Destroying Social Security to ‘Save’ It: the Arithmetic of Benefit Cuts

by Bruce Webb

House Minority Leader John Boehner said in a statement marking the 75th anniversary that while the law has served the needs of millions of Americans seniors, the Social Security and Medicare Trustees have “repeatedly warned Congress and the American people that reforms are necessary or future benefits will be threatened.”
He added that Republicans are “committed to protecting Social Security and preserving this invaluable program for current and future generations of retirees.”

Time to take a little closer looks at this framing in light of the numbers. Boehner here is defining ‘crisis’ explicitly in terms of “threatened” “future benefits” and then commits his party to “protecting” and “preserving” Social Security. But how does his party propose to do this? Well by cutting benefits, either through an increase in retirement age or via a switch to some form of price indexing. Kind of like saving your foot by cutting off your leg.

We know what the Trustees say: 100% of scheduled benefits payable through 2037 and 78% after that declining to 75% at the end of the projection period. Meaning that any proposal based on a crisis defined by “threatened future benefits” that produces a worse result in 2037 and after is some mixture of ineffectiveness and bait and switch, particularly if if also cuts benefits BEFORE 2037, from the perspective of the future retiree no matter what the age that proposal represents a dead loss. For workers the simplest benchmark is ’22%’, any ‘fix’ in excess of that is just theft from workers serving to advance some other purpose. Those purposes might be worthwhile on their own, but it is up to proponents to make the case to a democratic majority why the tradeoff is actually either in the interest of the nation and/or the vast majority of that nation that participates in Social Security.

Opponents of Social Security have tried to get around this difficulty, (and the even bigger one represented by what I call ‘Rosser’s Equation’, that 22% ‘cut’ is from a much larger baseline number than today) by using language that leads younger workers to believe that ‘benefits cut from a 160% baseline’ somehow translates to ‘no check for me’. It doesn’t. As long as FICA continues to be collected and is not permanently diverted to PRAs or something else, benefits will be paid at some level. It is up to reformers who are currently defining ‘crisis’ in terms of ‘benefit cuts’ to put up or shut up. Can they produce a better result for the democratic majority? If not why should we listen? And make them bring numbers and not slogans. Don’t let the Tan Man do the 2010 version of Ben Tre,

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