Thursday, February 24, 2011

Once More Into The Breach

It's clear that most people still don't completely understand the issues swirling around Social Security. One of the big reasons for the confusion is that those who intend to kill the program off have flooded the discourse with half-truths and outright lies. That's when the press has to step in and, via a little fact checking and truth telling, counter the misinformation that is pouring out of the blast faxes.

This time the job fell to Doyle McManus of the Los Angeles Times. While his latest column is a little soft because of its attempt to be "fair and balanced" (McManus operates from the mushy middle), it does clarify some important issues for his readers, and for that we should be grateful.

From 1984 until last year, Social Security collected more in taxes than it paid out in benefits, and that surplus — the Social Security trust fund — has been invested in federal bonds. (Some skeptics deride those as mere IOUs, but they're not much different from 10-year Treasury bills; the federal government has a legal obligation to pay them back.)

But last year, partly because of the recession and partly because a swell of baby boomers is starting to retire, Social Security collected less in taxes than it paid out. That will happen again this year and for every year in the foreseeable future, according to projections by the Congressional Budget Office.

That doesn't mean Social Security is in immediate trouble. The program merely has to redeem some of the IOUs in its $2.5-trillion trust fund. But it's a problem for the federal government, which has to come up with that money from somewhere else — and at this point, that will mean new borrowing.

So, that's the short-term budget issue: Social Security is about to start calling in its markers from the federal government, which will put additional strain on the budget.

OK, that's fair enough. While this "entitlement" (one which all workers have been faithfully paying into since FDR set up the program), does not get directly funded by the federal government, the federal government has been using the trust fund as a source of loans, loans which will soon have to be repaid. That does affect the federal budget, albeit indirectly. Fewer wars and overpriced military equipment is a more direct and ultimately more expensive drag on the budget, but apparently the Pentagon's money is off the table.

And more money is flowing out of the trust fund than is going in, for the very reasons McManus lists. In 30-40 years, the trust fund will be depleted to the extent that benefits will have to be reduced, assuming the economy and joblessness don't improve. That's the long term side of the problem, and one which should be addressed. It is here that McManus gets mushy.

Liberal Democrats revere Social Security as the cornerstone of the social safety net, point out that benefits aren't overly generous (currently less than $13,000 a year on average), and say the problem could largely be solved by eliminating the income ceiling on Social Security taxes. (Currently, the tax is paid only on the first $106,800 a taxpayer earns in a year. Those who make more than that pay no Social Security tax on their additional earnings.)

Conservative Republicans hate the idea of increasing taxes, so they look for other ways to solve the problem — without, however, cutting benefits that retirees are receiving now, since that would be political suicide. Some, like Rep. Paul Ryan (R-Wis.), chairman of the House Budget Committee, have proposed an entirely new system for the next generation based on individual investment accounts instead of one big shared trust fund.

These are most assuredly not equivalent plans. One shores up the system by a common sense approach, one that would work to keep the system intact and available to all. The other is a way to demolish a program which has enabled elders to live in some dignity after their working years are over.

What McManus suggests will be needed is a compromise between the two positions, which is ludicrous. Politics may require the art of compromise, but good governance surely does not.

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