in budgetary negotiations. They've had their cake, and they will insist on eating it.

The challenge for conservatives, then, is no longer how to prevent trust-fund surpluses from ballooning the federal-funds deficit. That ship has sailed. The task now is to determine how best to reform the programs whose obligations we have failed to finance in advance and which will likely crowd out all other budget priorities in the near future.

To some degree, taking all of our trust funds off-budget might actually undermine that task rather than facilitate it, because it would lend false credence to the already-common talking point that trust-fund financed programs should not be considered the drivers of our debt. For the Greenspan Commission in the 1980s, insulating Social Security from reforms once it had been placed on sound actuarial footing was one of the explicit goals of taking the trust fund off-budget. Given the dire need for entitlement reform today, such insulation hardly seems appropriate.

The simple answer, then, would seem to be to abandon the fiction of trust-fund accounting altogether, at least for now. We're already paying as we go for these programs, and the unified budget treats them as such. It would be better to have saved, but that has not occurred. Why not embrace that reality?

Eliminating the trust funds and adopting a pay-as-you-go approach to funding these programs, at least for now, would not amount to an abandonment of the goal of pre-funding for long-term obligations. Rather, it would make the debate about how to achieve savings more intelligible. The apparent irrationality of taking on transition costs to privatize pension programs would be placed in proper context once our budget debate is shed of the fiction of false trust-fund assets. And there would be side benefits, such as allowing for a less politically fraught reconsideration of the tax code, particularly on the payroll side.

For those programs the country might prefer to pre-fund but leave under government's control, there would be no precluding the re-establishment of trust funds at some point — but they would start from the more accurate premise that they bear no pre-existing assets. Of course, doing so would make little sense absent budget-enforcement mechanisms to prevent the sort of trust-fund raiding that has occurred for years under the unified federal budget.

Given the heavy political lift it would take to wipe our false but politically potent trust-fund assets away from consideration, thinking through such budget-enforcement mechanisms might therefore be a more sensible starting point for reforming the accounting of these programs. Consideration of such mechanisms would also need to address another important priority: the prevention of efforts to use reform of programs like Medicare as a pretext to expand the welfare state, as occurred with the passage of Obamacare.

Such a defense could be mounted through reform of two such mechanisms: first, the Senate's Byrd Rule, which requires that budget-reconciliation legislation not increase the deficit, and second, the PAYGO scorecards maintained both by statute and under the rules of the House and Senate. Though the details of the various PAYGO procedures vary, the relevant common thread is that all require Congress to find offsets for mandatory spending increases. Obamacare slipped by the PAYGO rules only by including its double-counted Medicare changes; had Medicare been excluded from consideration, we would not be burdened by the law's new spending today.

Preventing lawmakers from counting savings achieved in trust-fund financed programs as offsets under these procedures for new federal-fund spending wouldn't be unprecedented, as protections of this nature already exist for Social Security. And so long as we remain burdened by the fiction of our current trust-fund accounting system, such a rule would be perfectly consistent with efforts to protect those supposed savings. More important, in walling off a massive pool of potential spending offsets, this would decrease the likelihood of the next expansion of government and lay the groundwork for the future establishment of authentic trust-fund accounting.

A TIME FOR REFORM

This sort of debate may seem abstract at first, but rethinking assumptions about trust-fund accounting and the unified budget will have practical implications for conservatives' efforts to turn a page on decades of government overreach. Even in the last year, conservatives nearly saw stale budget thinking impede an essential policy priority, the repeal of Obamacare through budget-reconciliation legislation. Thanks to Obamacare's Medicare double-count, many believed repeal would be too heavy a lift for the Senate Budget Committee to shoulder. Republicans prevailed in that fight and advanced a repeal bill to President Obama's desk, but it is unlikely to prove to be the last time that the unified budget stands in the way of conservative policy priorities.

Conservatives will find themselves at a disadvantage time and again in the next Congress if they think about such incidents solely on an ad hoc basis. Process changes are no panacea, and obsession with process can distract from policy development. Still, budget process matters, as others have demonstrated so ably in these pages.

And it matters particularly in the moment we've arrived at in our public finances, which in so many ways reflects the moment in which we find ourselves in our broader politics. Our unified budget, born as the early baby boomers became taxpayers, told them that they could have it all: more spending on government programs to stimulate the economy during their working life and retirement security at the end of life, all funded by the same dollars. Now, the trust-fund reserves provide the opponents of reform grounds for unjustified sanctimony in making their case. It is all the worst of what the boomer era brought to politics, all boiled down in a simple budget concept.

There are few obvious remedies for the sort of budget confusion sown by these changes. But in understanding the problem, we can avoid making it worse, and we can give ourselves the perspective to see the cliff ahead of us before we drive over it. At a time when so many of our leaders are promising so much to us for free, it is as important as ever to educate the public that our choices today have consequences down the road, no matter how clever the fictions devised to conceal them.

Jacob Reses is director of strategic initiatives at Heritage Action for America.