To avoid possible brain damage, the Surgeon General recommends that Sebastian Mallaby’s columns only be read using the StupidVu 9000
Someone needs to tell Bush that when I wrote a post titled “Democrats Crush GOP; Bush Declares ‘Mandate‘”, I was joking. Now that El Jefe Maximo has psychologically disinvested from the Iraqi Occupation, he has decided that the message the American electorate sent in the 2006 elections was “You’ve done such a great job with foreign policy, FEMA, and the budget deficit, we would really like you to screw up Social Security.”
Really, Bush is once again, after repeated repudiation, still trying to privatize Social Security. Because what America needs is another untested conservative ideological fantasy unsupported by facts or evidence.
Clearly, the War on Drugs has not reached the White House.
And dutifully, Sebastian Mallaby of the Washington Post has decided to inflict his Compulsive Centrist Disorder upon Social Security, which is probably the most successful anti-poverty program ever designed in the U.S. As a card-carrying member of the Potomac Punditocracy, Mallaby advocates a compromise solution to deal with a non-existent Social Security crisis, even though one side–the Democrats–is relatively sane, and the other side–the Republicans–is fucking lunatic.
I’ve posted about Social Security before (and that’s even before one starts to root around the old digs), but it’s worth covering some essential points about Social Security. Before I get into it, I would point out that all of this has been covered ad nauseum by Dean Baker. And no serious economist has disputed his findings, largely because he is using the Social Security Trustees’ own figures. So here we go (Again. Sigh.):
1) The published estimate of the exhaustion of the Social Security fund is based on an annual growth rate in GDP that is roughly 80% of the historic U.S. GDP growth rate. Even a smidgen above that rate, and Social Security is solvent in its current form in perpetuity. Again, the U.S. economy has to perform at a pathetically poor rate that has never been observed for a decade, let alone forty years–even Little Lord Pontchartrain’s economy hasn’t sucked that bad. Otherwise, there is no Social Security ‘crisis’. Zip. Nada. Bupkis. It’s also interesting to observe how neither Congress nor the President ever use the overly pessimistic Social Security economic forecasts when constructing their own budgets….
2) Even if the scenario described above were to occur, it would only require a slight increase in payroll taxes (less than one percent, from 6.25% to around 7%) to keep benefits where they are. Given that there have been far greater increases in the Social Security payroll tax, this will hardly cripple the U.S. economy.
3) About one third of the annual revenues collected by Social Security are turned into the world’s largest municipal bond issue. There is no ‘lockbox.’ The annual revenue surplus is not stuffed under a giant mattress out at Area 51. That money is used to buy government securities: the U.S. taxpayer (in aggregate) is one of the largest holders of goverment securities. . In other words, the payroll revenue surplus is used to supplement government spending. The real Social Security crisis is the surplus crisis.
4) What the above point means is that currently about 20-25% of all discretionary spending (i.e., military and things other than Social Security, Medicare, Medicaid, debt interest payouts, and a few other mandatory things) is paid for by surplus Social Security revenue. If you take military spending off the table, around fifty percent of discretionary spending is currently paid for by Social Security tax surplus. Neither Democrats nor Republicans want (or can afford) to lose that source of revenue. If it went ‘poof’, either corporate or personal income taxes (or capital gains taxes) would have to be raised significantly. That is the real crisis. It is why Clinton kept referring to that damned lockbox: because he was afraid to speak honestly about this issue. After all, some people might want to lower the payroll tax (“it’s your money, not the government’s money” and all of that crap. Yet one more way Clinton’s cowardice screwed over the Democrats for the long-term). It’s about overall revenues.
So is Mallaby stupid or cynical? I don’t know, but either way, like most of the media, he should be impeached.
Related post: Upon returning from vacation, I see that Atrios, an economist, is thinking along the same lines (italics mine):
Look, people who advocate adding “personal accounts” to Social Security are just stupid people. Really, just morons. There’s no reason to do it. There’s no reason to take any part of Social Security contributions and put them in a little fund account with my name on it. If you think some Social Security contributions should be invested in the stock market (I don’t) to raise returns overall, then it can be stuck into an index fund or managed by a fund manager or whatever. I still think that’s a bad idea, but there’s a rationale for it. There’s no rationale for dividing that up into millions of individual accounts. There’s no rationale for letting individuals “control their own money” by letting them choose across some finite number of managed funds. Social Security is a lovely program which works just fine and really needs no changes other than extraordinarily nonurgent tweaks to the tax formula at some point. And, no, there’s no need for modest benefit cuts. There’s no need for means testing it. There’s no need for any of these things The Serious People like Bob Kerrey want to do. There’s no need to strike a “grand bargain” which combines some stupid things with some smart things because there’s no need to do so. Leave it alone.
There is no problem with the Social Security system. People who continue to argue that there is – and that the problem can be “solved” with the magic private accounts fairy – either have broken brains or are attempting to push an agenda for ideological reasons or for personal enrichment for themselves and their kind.
Another related post: Max describes a good pragmatic and populist position.