We have a serious problem with social security. Is it that it is
running thin, going bankrupt, or dying? No. The problem is that the
media and politicians have convinced us that it is.
How have they done this, you may ask.
Most people simply assume that social security is bankrupt or will be
any day. The media reports it as if it is fact. Yet nothing could be
further from the truth.
Last year, Social Security paid out $383 billion in checks, and
received $436 billion in taxes and an additional $49 billion in
interest. Instead of red ink, Social Security made almost $102 billion
in profit, to add to the more than $652 billion it had in profits from
previous years.
The Trustees of the SS system use very conservative estimates in
discussing the future of the program. But even using their figures, it
is not until sometime after 2020 that the program will collect less in
taxes and interest than it pays in benefit checks, and even then, it
will have more than $1 trillion in the Social Security Trust Fund, left
from previous years. Their most recent estimate is that, for the next
34 years, the taxes that are collected, when added to interest and
money from the Trust Fund, will be sufficient to pay all the benefits
currently planned.
It is not until 2034 that the Trustees project that there will be no
money left in the Trust Fund, and not enough taxes to pay all the
benefits that are expected. But even when the Trust Fund is empty,
and for the foreseeable decades thereafter, the Trustees expect there will be enough taxes to pay 75% of the planned benefits.
Now, ok, let's pretend that social security were going to go bankrupt
tommorow (as conservatives and the media would have us believe).
Presumably we would still be paying out benefits to seniors. This
would cause us to create a defecit, no? We would be spending that
which we do not have.
So, here's a puzzle for those loveably misguided cons out there: why
is it horrible, unthinkable, untenable that the SSA run a defecit while
it's perfectly reasonable for the general budget not only to run on a
huge honking defecit but to multiply that defecit by cutting revenues
(ie tax cuts) that go to those at the top?? This makes very little
sense to me, this distinction.
So, now that we've "established" that SS is an agency in crisis, how
have we made the jump from the need for preservation to privatization?
The claim that so much money could be made through investment
conveniently ignores the massive costs of such a transition. Their
conclusions can only be drawn by pretending that all the money that is
now paid as SS taxes could instead by invested in stocks and bonds in
individuals' accounts. Since current payroll taxes are used to pay
benefits to beneficiaries, transferring money into individual accounts
means that less money will be available to pay promised benefits.
To avoid major benefit cuts, younger workers would have to pay twice: once to fund the new account and again to meet SS's current obligations.
But, to the real point. I do not deny a fiscal crisis in the US, but
the crisis is more with the general budget than any program in
particular. Certainly not Social Security.
As to privatization itself (ie investment):
The only possible way that stock returns can be high enough to make
privatization work is if the U.S. economy grows at three to four
percent a year for the next fifty years. But Social Security's own
trustees expect the economy's growth rate to slow to 1.8 percent. If
that happens -- if their own assumptions are correct -- then
privatization would be a disaster. And if that doesn't happen -- if the
economy continues to grow at a steady rate -- then the trust fund is
good for the rest of the century, and we don't need privatization.
I quote Eric Bates, summarizing economist Paul Krugman's findings:
The privateers are claiming that you can have something for nothing.
They're basically saying, "Let's assume that pigs can fly." And when
you say, "You know, it's not good to assume that pigs can fly," they
respond by saying, "What's wrong with you? Don't you understand the
enormous advantage of flying pigs?"
So, what is our real crisis?
The health care system. The private insurance system is slowly falling
apart, with rising costs due primarily to administrative costs, which
eat up many times more of the annual health care spending here than
they do in other industrialized countries. Health care is an arena
where privatization raises costs. It doesn't (for many reasons that I
can go into if you like) work like a perfect market economy.
So, if this all makes very little sense, if social security isn't
actually bankrupt (as is clearly the case) and if privatization is a
Bad Call (which is fairly evident), why are so many people pushing for
it??
It, unfortunatley, all boils down to politics (as so many things do).
The people who want rid of this hate the idea of a social safety net,
of "their" tax dollars supporting someone else's retirement. These
people have never liked any of the New Deal legislation (which
ironically saved capitalism as we practice it) and have worked
ceaselessly to dismantle its programs.
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