Dean Baker: The Phony Argument that Social Security Needs "Adjustments"

amborin

(1000+ posts) Send PM | Profile | Ignore

Fri Jul-15-11 11:51 AM
Original message

Dean Baker: The Phony Argument that Social Security Needs "Adjustments"

Edited on Fri Jul-15-11 12:10 PM by amborin

http://www.press.uchicago.edu/Misc/Chicago/035468.html

http://epi.3cdn.net/6b8be14ba47a517a97_uym6b5jbh.pdf

http://www.newdeal20.org/2010/06/15/a-brief-history-of-... /

Social Security: The Phony Crisis

Dean Baker and Mark Weisbrot

"The program will take in enough revenue to keep all of its promises for over 30 years, without any changes at all. Thirty years is a long time—it’s hard to think of any other program that can claim to be secure for that long. Furthermore, the forecast of a shortfall in 2034 is based on the economy limping along at less than a 1.7 percent annual rate of growth—about half the rate of the previous three decades. If the economy were to grow at 1998’s rate, for example, the system would never run short of money.

snip

....we may have to increase the system’s revenues at some point. Would this place an undue burden on the post-2034 labor force? Hardly. Even if we were to increase payroll taxes to cover the shortfall, the added cost would barely dent the average real wage in 2034, which will be over 30 percent higher than it is today....

snip

***********************************************************

...The National Commission on Fiscal Responsibility and Reform set up by President Obama claims both that reducing the projected federal deficit should be a major national objective and that Social Security should be considered as one potential source of relief either through reducing benefits or enhancing revenues or some of both....

....the same attacks on Social Security have been going on — in different guises — for at least four decades. The stagflation of the 1970s, precipitated by the oil crisis of 1973-74, provided long-term, ideological critics of social insurance an opportunity to argue that such programs — retirement, survivors’ insurance, Medicare, disability coverage, unemployment — were unaffordable.....

.....What is crucial to understand is how devious and misleading such lines of argument are. They are best understood as an ideological remedy searching for plausible occasions to celebrate what was presumed. This strategic ploy is obvious in the case of Social Security pensions. Currently, Social Security is not suffering worrisome fiscal imbalances. The worry of the worriers is about 2035 or 2042 when, according to forecasts of the actuaries and CBO, there might well be some shortfall in revenues against predicted claims. .....

.....So the aging of baby boomers is the first premise, and the falling ratio of workers to retirees is the second. Together, these two premises suggest that there will be a need for cutbacks or increased contributory taxes. But if the baby boomers are growing in numbers and if Social Security is the ‘ third rail of American politics”, then critics had better scare citizens into accepting cuts now because it will be harder later on. Note, however, the deceits.......

************************************************************************************************

The Stealth Attack on America’s Best-Loved Program

........Washington bipartisan elites have been working to weaken Social Security since the mid-Clinton Administration. Clinton, prodded by his Treasury Secretary Robert Rubin, was on the verge of cutting a deal with Newt Gingrich to partially privatize America’s most successful retirement program.
The intermediary was Clinton’s White House chief of staff Erskine Bowles. The same Bowles is now the co-chair of Obama’s fiscal commission — which also has designs on Social Security. Corporate Democrats keep turning up, like bad pennies.

......But what is it with Democrats like Bowles, Rubin, and Rubin’s protégé Peter Orszag, now director of the Office of Management and Budget and another of the deficit hawks who would weaken Social Security in order to cut the deficit....

......the argument that Social Security is adding to the federal deficit is a bum rap. Ever since Congress in 1983 acted to anticipate the retirement of the baby boom generation by raising Social Security taxes and pushing back the retirement age from 65 to 67, Social Security has contributed trillions of dollars to a government surplus. The intent was to pre-fund the additional cost of the boomers......

.....Social security taxes wages. Get wage growth back to historic postwar norms, and Social Security is in surplus forever. Restore the traditional fraction of wages that are taxed, so that affluent people do not get a free ride on part of their income, and the proclaimed crisis disappears. There is no need to further cut benefits, or further raise the retirement age, or raise taxes on working Americans. If only Citigroup’s balance sheet were as healthy as Social Security’s!.....

http://www.newdeal20.org/2010/06/18/the-stealth-attack-on-america%e2%80%99s-best-loved-program-12715/