Facing dangerously low approval ratings for an incumbent, Senate
Majority Leader Harry Reid has turned to an age-old tactic in his
bid for re-election: scaring senior citizens.
As soon as Sharron Angle emerged as his Republican opponent, Reid
made Angle’s professed support for personal retirement accounts a
centerpiece of his campaign against her, launching a series of
ads blasting her for wanting to “wipe out” Social Security.
Reid’s gambit to defend his seat in a state with the nation’s
highest unemployment rate is part of a broader effort by
Democrats to navigate a difficult electoral environment. With a
weak economy and a public that has turned against President Obama
and his agenda, Reid and his fellow Democratic incumbents are
trying to resurrect their glory days, when they were the only
ones standing in the way of President Bush’s sinister plot to
destroy the popular but fiscally unsound government program.
The strategy was telegraphed in late January, when Obama cited
Rep. Paul Ryan’s “Roadmap for America’s Future” entitlement
reform plan in his talk at the House Republican retreat as a
“serious proposal” that he nonetheless opposed. Soon after, the
Democratic National Committee pounced on the plan and leading
Democrats argued that because Ryan was the ranking GOP member on
the Budget Committee, it showed that Republicans wanted to
“privatize”
Social Security.
The weak-kneed Republican leadership has mostly distanced
themselves from Ryan’s ambitious plan, emphasizing that it wasn’t
the official Republican budget. And in the midst of campaign
season, any GOP candidate who has indicated support for Ryan’s
proposal has been subjected to relentless attacks.
In the race for Wisconsin’s 7th Congressional seat, for instance,
Democrat Julie Lassa has
blasted Republican Sean Duffy for making general statements
in support of Ryan’s plan, which calls for voluntary personal
accounts for younger workers and other changes to make the Social
Security system solvent.
The campaign season debate over Social Security is set against
the backdrop of Obama’s fiscal commission. While conservatives
are convinced that the body is just a Trojan Horse for a European
style value added tax, liberal activists are worried that it’s
part of a plan to cut Social Security.
Last Wednesday, the liberal group MoveOn.org sent out an email
seeking to raise $185,000 to launch a preemptive campaign against
any efforts to cut Social Security. The ominous email warned of a
“showdown coming to Washington” over Social Security, with
conservatives and Blue Dog Democrats on one side, and
“progressives” on the other. As of this writing MoveOn had raised
$192,489, and had set a new goal of $250,000.
As part of the effort to avert any serious attempts to do
something about the looming Social Security crisis, liberals have
sought to deny any crisis exists in the first place.
Nancy Altman, co-director of the group Social Security Works, a
coalition of unions and other liberal activist organizations,
argued that “Deficit hawks plotting to cut Social Security to
reduce the deficit are seriously misguided. The truth is that
Social Security contributes not a single penny to the deficit.
Indeed, it is the poster child for fiscal responsibility.”
“Social Security is not in crisis,”
declared AARP President Barry Rand in May, urging the deficit
commission to avoid addressing the program.
At last month’s Nevada Democratic Convention, Reid got into the
act, too. “One of the myths around here is Social Security is in
deep trouble,” Reid
said, according to the Las Vegas Review-Journal.
“Social Security is not in deep trouble. If we did nothing with
it, it would be OK for the next 40 years. Now we want to make
sure it is OK for the next 40 years.”
Those who deny that Social Security is facing a crisis rely on a
series of specious arguments. The first is to put the focus on
2037 — the year the Social Security Trustees project the
program’s “trust fund” to be exhausted, rather than 2016, when
the program is expected to start running annual deficits. But to
draw such a distinction is to pretend that all of the money
doesn’t ultimately come from the same bank account (or in this
case, the collective bank accounts of American taxpayers).
The Social Security program is financed primarily by payroll
taxes. When the amount of tax revenue collected exceeds benefits,
the surplus is theoretically put in the trust fund. But in
reality, the federal government uses that surplus to finance
ongoing government operations, and puts a stack of bonds — or
IOUs — in the funds instead. So, while it’s true that for about
27 years, there’s theoretically enough money within the system to
keep paying beneficiaries, after 2016, that money will have to
come from somewhere — at a time when the nation is already
suffocating under a mountain of debt.
The 2009 Social Security Trustees report concluded that because
redeeming bonds held within the trust fund will need to come from
the general treasury, “Pressures on the Federal Budget will thus
emerge well before 2037.”
Further along these lines, the Congressional Budget Office, in a
report released earlier this month, wrote that the government
bonds held within the trust fund, “are an asset to the Social
Security system but a liability to the rest of the government.
The resources to redeem government securities in the (Old age,
Survivors, and Disability Insurance) trust funds and thereby pay
for Social Security benefits in some future year must be
generated from taxes, other government income, or government
borrowing in that year.”
Specifically, the CBO estimates that by 2020, Social Security
will be running a deficit of 0.3 percent of GDP. If you were to
apply that percentage to 2009’s GDP — the most recent year for
which actual data is available — it would represent $42.7
billion. That’s roughly the equivalent of the entire budget of
the Department of Homeland Security. And between 2020 and 2040,
that deficit is projected to more than quadruple, to 1.3 percent
of GDP, or $185 billion if translated into 2009 GDP terms.
Not having a plan to fix the Social Security crisis also makes
the bond markets more nervous, which could drive up the
government’s borrowing costs in the short term.
The other argument made by those who deny a Social Security
crisis is that the real crisis is the one facing Medicare and
Medicaid due to rising health care costs. It’s undeniable that
the health care spending crisis is worse (and that’s been further
exacerbated by the passage of the national health care law). But
that says more about the severity of the problems facing Medicare
and Medicaid than about the solvency of Social Security.
“There can be some tweaks done,” Reid himself said. “Stop trying
to frighten people about Social Security.”
While it is true that Social Security lends itself to a
combination of smaller fixes such as raising the retirement age,
limiting payouts to wealthier retirees who don’t depend on Social
Security for their livelihoods, or pegging the growth in benefits
to a lower rate of inflation, anybody who proposes such fixes is
typically subjected to the same sort of attacks that Reid has
been leveling against Angle. And the longer action is delayed,
the more drastic the solution will need to be.
Interestingly, during the campaign, Obama’s proposal for Social
Security was to slap those earning more than $250,000 with an
additional payroll tax (right now, payroll taxes only affect
salary up to $106,800). The problem is, Democrats already dipped
into that well when they introduced a similar tax to fund
ObamaCare.
Those who seek to preserve the unsustainable status quo in Social
Security like to see themselves as defenders of senior citizens.
In reality, they’ve declared war against America’s youth. If
there’s any hope for putting the nation on a sustainable fiscal
path, this will have to be proven a failed political strategy.
