I've been fighting a sense of despair on the subject of the brewing battle over Social Security. Here, once again, as with the runup to Iraq, we have a major battle in which the Bush team is systematically bulldozing a set of facts in order to throw up a new Potemkin-village reality in which their ideological preferences make sense. They've got the majorities in Congress, they had their "accountability moment," and now facts are just inconveniences to be flicked away. Social Security must be dismantled, therefore it must be in crisis. Don't believe it? They'll keep saying it, and much of the media will dutifully repeat it, until you ask yourself, "Am I crazy?"
So for the record, just as a matter of bearing witness to a set of facts that deserve as much air time as possible right now, here are some Social Security basics. I claim no originality; if you've been reading Brad DeLong or Josh Marshall, or if you tune in to the new Thereisnocrisis.com, or if you read the New York Times magazine cover story by Roger Lowenstein last week, this will be old news. Some things just bear repeating.
Social Security is supposed to be a safety net -- otherwise we'd all just have IRAs. The stock market is not a safety net. Privatizing a portion of Social Security can't be a means of saving Social Security because a private account is not Social Security, it's something else entirely. Saying "We have to privatize Social Security in order to save it" is like saying "We have to destroy the town in order to save it." (Oh, right, they've been saying that lately, too.)
Social Security taxes got a significant boost in the 1980s to help cushion the cost of paying for an increasing number of retirees due over the next couple of decades; that tax hike meant Social Security would run a surplus, and the surplus got stashed away in something called the Social Security Trust Fund. The fund takes your taxes and buys U.S. Treasury bonds. Sometime around 2018 the fund will have to start cashing in some of those bonds in order to cover the extra costs of Boomer retirement. This is part one of the "crisis" the Bush administration is warning about.
There was a federal budget surplus for a while under Bill Clinton, but George Bush decided that that money was "ours." The Feds should have been saving for that rainy-retirement day, but instead they went on a tax-break bender (and they picked and chose which of "us" got the most back). So come 2018, the federal government won't have the cash on hand to make good on those trust-fund bonds.
Now we hear a hypocritical chorus on the right telling us that the Trust Fund's assets are meaningless "IOUs" (Ramesh Ponnuru of National Review) or that the government's "promise" to pay Social Security benefits is "less and less believable" (George Melloan of the Wall Street Journal).
Note the bias here: Property rights are the foundation of capitalism -- but put that property in the hands of a program conservative Republicans have ached to destroy for 70 years, and suddenly it becomes transient, elusive, unreliable. When a Treasury bond is held by a private citizen or a foreign government, it's a financial obligation, indeed one of the most reliable and conservative investments around. But when it's held by an arm of the government in trust for the retirements of millions of working people? Then it's just meaningless paper. (Try using that argument on the bank that holds your mortgage or your credit card account! "Oh, yeah, I know I said I'd pay that money back, but it's really just meaningless paper, you know, and I already used the money for other stuff that I believe in. We've got a crisis." )
Conservative advocates of the Social Security pseudo-crisis like to say that the Social Security Trust Fund is an "accounting fiction" because it's just one arm of the government owing another. Of course, it's not an accounting fiction every April 15 when we tally up the 12 percent or so of our income that we pay into it. It's only an accounting fiction if you're George W. Bush and you and your Congress have raided the account and now you've got to come up with a good story for the American people about why you think it's more important to keep cutting taxes than it is to meet your Social Security obligations.
Now, there's another long-term issue with Social Security that kicks in, oh, somewhere in the 2040s or so, when -- depending on whose predictions you buy -- the Trust Fund itself might run out. Social Security wouldn't just vanish, but if the worst happens, then the government could only fund 70% or so of its obligation. This scenario could be avoided by raising the retirement age, increasing taxes, removing the Social Security tax's income cap or other tweaks. (This is what I meant last November when I wrote that "Everyone in Washington knows we need to fix Social Security," but -- as Dave Johnson rightly chided me for at the time -- in the current debate such a statement is easy fodder for distortion.)
Look, I'm sorry, but nothing that happens in the 2040s is a crisis today. And our government has a lot bigger fiscal troubles looming a lot sooner than Social Security's 40-year horizon.
By deliberately confusing the real-but-manageable long-term problems of Social Security with the non-crisis of 2018, the Bush administration is making it harder to provide a real fix for the 2040s -- because its chosen solution of funding private accounts will actually cost the already cash-strapped government trillions more in the short term.
The whole thing is a fiscal and ethical train wreck. Democrats have every right -- indeed, they have an obligation -- to try to make it a political train wreck, too. If the Republicans really want to go ahead with Bush's plan, let them do it alone, as Josh Marshall has been eloquently arguing, and let them pay the political price. If there's anything Democrats can and should be proudly partisan about, it's Social Security.
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