Thursday, February 3, 2011

Social Security Reform and Pavlov's Dogs

Much like Pavlov's dogs it is predictable that if anyone brings up the subject of reforming Social Security liberal Democrats reflexively start shouting about partisan conservative attacks on our vulnerable senior citizens. 

A typical example is the comment below from James that I received in response to my February 1, 2011  post "Social Security-What Would FDR say?"

"It's a partisan conservative attack on the efforts of Democrats to protect the financial future of a fragile sect of our nation's population. All of these attacks on Social Security are ill-founded and show an ignorance (or maybe indifference) to the realities of life for many Americans. It's a fact that Social Security has run a surplus for the past 25 years, and the surplus dollars have been placed in a separate fund. SS is fully funded for the next 40 years (some people predict it will never run out). If you want to talk about reducing the federal deficit, let's start with defense spending- because Social Security works."
I just don't understand the level of vitriol that is apparent in these kind of statements nor the unwillingness to recognize that Social Security and the rest of our federal budget are on an unsustainable path.  How are we to save ourselves if so many will not even recognize that we have a problem?

The so-called "partisan conservative attack" used an analysis from the liberal Urban Institute to show the bad deal that Social Security has become for most Americans today.  The average American wage earner retiring today is getting a negative return on their contributions into the system over their lifetimes.  It will be a negative return for almost every worker very soon. Therefore, there was no "ignorance or  indifference to the realitiesof life for many Americans".  BeeLine is the one that is concerned for young, old, rich and poor and everyone in between.  James is the one who does not recognize the realities of life for the workers who pay the bills. This "attack" also included the actual words of Franklin Delano Roosevelt. He stated that Social Security would need to be reformed in about 30 years because of the way it was established.  He undersood it was not sustainable.  That was 45 years ago. Do you think we are a little overdue?  These are facts that liberals want to ignore.

The one fact James is correct about is that Social Security has run a surplus for the last 25 years.  Where was that surplus invested?  It was "loaned" to the federal government and used to pay for food stamps, fuel that went into Air Force jets, health care for the lady who works in the Interior Department and a trillion other things.  This is the so-called separate "Trust Fund" that James is counting on to take care of all future funding problems. In the 2010 Social Security Trustee's Report the balance owed Social Security from the federal government for these "borrowings" is $2.5 trillion.  How will Social Security get repaid?  Therein lies the problem as there are no assets to sell as in a normal private trust.  There are only 3 options-borrow more money to pay SS back, raise taxes on future wage earners or print money.  In our current situation, none of these is very attractive.

James and other liberals always like to bring up the Defense Department budget as a likely place to look for money rather than address the need for entitlement reform.  I have already addressed this fallacy in my earlier post on the "Debt Ceiling Dilemma".  The Defense Department budget is about $900 billion.  Our projected budget deficit for the current year is $1.5 trillion based on the latest CBO report.  Therefore, we could eliminate the entire Defense Department and still have a $600 billion budget shortfall for the current year!  More sobering is the fact that the CBO projects that the interest expense on the federal debt will increase by $600 billion per year by 2020 compared to what we pay today.(see the post "Unstoppable-The Feceral Debt Train")  That means we have to find another $600 billion a year that we don't have today.  That means we are on a path to be facing a $1 trillion deficit in 2020 even if we spend nothing on Defense!

We need to rid ourselves of these Pavlov dog responses and get some dogged determination to fix the doggone problem without being so dogmatic.  When you look at the facts, do we really have any other choice?

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