Social Security - The Last Stand

President Bush and the Republicans want to end social security. This is not new, and it precedes G.W. Bush. Social Security has a massive trust fund ripe for the raiding. Whether you call the proposed plan "privatize" or "personalize" it means the same thing - undermining the retirement fund and putting trillions of dollars into the hands of big finance at tax payer expense (see UTJ Privatizing Social Security is a Ponzi Scheme).

The Center for Budget and Policy Priorities has an excellent analysis of the most recent Congressional Budget Office report on Social Security titled The Implications of the Social Security Projections Issued by the Congressional Budget Office.

Two important books written by four of the nation's leading Social Security experts — Countdown to Reform: The Great Social Security Debate by Henry Aaron and Robert Reischauer, and Saving Social Security: A Balanced Approach by Peter Diamond and Peter Orszag — have shown, using the Trustees' projections, that long-term Social Security solvency can be restored by modest benefit and payroll tax changes that are phased in over a number of years. These books, as well as proposals developed by other experts, have shown that radical changes in Social Security's structure — including the replacement of part of Social Security with private accounts that carry greater risk for individual beneficiaries — are not necessary to restore long-term solvency.

The new CBO estimates strongly underscore this point. Under the CBO projections, the benefit and tax changes needed to restore long-term solvency would be still more modest.

According to the Social Security Trustee's report, there is not a fund issue until 2042. Using the assumptions of the CBO, that date would be 2052.

The Center report also notes the cost of permanitzing the Bush tax cut compared to the Social Security fund issue. They sate:

If the 2001 and 2003 tax cuts are made permanent as the Administration has proposed, their cost over the next 75 years will be more than five times the Social Security shortfall over this period, as projected by CBO. In fact, the cost over the next 75 years of the tax cuts just for the one percent of households with the highest incomes — a group with average incomes of about $1 million per year — exceeds the entire 75-year Social Security shortfall that CBO projects.

The Congressional Budget Office reports: "However, a pay-as-you-go retirement system such as Social Security cannot move to a funded basis--for example, to a system of private retirement accounts--without putting an extra burden on some generation or generations. To move to a funded system in one generation, either workers have to pay double, some generation must receive no benefits, or some balance of increased payments and reduced benefits must occur.

This flies directly in the face of Bush's State of the Union Address which attempted to create age warfare by in effect saying that only privatization would allow them any retirement possibility.

From the State of the Union Address: "For younger workers, the Social Security system has serious problems that will grow worse with time. "

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I recognize that 2018 and 2042 may seem like a long way off. But those dates are not so distant, as any parent will tell you. If you have a five-year-old, you're already concerned about how you'll pay for college tuition 13 years down the road. If you've got children in their 20s, as some of us do, the idea of Social Security collapsing before they retire does not seem like a small matter. And it should not be a small matter to the United States Congress.

Bush claims that by 2027, the government would need to come up with an additional $200 billion, and by 2033 another $100 billion to balance payments into the system to payments out of the system. There are a couple of problems with this analysis. The taxes for Social Security were increased with the demographic picture in mind. That is why there is a surplus in Social Security. The taxes were increased to address the issue that Bush raises, and the CBO reports reflect that. The other problem is that the transition to "personal" accounts is expected to cost $2 to $3 trillion. That is 1,000 times the cost of the estimated shortfall. Further, that is money that will be borrowed, which means that not only will tax payers have to make up the difference, tax payers will have to pay the interest on that debt.

It is well known that the much larger financing crisis is Medicaid - not Social Security. So why go after Social Security as the priority? It is the most lucrative to big finance. It also serves the larger purpose of shrinking government to the size that you can "drown it in a bathtub." And the cutting the government "down to size" was also clearly stated by Bush: "My budget substantially reduces or eliminates more than 150 government programs that are not getting results, or duplicate current efforts, or do not fulfill essential priorities." And what are those "priorities?" The privatizing Social Security, capping medical malpractice awards, opening up public land for oil exploitation, the "war on terrorism," and on "tyranny," and spreading "democracy" and "freedom." Oh yeah, I forgot last year's big vision - putting military outposts on Mars.