Political pandering and editorial ineptitude are creating confusion about an important institution – Social Security – at a time when clarity and insight are needed.
I refer to the irrational conflation of two different issues: Social Security and the size of federal budget deficits or surpluses. This occurred when the Office of Management and Budget and the Congressional Budget Office issued slightly different estimates of the budget for the current fiscal year.
“Hit on Social Security puts Bush on the spot,” was the headline in one local daily. Anyone reading such a headline could reasonably assume that something important had happened to Social Security, a program U.S. citizens have valued for 60 years and can expect to enjoy for at least another 60.
But just what is this “hit” to Social Security? The article began by saying “the federal government will need to take $9 billion out of Social Security surpluses this year to help pay for other programs.” It briefly notes that this action will not affect current benefits and that many economists agree that this budget outcome may be good for the economy.
But oddly, the front-page article never indicates where Social Security surpluses would go if not spent on other programs. Nor did news stories on public and commercial radio or network television news. All hyped the factoid that Social Security funds were being “spent on other things.” Several recalled Bush’s campaign promise, repeated in February after his inauguration, that “every last dollar of Social Security and Medicare tax revenues will be reserved for Social Security and Medicare.”
Fortunately, another local paper got it closer to the truth. Early in its front-page article, it noted that politicians “have repeatedly pledged to devote the surpluses generated by Social Security to pay down the national debt.”
It would have been better if they had added the words “held by the public” to that sentence, but at least this story gets to the key question. What is the appropriate overall budget deficit or surplus for the federal government to run in a year when the economy is sliding into recession? Or, stated another way, should the debt that the federal government owes to individuals and nonfederal institutions in this country and around the world increase or decrease this year?
The crucial argument is about the size of the deficit or surplus. All the rhetoric about how this will affect Social Security is a bipartisan self-induced hissy fit affecting politicians in Washington.
This would not be so unfortunate if not for the genuinely unresolved issues about how our society will handle the retirement of baby boomers. Social Security plays a part in this. And any federal money to fund the boomers’ retirement will have to come from either taxes or borrowing. These are the only two ways the Treasury can obtain funds.
All other things equal, either taxing or borrowing will be somewhat easier 15 to 20 years from now, if the national debt is reduced in absolute terms or at least relative to the size of the economy. But this will be affected only slightly by the size of the final budget deficit in 2001.
The effect of the Bush tax cut over a multiyear period is an important issue, as is increased spending advocated by both parties. But these are only tangentially related to funding Social Security. Growth of productivity in the economy and the number and age of immigrants expected in the next two decades are issues ultimately much more critical in this regard than whether we pay down the nation’s public debt at a rate exactly equal to the growth of the trust fund surpluses.
A cry of threats to Social is the 21st century’s last refuge for political scoundrels. The media should be careful not to aid such rogues in creating confusion.
© 2001 Edward Lotterman
Chanarambie Consulting, Inc.