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WHY SOCIAL SECURITY IS NOT IN DANGER.
As a quick clarification to Jane Hamsher's post, no one at the White House ever mentioned the Orszag-Diamond plan to me. I brought it up in this post as an example of the sort of thinking that administration members had done on Social Security in the past, not as something that anyone was floating for implementation. If I was unclear on that, I apologize.
What people at the White House have told me on Social Security -- and what I wrote in the post she's referencing -- is that there's no intention to touch Social Security in the foreseeable future. It's not a priority and it's not a political winner. Some have lamented that fact. In a perfect world, they suggested, it would be preferable for progressives to fix the system's minor liabilities now rather than wait for conservatives to opportunistically hammer away at it later. They did not say what those fixes should look like, because the White House isn't building policy on that score. (If you want an idea, though, you can look at Obama's plan from the election.) The problem, they say, is health care, not Social Security, and that's where the White House is focusing.
Meanwhile, there have also been changes in the thinking of the center-left economic community on how to fix Social Security. My interview with Henry Aaron over the weekend -- which has now made for quite a few blog posts -- touched on this. "One way to handle Social Security is that we cut benefits and raise taxes and split the difference," he said. "That's sort of where I was. It's not where I'm at. I think it's a bad idea to cut benefits at all. There’s a better case for raising them than lowering them. That means you have to find the financing to cover things, of course. But benefits were reduced statutorily in 1983, and there are more cuts yet to be implemented from the legislation. The take home pay from Social Security is down in addition because you take out Part B premiums. And third, everything else everyone that serves as retirement income has become riskier. The importance of stability from the one remaining large defined benefit plan is enhanced."
If you're really interested in this question, Aaron kindly gave me permission to upload a speech he gave further detailing his thinking on the question. It includes this nice table laying out how relatively stingy the U.S. pension system is:
It's unclear why the richest nation in the world would have to cut its peculiarly spare pension program further. It's even less clear why we'd do it having just seen how unstable other sources of savings can become.
COMMENTS (11)
Ezra,
A meta-point:
You need to think about how you want to source your blog posts. Blog journalism is a different beast, but with a Democratic administration in house, your posts have become increasingly opaque on your information sources. For me, its too difficult to sometimes parse out conversations from Administration sources vs. congressional sources vs. think tankers/other DC types vs. pulling threads here and there and making your own conclusions. Print journalism has an expectation of clearer sourcing, and while blogs may not have the same exact standard, I'd suggest giving some thought to how you may want to better source your work that is consistent with journalistic standards and the rapid nature of blogging. It isn't a clear decision, but that's why you get paid the big bucks. :)
Posted by: wisewon | February 23, 2009 2:19 PM
In today's Washington Post, Rober Kuttner says that if labor shared in the productivity gains of the last three decades, we wouldn't have any problem with Social Security funding. Why are we taking the labor-has-limited-bargaining-power for granted in this debate and discussing tax increases or benefit cuts?
I think progressives have to seriously look at the forces that have led to this situation. (I put free trade with developing nations top on the list, but there are other factors at work too.) Whatever Social Security shortfall there may be is a symptom of an inbalance within the economy of the U.S., and not some sort of inherent propensity for doom.
Let's get the share-the-productivity debate going!
Posted by: Quiddity | February 23, 2009 3:22 PM
It's unclear why the richest nation in the world would have to cut its peculiarly spare pension program further
One word - racism. Historically, Americans hate to see money being spent on brown people. Also, we hate to spend money on poor people because some of them might be brown.
Posted by: fasteddie | February 23, 2009 4:19 PM
Social security is in no danger and will not be in danger as long as most voters like the program. It does not matter if it is "under funded", in fact nothing else matter it purely political. Contrary to what many people believe, it is getting stronger as a higher percent of the voters begin to collect. The young worker does not like the tax but he is out gunned in the voting booth.
Posted by: Floccina | February 23, 2009 4:28 PM
Check the Social Security trustees reports. There is nothing in the Social Security trust fund. This is big trouble.
Oh, there are those $2 trillion in IOUs. But when you get a chance, ask your congressman what the difference is between those IOUs and zero. There is no difference.
Social Security must be turned into a self-sustaining "system" again, and it has to be protected from the regular looting that has left it empty.
Starting in 2013, Congress won't be able to steal from the Social Security fund anymore, because that year, Social Security payments to retirees will exceed Social Security taxes paid by workers.
Had we insisted that $2 trillion in IOUs be real money instead, the 2013 cash-flow would not be a problem. But those IOUs aren't real money, so just as we would do if we had no IOUs, we will have to start borrowing cash or cutting benefits.
All those who have been telling us the last 15 years that Social Security is not in crisis can blame themselves for yet another multitrillion-dollar disaster.
Posted by: Frank Warner | February 24, 2009 12:40 AM
peculiarly spare pension program
Get a grip. It's a safety net, not a pension plan.
Anyone banking on Social Security for anything other than "cigarette money" will be having a hard retirement.
Posted by: Neo | February 24, 2009 1:23 AM
This is why anonymous sources are not helpful. "people at the White House" can tell you one thing and then tell David Brooks the opposite (see "When Obamatons Respond"), and no one can confront them with their hypocrisy, their double-dealing of messages, or even begin to sort our which is true.
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