I hope Brad De Long won’t mind my reprinting his The Social Security Party Line: Talking Points in full:
I figure I might as well lay down what the party line is on Social Security:
Social Security Talking Points
Social Security’s Troubles Are Smaller than Our Other Fiscal Problems
- The projected long-run Social Security Trust Fund deficit ranks no higher than fourth in urgency and in size on our list of fiscal problems.
- Bigger fiscal problems include:
- The current $600 billion a year General Fund deficit.
- The long-run problems of finding financing for and controlling the growth of rapidly-rising Medicare and Medicaid spending.
- The need to make sure that the General Fund has the resources to meet its commitments without undue strain after 2020–when it will no longer be able to borrow from the Social Security Trust Fund.
- If our current General Fund deficit is like having an impaired driver who has just crashed us into a tree, and if the Medicare-Medicaid problems are like a melted transmission, and if the post-2020 General Fund is like having no brake pads left, then our long-run Social Security deficit is like a slow tire leak.
- If our Social Security problems are neither extraordinarily urgent nor extraordinarily large, why is the Bush administration so focused on them?
- Possibly because of incompetence: George W. Bush and his inner circle simply do not understand the magnitude and importance of the federal government’s other fiscal problem.
- Possibly because of ideology: it is for some reason important to undermine the successes of FDR’s New Deal.
- Possibly because of capture: just as the principal aim of the 2003 Medicare Drug Benefit bill as it was written was to boost pharmaceutical company profits, so when the Bush Social Security proposal emerges we will see that its principal aim is to boost Wall Street profits.
- Which of these is really the most important reason? I don’t know. Your guess is as good as mine. Certainly the public rationales the Bush administration has offered for the “reform” program it has not announced are extremely thin.
What Should Be Done to Fix the Social Security System?
- Minor adjustments–the kinds of things that you do to fix a slow leak in a tire:
- Pump in more air–raise Social Security taxes a bit (perhaps by applying the FICA tax to all earned income, rather than exempting income over $90,000 a year from the tax).
- Patch the leak–raise the retirement age as life expectancy increases.
- Make these minor adjustments automatic and ongoing:
- We will have good and bad news in the future, and will be making further adjustments–both up and down.
- This Congress and George W. Bush have demonstrated an inability to make economic policy in the national interest–whether it’s the train wreck of their budget deficits, the sinkhole of their corporate tax bill, the car crash of their steel tariff, or the current vastly exaggerated cries of “crisis, crisis.”
- It’s time do with Social Security policy what Congress long ago did with monetary policy: adopt the Federal Reserve model.
- Seven Governors of the Social Security Trust Board appointed for fourteen-year terms with the advice and consent of the Senate.
- They then elect a Chair.
- Their responsibility is to adjust the retirement age (and, within narrow limits, the payroll tax rate) in order to keep the Social Security System solvent in expectation.
What About Private Accounts?
- Private accounts are a good idea–most Americans save too little, and, remember, Social Security is supposed to be a solid, secure base of retirement income which people can rely on no matter what.
- Social Security was never intended to be all of anyone’s retirement income: everyone was supposed to have private pensions and personal savings as well.
- But private accounts funded by cutting Social Security contributions are a bad idea:
- Robbing Peter to pay Paul is in general not a good idea.
- Reducing the guaranteed Social Security income floor will turn out to be extremely painful for those who are on the downside of the risks inevitably borne by private accounts.
- The government-funded part of the retirement-income system as a whole needs more resources, not a shell game.
- A good system of private accounts would be very different than the game of three-card-monte the Bush administration wants us to play.
- Here is a good system of private accounts:
- Automatically–without your having to opt in–half of your tax refund up to $2,000 a year is invested in your private account in the federal government’s low-overhead Thrift Savings Plan.
- If half your refund is less than $2,000, you can top off your investment in the TSP.
- If you wish, you can file a form and withdraw your this-year’s contribution from the TSP and get it in cash now.
- Investments in the TSP accumulate tax-free.
- You can’t get your TSP investments out until retirement–but your creditors can’t get at it either.
- For low-income and medium-income taxpayers, your contributions to the TSP are supplemented by the federal government, which levies a surtax on incomes above $200,000 a year to finance the supplements.
- A good system of private Social Security accounts is automatic; administratively simple; administratively low-cost; well-diversified; and substantial.
“What party?” you ask. Ah, that *is* an interesting question…