Thursday, October 27, 2005

Budget Deficits and Social Security Red Herings

In my last post I referred to a David Broder op-ed column that referenced a speech by Maya MacGuineas of the New American Foundation, delivered at a DLC conference. In it, Maya argued that in the face of the country's budget problems, Democrats need to step forward with bipartisan-like solutions, such as the willingness to whack Social Security benefits for future retirees.

Among the dumb ideas parroted by the DLC and like-minded "centrists", this the-budget-deficit-means-we-need-to-cut-Social Security line is close to the worst, in both logic and ultimate effect.

Social Security is running a surplus, and has been for the last two decades. Around 2018, annual benefit payouts from the program will begin to exceed incoming payroll taxes, although the program will still have interest payments due from the general budget fund as the result of the lending by Social Security of its annual surpluses to the general budget since the 1980's. And as everyone knows, Social Security's Trust Fund will become exhausted in or around 2042. That's a pretty long time off, and the date is likely to be continually pushed further out as new economic and demographic assumptions are configured into the Social Security actuary's logorithms.

In any event, since 2042 is a long way off, conservatives have tried to make a big whoop to do about the fact that between 2018 and 2042, the federal government will have to pay back what it's borrowed from Social Security, putting a strain on the rest of the budget. In this doomsday scenario, taxes would have to be raised, spending on other programs cut, or more money borrowed.


Before you get suckered into that spin, consider the fact that the current budget deficit is in the neighborhood of $400 billion per year. This means the federal budget is right now in exactly the same situation as it would be in the years between 2018 and 2042, give or take a couple hundred billion dollars. So, if conservatives want to be worried about budget deficits in 2018 and beyond, why aren't they upset about them now? And if conservatives were concerned about the retirement of the baby boomers and the needs of an aging population, then maybe they shouldn't have cut taxes as much as they did, and as much as they would like to do by extending the 2001-2004 tax cuts. So when conservatives talk about the looming fiscal problems set to begin around 2018, tell them that yes, it' s a crisis allright, but it's a budget crisis, not a Social Security crisis.

In short, don't be fooled by this shell game. Republicans are doing the same thing they did in the 1980's--cut marginal tax rates and tax revenue dramatically, increase defense spending, explode the deficit, and then blame Democrats and the social safety net of domestic spending programs for the sudden "budget crisis". And so now people like Maya MacGuineas want us to throw Social Security under the bus, hoping we'll be confused by the shell game the Republicans and organizations like hers have been playing.

Social Security is not the problem. It's the taxes and the defense spending (and the war), stupid.

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