It's Not The Program – It's The Debt
The Des Moines Register's Jane Norman wrote a column with her take on the Social Security Trustee's report.
I have just a few things to point out about the report. The first one, of course – is the title.
it's impossible to make that determination without understanding how
the model used to predict the future is tweaked. Assumptions make
all the difference – and to consider a “one-year” shift, one would have
to assume that there really isn't much difference in the real status of
the program. Something interesting to note: through all of
the bad economic news of the past five years, the Social Security
outlook has actually improved.
Here's the trust fund solvency outlook from 2000:
2000, the trustees stated that the “intermediate” case meant the trust
fund would be exhausted in 2037. Here's yesterday's chart:
On that same topic, Ms. Norman wrote this:
Social Security is a pay-as-you-go system, which means current
workers through their payroll taxes pay for the benefits of current
beneficiaries.
The surplus is essentially loaned to the rest of the federal government as an IOU.
The
trustees said they now believe that by 2017, taxes will be insufficient
to pay for benefits, and Social Security will have to start collecting
on that IOU. To pay, the government then would have to borrow, raise
taxes or cut spending. Previously, the trustees had set the date at
2018 when that would happen.
Between 2017 and 2041, the IOU and
its interest would be exhausted, at which point Social Security would
be able to pay only 74 percent of scheduled benefits rather than full
benefits.
The
issue with treating the Social Security 'trust fund' as a stack of
IOU's is extraordinarily dishonest. When the trust fund was
created in 1983, the Greenspan commission (along with Ronald Reagan and
the Democratic Congress) saw the coming 'seven years of famine' and
decided that in order to keep the social insurance aspect of the system
a trust fund should be created from the earnings of wage earners.
The idea behind raising taxes on wage earners was simple – that money
would be there for the retirement of the baby boom generation, not to
be an accounting gimmick to hide deficts, nor to simply sit
unredeemed.
Treating
that money as a way to cover up the loss of revenue due to upper-level
income tax cuts isn't just dishonest – it's quite frankly a tax hike on
the backs of wage earners to support tax cuts for the upper
class.
Now, in 2005 we're looking at the accumulated federal deficit of a fiscal policy that says “deficits don't matter”.
Deficits do matter if you want to retain the promise made to wage earners in 1983.
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