Throw away the lock box. Ignore the blue-ribbon commissions.
Don’t save Social Security. As the baby boomers age, the new
liberal mantra concerning FDR’s retirement program may be summed up
in a single sentence: The system ain’t broke, so don’t fix it.
Consider just last week’s liberal commentary on the subject.
Writing at TalkingPointsMemo, Josh Marshall discovered that “the non-existent Social Security
crisis” is really just a ruse by right-wingers to justify pumping
billions of dollars into the trust fund in order to subsidize “big
tax cuts for upper-income earners.” He concluded that even the
Democratic presidential candidates’ timid Social Security reform
proposals would be counterproductive if such tax-cutting were to
occur.
The New Republic’s Noam Scheiber quickly agreed, asking why “if you don’t actually
believe in the trust fund” — as most people who have watched the
federal government in action over the last 25 years don’t — would
you want to put more revenues into it. Scheiber then answered his
own, and Marshall’s, question: Because right-wingers “want to raid
it for tax cuts.”
But it isn’t right-wingers who want to stuff the trust fund with
more IOUs and more payroll-tax revenues. Typically, the culprits
are liberals. The proposal that got Marshall thinking was floated
by Illinois Sen. Barack Obama, a Democratic presidential candidate.
Obama suggested raising the cap on earnings subject to payroll
taxes, which now stands at $97,500. His rival John Edwards has
recommended levying that tax on workers earning more than $200,000.
(Hillary Clinton is presumably banking on the repeal of the Bush
tax cuts to supply the revenue.)
Robert Ball, a former Social Security commissioner under
Presidents Kennedy, Johnson, and Nixon, took to the Washington
Post op-ed page to argue that Social Security shortfalls are real
and can be solved predominantly by tax increases. “It’s the essence
of responsibility,” Ball asserts, “to insist on no benefit
cuts.”
Instead Ball would raise the payroll tax cap to cover 90 percent
of all earnings. The estate tax would be maintained and enlisted in
propping up Social Security. Investment is also an option, but for
the government rather than individual workers.
Even the usually respectable mix of tax increases and benefit
cuts, the last bipartisan fix agreed upon in 1983, is out. Ball
says that was fine back then, but would be “wrong today.”
This brings us back to where Marshall and Scheiber have better
than half a point. The Social Security trust fund is a polite
fiction, an accounting gimmick. The system’s surpluses have been
used to augment general revenues and spent on other budget
priorities. Preserving those surpluses will probably do more to
perpetuate this trend than promote long-term solvency, ensuring
that every so many years it will be 1983 all over again.
YET THERE ARE BIGGER THINGS to worry about than the possibility
that some rich person somewhere might someday get a tax cut. Under
the current laws, the Social Security system promises benefits it
cannot afford to pay. Throw in Medicare and Medicaid, and programs
that today eat up 40 percent of the federal budget may by 2030
consume 75 percent. Every year reform is delayed, the solutions —
both in terms of tax increases and benefit cuts just to pay for the
benefits of Americans who are already retired — get worse.
Moving from wage indexing to price indexing would slow the
growth of Social Security benefits without shrinking current
retirees’ checks. To the extent that this is a benefit cut, it will
fall disproportionately on the affluent taxpayers who benefited
from the post-Reagan reductions in income tax rates that vex
Marshall and Scheiber so.
Add a personal-accounts component and the Social Security reform
plan will alleviate Congress’ trust-fund temptations while
increasing the rate of return for young taxpayers. This is not a
cost-free proposition, given the temporary (but substantial)
increase in on-budget debt that would result. But taken together,
it could lower the cost of Social Security over the long term
without impoverishing retirees.
Such an approach was not controversial among mainstream
Democrats during the 1990s, when the nation was under Bill
Clinton’s watchful eye. Clinton named one Democratic supporter of
personal accounts, Bob Kerrey, chairman of an entitlement reform
commission. Another, the late Daniel Patrick Moynihan, preceded
Hillary Clinton in the Senate from New York.
If these reformist impulses are now passe because
Kerrey-Moynihan Democrats were insufficiently enthusiastic about
higher taxes, it won’t be right-wingers who destroy Social Security
in order to save it.
