Alan Greenspan has his eyes on the Social Security benefits for which you have paid all your lives.
Like every other major institution in the public and private sectors, Social Security has taken a few licks from the current recession. But the problems are simply not very serious — the entitlement program’s trust fund currently stands at a massive $2.5 trillion — that’s trillion with a "t." If the federal government makes absolutely no changes to Social Security whatsoever, the program is currently projected to remain fiscally fit through 2037. The effects of the recession are included in that projection — prior to the financial crash of 2008, Social Security was projected to remain solvent through 2041.
But pesky facts like that are not the focus of the story from Times reporter Mary Williams Walsh, who instead highlights a fundamentally meaningless statistic to needlessly frighten her readers:
This year, the system will pay out more in benefits than it receives in payroll taxes, an important threshold it was not expected to cross until at least 2016.
That threshold would indeed be important — if Social Security weren’t sitting on an additional $2.5 trillion. Walsh dismisses the trust fund — putting the term in scare quotes and calling it a mere "accounting device." And, in fact, the trust fund is an accounting device — just like bank reserves and dozens of other financial metrics used in the business world. What that accounting device shows is that Social Security is fundamentally stable from a fiscal standpoint, to the tune of $2.5 trillion. There’s nothing fishy about it.
If that $2.5 trillion ever runs out — which it won’t, because Social Security’s revenues will increase in a few years as the economy recovers — policymakers would still actually have plenty of options available for boosting the program. But according to former Federal Reserve Chairman Alan Greenspan, there’s only one truly viable course of action — draconian benefit cuts for seniors. Here’s the Maestro, from Walsh’s article:
When the level of the trust fund gets to zero, you have to cut benefits . . . . Because of the size of the contraction in economic activity, unless we get an immediate and sharp recovery, the revenues of the trust fund will be tracking lower for a number of years.
Greenspan, lest anyone forget, is one of the people most responsible for moving Social Security’s solvency projections from 2041 to 2037. Our current recession was caused by rampant financial excesses that Greenspan actively refused to regulate and a housing bubble that he explicitly refused to act on. To the extent that today’s government finances are constrained, the two major culprits can both be laid at Greenspan’s feet — the bank bailouts that were deployed to clean up his mess, and the lost tax revenues from job losses and plunging home values.
So it should come as no surprise that Greenspan is simply wrong about even the hypothetical need for benefit cuts. If — under a wild, unthinkable set of economic circumstances — Social Security did one day find itself in a fiscal hole, the government could always simply increase Social Security taxes or tap revenues from other government programs. In fact, when Greenspan himself was part of a commission to fix Social Security in the early 1980s, that commission did not cut benefits — it raised taxes. Policymakers would not need to cut benefits — Greenspan simply prefers that they do, because he doesn’t like the idea that the government should be providing safety nets for the elderly.
That’s a perspective shared by Wall Street billionaires like Peter Peterson, who has pledged a massive fortune to spreading the message: Save the bankers and brokers first — everyone else, including seniors, is expendable… [emphasis added]
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Social security benefits have been a GOP target for years. Every penny spent reimbursing seniors is a penny that can’t spend on a millionaire. But any solvency problems Social Security may have can be corrected with one simple fix. Remove the salary cap. The current rate and cap structure is a social security tax of 6.20% (matched by employer) of income up to $106,800. The bankster with a $20 million bonus pays the exact same dollar amount as someone making $106,800.
Consider the current distribution of wealth in the US. The richest 20% have most of the pie. The bottom 40% have that tiny sliver, only 0.2% od the total wealth. The Social Security tax structure is regressive, because it disproportionately protects the income of the rich at the expense of the poor and middle classes. That is the sole cause of the problem. No other fix is acceptable.
18 Responses to “Is Social Security the GOP’s Next Target?”
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Greenspan might have his eyes on the scared cow, but it’s going to take a political party to hi-jack Social Security, I wonder how the GOP will frame their argument considering all the mistrust between the population and Wall Street right now?
Holte, I think their first tack might be to raise the rates for the lower and middle classes, and then claim that the ‘Democrat rate increases’ are forcing the young to pay for the old.
The GOP has wanted social security for decades, or should I say they haven’t wanted it. Their hatred of government run programs runs counter to the needs of the people. We all remember the Idiot Bush running about the country trying to privatize SS. It didn’t work then and it won’t work now. The GOP doesn’t have the power to get this done, much less Greenspan.
Mike, I have to disagree on one aspect. Republicans love government run programs as long as the benefit millionaires at our expense. It’s government run programs that benefit common people that they hate. I don’t think that they can get it done at this point either, but it’s important to keep abreast of what they schemes are in order to prevent them from getting to the a situation where they could get it done.
Social Security is fundamentally stable from a fiscal standpoint, to the tune of $2.5 trillion. There’s nothing fishy about it.
But there’s always some Nimrod who doesn’t like it just sitting there. There’s a killing to be made.
You’re right, Ivan. That’s $2.5 billion that the GOP could spend on welfare for millionaires.
Well, if the Republican dumbasses want to try this, fine with me. Social Security isn’t called the “third rail” for nothing. Short of adopting a party platform plank favoring the strangling of adorable puppies, I can’t think of anything they could do to hurt their electoral chances more. Most teabaggers look pretty close to retirement age to me. Isn’t that the one group they haven’t alienated yet?
Infidel, I don’t think they want to try to do away with it now. I think they are more likely to try to raise the rates and reduce payments to make it less popular.
Any funding problem that Social Security has can be solved easily by removing the cap on contributions. Just let everybody pay the same percentage into SS. Right now, everyone earning over about $100,000 per year is getting a tax break. The GOP loves a flat tax. Make SS tax a flat tax. Problem solved.
I obviously agree Jerry. That’s what I said too.
What Jerry said and the Medicare tax as well. About time these millionaires paid their fair share. Go ahead and mess with SS – you’ll have so many seniors on your ass you’ll regret the day you said it.
Amen to that, Lisa.
The Rushpubliscums have ALWAYS had their eye on stealing Social Security and transferring it to their rich peers. Chimpy didn’t get anywhere with it, but there’s always time, and always some idiotic Klanbaggers (most of who ARE Social Security recipients) to take along for the ride.
JR, the irony is that, if the Teabaggers could wrturn the GOP to power, they would be the first ones under the bus.
Anything with the word “social” in it is fair game for them, we have to keep an eye out because I don’t trust them one bit. They will find a way to sink it…
That’s why I posted this, Teeluck. Forewarned is forearmed.
Jest let ’em try it. Not only will they piss off everyone on SS, or about to be on it, I’ll be in DC with my own kind of signs.
….and I won’t even ask what those signs might say. 😉