Let’s say we assemble a package of changes to Social Security, including a diversion of funds from Social Security to private accounts that somehow manages, by the necessary combination of tax increases and benefit cuts, to achieve solvency for th eprogram. If you put it all on a balance sheet, the diversion would have to count as an outflow…a reduction of the cash available to pay benefits.
Now. Remove that diversion from the balance sheet.
Suddenly the size of the necessary tax increase or benefit cut is reduced. Drastically.
It’s that simple.