Donald Luskin performs a public service – sort of. He warns us that the Bush White House still wants to deform the current Social Security system:
But reform isn’t dead. It can’t die. Reform is inevitable, because the Social Security system really is in crisis, in the sense that the accounting mirage of the Trust Fund doesn’t hold any real assets to pay off the system’s obligations. Even if it did, the assets would be exhausted in a few short decades as the baby boom generation retires … An editorial three weeks ago fulminated, “it’s information Congress and the public deserve to have. Holding up the reports seems like an attempt to hide the truth.” What truth? The truth that the so-called trust funds aren’t going to be able to cover promised benefits in the future? That’s precisely what the president said over and over last year – and that’s precisely what the Times consistently denied.
The fact that the Trustee’s Report will not be issued until May 1 has never been a major concern to me. After all, the moment that it is released – there will be several folks pouring all over the analysis with these folks ranging from serious scholars to partisan hacks. Luskin is clearly in the latter category when he claims that President Bush has been telling us the truth. After all, Bush wants us to believe that the Trust Fund is teetering on bankruptcy now and that it will be flat broke by 2042. Luskin has made similar comments but now he notes that “assets would be exhausted in a few short decades as the baby boom generation retires”. OK, four (as in decades) qualifies as “few” even if I’m not sure a decade is properly considered a short period of time. And even if the reserves that do exist – even if Luskin calls them a mirage – do run out in about 40 years or so, the Trust Fund will still be collecting payroll contributions.
But what is the Bush-Luskin plan to magically save the Social Security system? Is it the destruction of the system itself or is it some reduction in benefits to current recipients or to the kids just entering the market? Oh no, President Bush is telling granny she won’t have to sacrifice a dime, while he is telling junior that he’ll be better off. Of course, such promises are financially impossible if the system is as insolvent as Luskin wants us to believe.
But the high comedy of Luskin’s rant is when he decided to take on William Spriggs and Jason Furman:
Spriggs and Furman celebrate how wonderful the Social Security status quo is for blacks. They totally ignore that the punishing Social Security payroll tax consumes any capacity for independent retirement savings that might have been enjoyed by lower-income Americans of any race, leaving them effectively wards of the state in their old age. Instead, the authors sing the praises of how blacks benefit from the current system’s “progressive” benefit formulas that are skewed in favor of lower earners; how blacks, who are more likely to become disabled, can take greater advantage of the program’s disability benefits; and how blacks, thanks to their lower average life expectancy, benefit more from the program’s survivor benefits. All those things are true. But Spriggs and Furman lie when they use their academic skills to manipulate statistics to claim that Bush’s proposals do anything but make all those things even more true.
What does Luskin mean by “punishing Social Security payroll tax consumes any capacity for independent retirement savings that might have been enjoyed by lower-income Americans of any race, leaving them effectively wards of the state in their old age?” And what Bush proposal is Luskin babbling about?
Let me put this in context by dragging out what seemed to be Robert Barro’s thinking when Governor Bush was running for the White House in 2000. As I understand the very smart and very honest and quite conservative Dr. Barro’s position – he would have done three things: (1) eliminate all Social Security benefits; (2) eliminate all payroll contributions; and (3) take the Social Security reserves and given them to old people currently on retirement. Got it? Luskin’s dream come true. What Barro admits – even if Luskin can’t comprehend such simple finances – is that complete privatization would have meant that Bush’s tax cuts would have been exposed as leading to a bankruptcy of the General Fund. OK, I have said the General Fund is on a bankruptcy path even under the current system. The only difference being that the Trust Fund surpluses – which Luskin calls a mirage – are used by some rightwing hacks (e.g., Luskin) to claim the Federal finances aren’t so bad.
So how does the White House plan to address the General Fund fiasco? Simple – cut Social Security benefits by MORE than we cut payroll contributions. Lower income individuals still will be punished in terms of “any capacity for independent retirement savings” as they see their future Social Security checks being reduced. Of course, Luskin is not so stupid not to realize that such proposals will make lower income individuals worse off – but he is hoping his readers are that stupid.