Sunday, February 06, 2005

For Democrats, the SS Crisis is “Here Yesterday, Gone Tomorrow”

Congressional and other Democrats are beside themselves trying to combat President Bush’s efforts to head off a looming crisis in Social Security. Only a few years ago, Social Security was about to collapse unless the Democrats saved the day. Today, when someone else will get credit for saving the day, the Democrats can’t seem to identify the crisis.

They should read the column below.

February 1, 2005

Signs of Crisis Are Clear

by Michael Tanner

Michael Tanner is director of health and welfare studies at the Cato Institute, a libertarian think tank in Washington, D.C.

We can become embroiled in semantic quibbles over what constitutes a "crisis." However, the facts have a certain heft.

Social Security will begin running a deficit in less than 15 years — that is, it will begin to spend more money on benefits than it brings in by taxes. At that point, to continue to pay promised benefits, the program will have to draw on the Social Security Trust Fund.

Crisis deniers have made much of the trust fund recently, suggesting that it guarantees Social Security's solvency until 2042, or even 2052, according to some projections. However, it was President Clinton — not President Bush — who pointed out that: "These trust fund balances are available to finance future benefit payments … but only in a bookkeeping sense."

Clinton's fiscal year 2000 budget explained that trust fund assets are not "real economic assets that can be drawn down in the future to fund benefits." Rather, these funds are "claims on the Treasury that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures."

Thus, in less than 15 years, the federal government will have to begin finding billions of dollars to continue paying benefits — by cutting benefits, raising taxes or borrowing even more money. Overall, Social Security's unfunded liabilities total nearly $12 trillion, and the longer we wait, the worse it gets. Estimates suggest that each year that we wait to reform Social Security costs between $150 billion and $600 billion more.

That sure looks like a crisis to me.

But the larger crisis is not about the system's finances. It is about workers forced to pay 12.4% of their wages into a system that cannot pay them the promised level of benefits. It is about a system where workers have no real ownership of their benefits, and where low- and middle-income workers cannot accumulate wealth that they can use in retirement and pass along to their heirs.

We have an unfair system that is slowly going broke. Some commentators say this is acceptable and is not a crisis because they might be dead by the time the bill comes due. The mind boggles.


Unknown said...

There is no crisis. A crisis would insinuate that if we do not do anything right now, then older (working class) people would not be receiving SSI benefits due to a lack of funds available... in five years from now... That is just NOT the case.

There is a problem, one that can be fixed with slow, incremental change over the next ten years. Slow continuous steps can fix this problem...

Drastic changes such as "private accounts," appeal to many in the upper middle class, like myself. But SSI is not about me, it's not about you...

People in the upper middle classes already have "private" accounts... It's called 401(k) plans, IRAs, Trust Funds, etc...

In my world, I would suggest that my portion and my employer's portion would all be put into some 401(k) type account... that would be fine with me... but I am an American... and understand that not everyone has the same earnings as myself.

In the grand scheme, the costs of SSI are naught compared to truly wasteful programs that we invest in...

Buffalo said...

Naive individual that I am, I wonder how many of our woes could be solved if the government would quit spending our money like drunken sailors on shore leave.

The business of this country should be treated like business. If you spend more than you take in, you go bankrupt. If you borrow from your escrow account to pay other obligations the escrow account dwindles and you can't meet the obligations for which the money was earmarked.

Virtually every problem we have in this country exists because we allow it to exist. We keep electing the same people time after time after time. Only the names change on occasion.

James Shott said...

Well, Brad, I just don't know what to say. The Democrats not so long ago said we had a "crisis." GWB now says we have a "crisis." He demonstrated fairly well that a problem does indeed exist, although we won't feel the pain for some number of years, depending upon whom we believe. For me, I am old enough not to be affected by whatever happens down the road. But my kids will be, and I choose to believe that we need to address this problem now, or at least pretty soon.

Why wait, and then have to impose extreme measures? Why not start now making gradual changes to shore up the system?

Buffalo is right, of course. We do spend too much. And Bush is not nearly conservative enough on spending. But I think he's right about SS, and we need to start working on this real soon.

I'm not necessarily advocating the privatization-that-is-really-not-privatization solution, although for the life of me I can't see any harm in allowing people the option of controlling a portion of their own money going to fund their own future. If there's a cost to doing that, all the more reason to start now to pay for it.

We all three know that SS was not intended ever to become a retirement funding plan. That's one reason it's in so much trouble. So why not create a better system that IS designed to be a retirement funding system?

Unknown said...

If what you said in your comments is what you believe, then we are very much agreeing... especially the slow, incremental change (Kaizen in mangement terms)

Both parties use SSI as a political football... I do not much care about that...

I am going to say something that is kind of coarse, but it is gut-level honesty that from which I will probably get chastized...

I am a low, low, low six figure earner... but I have no problem paying SSI Tax (which is what it is, not an investment program for me)... above the $90,000 cap?

You know why? It's simple, really. You havce heard of motivating factors and hygiene factors? Well, SSI has become a hygiene factor... In the type of economy that we live in... there are haves and have-nots...

If we spread the burden across many people, and save the revenue as opposed to giving it away to people in the form of tax cuts, corporate welfare, etc... then we can have more than enough to accomplish our national goals all the while assisting the less fortunate.

That's compasion... I am not some bleeding heart liberal... I am by and large a capitalistic conservative...

But George Bush is moving past his "mandate," and is, frankly going into territory that he needs to leave alone.

Tax breaks for the rich, spending record amounts on out-sourcing to his "croonies," taking away programs that asssist the weaker among us...

That's not compassionate conservatism... that's the making of a revolution.