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Josh Marshall's regular postings on the Social Security debate have been impassioned, persistent and invaluable. Today's Talking Points Memo lays out, in different and probably clearer language than I have been able to muster, the point I've been intermittently making here about the Bush Administration's duplicitous case for Social Security "reform" -- that the "crisis" Bush and co. are scaring the nation with is one of their own making, since they've squandered so much of the fiscal reserve set aside precisely to shore up the retirement system's future:
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After 1980 we started borrowing money big-time to finance our deficits -- in large part because of tax cuts on high-income earners. However you want to slice it, we started spending substantially more than we were taking in in tax revenue. So where'd we borrow the money? This is from memory, so I may have the numbers a bit off. But I believe about $4 trillion of that debt was borrowed on the open market -- individual Americans have them in their investment portfolios, or pension funds hold them, or the Chinese, Japanese and the Saudis and others have them in bonds. But about $3 trillion of those dollars we needed to fund the 1980s and 1990s deficits we managed to borrow closer to home. We borrowed it from the Social Security (and a few other government) trust fund(s). Almost the entirety of President Bush's Social Security phase-out plan comes down to a simple proposition: finding out how not to pay it back. |
Josh's writing here comes close to the "It's a Wonderful Life"-style clarity on this subject that so often eludes even our most gifted economist-pundits, and that I ached for a month ago. As this debate unrolls in the New Year, he is someone to keep up with.
BONUS LINK [Via Brad DeLong]: For those interested in delving a bit more into the numbers, this post by Brad Setser is a great complement to Marshall's.
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