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.