In recent days there has been a lot of gnashing of teeth among Social Security supporters at the prospect of even having Social Security on the table during next month’s economic summit. I gave a few reasons a couple days ago why we don’t need to let ‘fear itself’ rule us Obama and Social Security: why NOT to worry. Today I want to add some reasons why this could work in total favor of the progressive agenda. And rather than recreate the wheel I am just going to repost something from my own blog from August 2005, which post had the same title as this one. Given the passage of time and the new economic situation I would today have to update a couple points, these are indicated in italics. Otherwise it has I think held up well. Full text below
Time for Politics.
Social Security offers the opportunity to reverse a whole generation of political defensivism on the part of Democrats. We have the unique chance of changing the entire narrative.
Because Social Security “crisis” is not a matter of numbers, not really, it is a story in support of an ideology which can be boiled down to “Markets Good, Government Bad”. This story has been carefully crafted for seventy years and finally got its opportunity to be put in play in 1980 with the election of Ronald “Government is not the solution, government is the problem” Reagan.
As it turns out Reagan was forced to compromise on Social Security in 1983 and accept an increase in payroll tax. The response of the Social Security haters was then laid out in the Fall 1983 issue of the Cato Journal Social Security: Continuing Crisis or Real Reform? Particularly illuminating is the article by Butler and Germanis “Achieving Social Security Reform: A “Leninist” Strategy”. They laid out a careful, long term strategy that would allow them to kill Social Security at the next crisis point, which point was projected to coincide with the retirement of the first Boomers, which would start as early as 2008. According to the story the impact of Boomer Retirement would send the whole edifice crashing leaving Private Accounts standing triumphant.
But history and the economy did not play nice. They conspired to return economic numbers that started to push shortfall and depletion back. This trend accelerated in the nineties and can be inspected here Economics Policy Institute: Changes in Trustees Projections over time. A Trust Fund that was projected to run dry in 2023 was over a period of years adjusted to a Trust Fund projected to run out in 2041, and that date was being pushed back more than 1.3 years per year.
Privatizers panicked. Their carefully generated narrative began to lose its punch. In 2041 the youngest Boomer (born in 1964) will be seventy four, the oldest (born in 1946) ninety-six. It would be pretty hard to argue that they in fact had not fully paid for their Social Security themselves. So privatizers began to tweak the numbers and move the goalposts. In doing so they had to cast doubt on the very existence of the Trust Fund. Hence the talk of “worthless IOUs”. But even this new story is losing its impact.
Because amazingly enough we may not even need to tap the Trust Fund principal, we may need at worst to tap a fraction of the interest due. Because we are soundly beating the productivity numbers required by Low Cost.What is the Low Cost Alternative: What does it mean and Low Cost predicts just that: a minor shortfall in income less interest against cost in 2023 which is more than offset by interest earned. Absent some future government proving themselves to be Crooks and Liars in abrograting Trust Fund bonds issued with the Full Trust and Credit of the United States beating Low Cost means we are home free.
But it might well be better than that. The economy is returning productivity numbers close to double what Low Cost requires, and minor changes in productivity in the early years have outsized impacts on the Trust Fund in the outyears. As it sits we may have a Trust Fund that is actually overfunded going forward. And that is our opportunity.
Imagine a March 2006 Report that announces that not only will Social Security not be going broke, it will be a net lender forever. That shows that privatizers pushing “Crisis” were not just alarmists but outright liars trying to sabotage the legacy of Roosevelt. Do you think we could run with that? Do you think we could run ON that? Well I do.
Because this is what I have been working for. I am tired of continually playing defense on Social Security. I want to take it right to the other guy. And we are not going to get there by trying to keep the ball out of play. We just need to open a nice big can of FDR WhoopAss and show the other guys that we got the numbers on this.
So lets get out of our defensive crouch and stop letting the other side run all over us on this. We have two choices here. We can channel Bush I “Wouldn’t be prudent” or go right back to our original inspiration “The only thing we have to fear is Fear itself”. I know where my preference is.