(ed.note: Josh Marshall will be back Sunday evening. But he couldn’t resist this one post from abroad.)
In the context of Social Security, what exactly is âsolvencyâ? And just what are we looking for when we say we want to find it? I pose these questions because the president’s new âplan’ has placed them in a much higher relief for the following reason. According the Social Security Trustees’ rather pessimistic estimates, in 2041 or 2042, the Trust Fund will run out and benefits will have to be cut by just over 25%. President Bush calls that âbankruptcyâ. On the other hand, President Bush’s ‘plan’ cuts benefits by about the same amount. And he calls that âsolvencyâ.
Same cuts: one is a looming disaster, the other is an act of statesmanship. Go figure.
Now, there are some details and caveats. The Bush cuts aren’t quite as big. He cuts a bit of a break for the working poor while reserving the full brunt of the pain for the middle class. On top of that he includes a private accounts-based phase-out plan and a ton of new borrowing. But then, as even the President’s budget wizards now concede, his plan only keeps the program ‘solvent’ for a few more years. So it’s not like it accomplishes much of anything anyway.
Yet none of this changes the essential logic of the Bush plan. And thatâs where our attention should focus. If the issue is simply making sure that benefits remain equal to payroll tax revenues, that’s easy. Indeed, we’ve already got that since the way the Social Security system is set up, benefits are automatically cut to the level of revenue coming into Social Security form payroll taxes and the Trust Fund. Just leave the damn thing on auto-pilot and it will remain ‘solvent’, automatically, from now until the end of time.
All the president has done is take the problem — steep benefit cuts — and redefined it as the solution. Thatâs not a plan or a solution; itâs a word game. And if we’re really setting such a feeble standard, there are an infinite number of similarly silly ‘plans’ folks can cook up.
The point, I think, is that when people worry about ‘solvency’, their concern is not about something so trivial as a book-keeping entry. Their worry is that people like Social Security as it is today. And they want it to be there for themselves or, depending on their age, their children or grandchildren. Only there’s a problem. And that is that in the second half of this century potential funding shortfalls could require cuts that begin to make Social Security into something very different than what it is today and what it was for those in the past.
Now, not every thing we want is possible in this world. And perhaps at some point some level of cuts will be necessary. But, as I said, I think they are what most folks want to avoid rather than being the goal, as seems to be the case for President Bush.
But, if changes become necessary, they are far from the only lever that can be pulled to put things back into balance. We could remove or limit the high-income-earnersâ payroll tax exemption, the so-called âcapâ. We could supplement Social Security with funds from general revenue. We could invest a portion of the Trust Fund in something other than Treasury bonds. We could nudge the retirement age up another year. Perhaps most immediately we could forgo the new round of high-income tax breaks President Bush wants passed â those which would re-pass or make permanent those from his first term. That in itself would go a long way toward solving the whole problem. Various mixes of these possibilities would solve the whole problem. And it is important not to forget that it is not at all clear that the problem will ever even materialize, at least at this scope, given increased productivity and immigration.
The important point is that for President Bush thereâs only one solution — big middle class benefit cuts. (And, of course, on top of that, lots more borrowing and cutting to create that Write House Holy Grail, private accounts.)
For most folks, thatâs the problem. For President Bush, itâs the solution.
Itâs his goal.
And that shouldnât surprise you, since phasing out Social Security has always been what the president is after.