Is Social Security the Worst Government Program Ever?
Human Events lists its top ten. I hate to agree with these rightwing zealots but farm subsidies and earmarking should make this list. And I’ll give credit to Human Events for placing some of the blame on the Republican Party. #3 on their lists confuses income tax withholding with income tax rates – and perhaps these fellows should realize that every dollar the government spends has to be collected in taxes eventually from some source. McCain-Feingold and funding of contraceptives as an alternative to more unplanned pregnancies, which might end up in abortion are bad policies??? Medicare, Medicaid, Affirmative Action, and the Davis-Bacon Act are other areas where I would take exception to their list.
But there #1 bad government program is – surprise, surprise – Social Security! And what is wrong with a publicly run defined benefits program?
The program has socialized the retirement of Americans, making most seniors financially dependent on payments that the federal government may alter, decrease or even cancel … Social Security collected $657.7 billion in taxes in 2004 and paid out $501.6 billion in benefits. Congress spent every penny of the $156.1-billion Social Security surplus on non-Social Security items.
I see – the lack of fiscal discipline from the Republican Congress and President Bush is taking the funds that are supposed to be dedicated to the retirement of working class Americans and giving them to high income individuals in the form of income tax reductions. Brad DeLong treats us to the latest from Jason Furman and Robert Greenstein:
Anyone concerned about Social Security’s long-term impact on the federal budget ought to be even more concerned about the long-term fiscal impact of extending the 2001 and 2003 tax cuts. If made permanent, the tax cuts will cost nearly three times as much, over the next 75 years, as the 75-year deficit in Social Security
Or as Brad says:
Anyone who claims to be a “deficit hawk” who favors extending Bush’s tax cuts is not a deficit hawk, but a deficit turkey.
Speaking of turkeys, check out the latest spin from Allan Sloan:
Cash is what matters, because Social Security’s multitrillion-dollar trust fund, consisting of IOUs from the U.S. Treasury, won’t help the federal government cover shortfalls when the program begins taking in less than it spends. The shortfalls are projected to start at about $11 billion in 2017.
By 2017, benefit payments may start to exceed payroll contributions – but guess what, reserves will continue to rise for a few more years. Dean Baker comments:
Washington Post columnist Allan Sloan called for defaulting on the U.S. national debt, or at least a portion of it … Mr. Sloan probably would object to describing his column as a call for default on the national debt, but this in fact exactly what it is. In the column, he implicitly derides the legitimacy of the bonds held by Social Security by calling them IOUs. Of course all bonds are IOUs, but they are never described this way in normal discussions.
As a final note, during yesterday’s progressivity debate, a 2004 discussion of Social Security by Arnold Kling was mentioned:
For the Left, the Achilles heel of Social Security is the regressive payroll tax that is used to fund it. Social Security taxes soak up a much larger share of the income of the average worker than of the affluent. Income taxes, on the other hand, have become increasingly progressive.
This discussion makes sense ONLY IF one ignores the distribution of benefits across income groups. While I might be tempted to suggest that this oped ranks as one of Arnold’s worst, maybe he was forecasting that Allan Sloan’s suggestion might become reality.
As far as the Social Security program – with modest adjustments to the benefit structure to be paid to future retirees – this program can be solvent. But then I’m assuming that we can prevent Allan Sloan, the Human Events, and Bush wing of the Republican Party from stealing the Trust Fund reserves to pay for goodies for the rich paid for by our payroll contributions. And yes – that is a very big assumption!
Update: Some of the more informed AB readers want me to find something to rebut the spin from JoshK who claims that giving people their money back allows them to get a better return than they would get from putting their money in the publicly run defined benefits program known as Social Security. I have often mentioned Robert Barro’s July 2000 Business Week op-ed that said this free lunch proposition was bunk and more recently I linked to another conservative economist who agree with Barro – that being Gary Becker:
It is true, as some critics observe, that there is no magical gain in privatizing Social Security, since all systems have to provide incomes for retired persons … Contrary to the Bush position, however, I do not believe that the main advantage of a private-account system is that individuals can get a higher return on their old-age savings by investing in stocks. There are no freebies from such investments since the higher return on stocks is related to their greater risk and other trade-offs between stocks and different assets.
I have made this point in several posts and this point has been made by a number of economists – both conservative and liberal. Yet – George W. Bush still argues there must be some free lunch, so why should we be surprised that his loyal followers think the same thing?