Wednesday, May 13, 2009

The Truth About Social Security From

This is one of the benefits of having lunch with Nick. The lie about Social Security is one of his areas of study and expertise. It was Nick who passed this to me, but I too get the daily update from Obviously Nick reads his updates, while I often just open my mail and skip actually reading it. This just might be the information that gets me back to actually reading my mail. Please read this. Our news media is not telling the truth about Social Security. Why? I'm not sure. I suspect it's just laziness or sloppiness, but whatever the reason, it's inexcusable. So, from Salon I give you the truth about Social Security.

Let's cut Social Security to pay for banker bailouts!

You are about to be hit by another wave of disinformation about how
Social Security is going broke and needs reforming (meaning, your
benefits must be cut). It's not true.

By Michael Lind

May. 12, 2009 |

On Tuesday, May 12, the trustees who oversee Social Security and
Medicare will issue their annual report. I don't know what will be in
the report. But I do know what the response will be. Conservatives,
libertarians and center-right Democrats will take whatever the report
says as evidence that there is an "entitlement crisis," which should
require us not only to address spiraling healthcare costs (a genuine
issue, affecting the private sector as well as Medicare and Medicaid)
but also the alleged "crisis" of Social Security (an imaginary

The coalition of libertarian zealots, Jeffersonian conservatives,
center-right Democrats and bankers and brokers who would like to earn
fees or commissions from the diversion of Social Security payroll
taxes into IRAs recycles the same arguments against Social Security,
rain or shine, boom or bust. They've been doing it for more than a
quarter-century, ever since a couple of libertarians wrote up a guide
for small-government conservatives on how to spread doubts about a
popular, solvent and effective entitlement. These tried-and-true
arguments will be dusted off and dragged through the media once again,
after the latest Social Security Trustees' report is published. Among
the bogus arguments you can expect:

The date at which Social Security will become bankrupt has advanced!
From annual report to annual report, the two key dates -- the date at
which Social Security payouts from the Trust Fund exceed payroll tax
intake, and the date at which the Trust Fund is exhausted -- advance
or retreat, depending on the contemporary economy and changes in
calculations. For example, in 1997 payouts were supposed to exceed
revenues in 2012 and the Trust Fund was supposed to be exhausted in
2029. By 2004, the trustees were more optimistic: The two dates were
2018 and 2042, respectively. If as a result of today's bad economic
conditions future growth rates are revised and the two dates are
slightly closer to the present in the latest report, should you be
concerned? No. Relax. When estimates vary so much, it would be crazy
to try to make public policy for the United States of nearly half a
century from now.

We have only two choices, or a combination -- cutting benefits or
raising the payroll tax. False. There are at least two other choices
that the deficit hawks never mention. One is more rapid economic
growth, which would make it easier to pay Social Security taxes in the
future without either benefit cuts or tax increases. The other option
that the doomsayers never discuss is an infusion of money from other
revenues, to supplement the payroll tax. Medicare is already paid for
partly by a payroll tax and partly by general revenues. Why not cut
the payroll tax and make up the difference out of general federal
taxes? If you want to be revenue-neutral, the Social Security
shortfall of about 2 percent of GDP between now and mid-century could
be patched with general revenue funds diverted from defense, if
without endangering our safety we could gradually lower defense
spending from its present wartime level of about 4 percent of GDP to 2
percent, which is more than most other advanced industrial countries
spend on defense.

Social Security and other entitlements are responsible for unfunded
liabilities of more than $100 trillion -- and as the baby boomers
begin to retire, the bill is coming due! Total nonsense.

About a decade ago, conservative and libertarian economists who oppose
Social Security, Medicare and other entitlements came up with a clever
rhetorical strategy. They would calculate the gap between the payroll
taxes that pay for these programs and estimated costs over time. But
there was one problem: The gap isn't all that scary, at least in the
near future. So in order to frighten the American people and their
elected leaders, deficit hawks cite the sum total of Social Security's
"unfunded liabilities" over 75 years. But even this -- a paltry $4.3
trillion over three-quarters of a century, according to the 2008
report -- isn't sufficiently terrifying.

In order to frighten gullible Americans, anti-Social Security
crusaders conflate Social Security with Medicare and talk about the
"entitlement crisis" in general. This masks the fact that Social
Security's projected shortfalls are minor, compared to those of
Medicare. Better yet, it produces a suitably spooky 75-year shortfall
of $42.9 trillion. And if this is not alarming enough, deficit hawks
can cite the truly apocalyptic figure of $101.7 trillion in combined
"entitlement" spending over an infinite time horizon.

The anti-Social Security lobby always presents the "unfunded
liabilities" of "entitlements" in scary dollar terms, rather than as
percentage points of GDP. Here's why: Over the next 75 years, the
Social Security shortfall at most hovers around 1 percent of total
U.S. GDP over that same period. Yes, that's right -- around a whopping
1 percent of U.S. GDP. And that is only in the unlikely event that
some combination of growth, taxes and benefit cuts do not eliminate
the shortfall in the future.

Dishonest deficit hawks also won't tell you that the Social Security
shortfall, at its worst, is only a minor cause of the total budget
deficit, which mainly has other origins. Among those are the
off-the-budget wars and the Bush tax cuts, which, if they had been
made permanent, would have created a 75-year shortfall between three
and six times greater than the Social Security shortfall (Furman and
Greenstein). By allowing tax rates for the rich to return to pre-Bush
levels, Obama has already averted huge potential revenue shortfalls
that would have made the gradual reduction of today's emergency-driven
deficits much harder.

By the way, the huge expansion of the deficit and debt in the last
year has had nothing to do with Social Security (without which not
only retirees but the economy as a whole would have been much worse
off). Indeed, thanks to the modest stimulus and the much larger
bailouts, the contribution of Social Security to long-term deficits --
always pretty small -- has just gotten a lot smaller in relative
terms. Anyone who says that the costs of the bailout mean we must now
cut Social Security is literally saying that in order to bail out the
bankers who created this crisis we need to slash benefits for American

Who is behind this disinformation campaign? The deficit hawks include
billionaires like Ross Perot and Pete Peterson, Republican
conservatives, libertarians and "fiscally conservative" Blue Dog
Democrats. This coalition has campaigned against Social Security for
more than a quarter of a century.

In 1983, in the Cato Journal published by the libertarian Cato
Institute, Stuart Butler, a transplanted British Thatcherite, and
Peter Germanis published their manifesto"Achieving a 'Leninist'
Strategy." Small-government conservatives, they argued, should learn
from Lenin, who sought to shape history rather than wait patiently for
the inevitable evolution of socialism: "Unlike many other socialists
at the time, Lenin recognized that fundamental change is contingent
both upon a movement's ability to create a focused political coalition
and upon its success in isolating and weakening its opponents."

Our two Leninist libertarians went on to argue: "First, we must
recognize that there is a firm coalition behind the present Social
Security system, and that this coalition has been very effective in
winning political concessions for many years. Before Social Security
can be reformed [destroyed], we must begin to divide this coalition
and cast doubt on the picture of reality it presents to the general
public." Because the "political power of the elderly will only
increase in the future," Butler and Germanis argued that any plan to
phase out Social Security should assure the elderly and near-elderly
that they would get their benefits: "By accepting this principle, we
may succeed in neutralizing the most powerful element of the coalition
that opposes structural reform."

While pursuing a divide-and-rule policy to "neutralize" the elderly
and other supporters of Social Security, the authors of the Leninist
strategy called for libertarians to build up a counter-alliance
consisting of institutions that could profit from the privatization of
Social Security: "That coalition should consist of not only those who
will reap benefit from the IRA-based private system ... but also the
banks, insurance companies, and other institutions that will gain from
providing such plans to the public [emphasis added]." They continue:
"The business community, and financial institutions in particular,
would be an obvious element in this constituency. Not only does
business have a great deal to gain from a reform effort designed to
stimulate private savings, but it also has the power to be politically
influential and to be instrumental in mounting a public education

In true cunning Leninist fashion, the opponents of Social Security
would disguise their revolutionary goal by pretending to be interested
only in modest, piecemeal reforms: "The first element consists of a
campaign to achieve small legislative changes that embellish the
private IRA system, making it in practice a small-scale Social
Security system that can supplement the federal system." Only when all
of the pieces were in place -- when the concerns of the elderly had
been "neutralized" by reassuring words, when banks and other
businesses seeking to cash in on Social Security privatization were
part of the libertarian alliance, and when business-funded campaigns
of "education" [that is, propaganda] had convinced most Americans that
Social Security was untrustworthy, would the Leninist right reveal its
true colors: "If these objectives are achieved, we will meet the next
financial crisis in Social Security with a private alternative ready
in the wings -- an alternative with which the public is familiar and
comfortable, and one that has the backing of a powerful political

I mean, really. Is this the ultimate smoking gun, or what? Twenty-six
years ago, Butler and Germanis, in a journal they must have expected
few if any non-libertarians to read, laid out the elements of the
dishonest and cynical campaign against Social Security that the right
has pursued ever since, right up to George W. Bush's support in his
second term for the partial privatization of Social Security. Stuart
Butler is still at it; only last year he called, again, for abolishing
Social Security as an entitlement and turning it into a program for
the poor that would be funded or not from year to year at the whim of

Even a Republican Congress was unwilling to touch the proverbial
"third rail," and in the aftermath of two stock market crashes in less
than a decade the idea of funneling Social Security funds into Wall
Street is going nowhere. But that doesn't mean the threat to Social
Security isn't over. Even if they can't directly privatize it, the
Leninists of the right will keep trying to "educate" Americans into
believing falsely that they personally are unlikely to receive their
full benefits and that Social Security somehow will bankrupt the
country -- even while they remind America's battered bankers and
brokers just how much money they could make on commissions by flipping
stocks if Social Security were gradually replaced by IRAs. Meanwhile,
they will keep trying to whittle away at America's most successful
social insurance program. They will call for converting it into a
means-tested welfare program, or rejiggering benefits formulas so that
inflation will render Social Security negligible as part of the
retirement income of most Americans. And all the while these radicals
of the right will disguise their true radicalism, pretending to be
centrist "fiscal conservatives" concerned about "fiscal
responsibility" and about "our children and grandchildren."
(Interestingly, children and grandchildren are not mentioned in the
Butler/Germanis manifesto, which contains several references to "the
business community, and financial institutions in particular.")

So be prepared, America. As soon as the latest trustees' report is
out, the media will be full of doomsayers and hand-wringers telling us
again, as they have told us year after year, decade after decade, that
we can't afford Social Security anymore. When they call on us to take
action now, we should indeed respond. With a yawn.

-- By Michael Lind

My Political Compass

I was doing a little blog surfing and ran across this at Kulkuri's place. There is a brief test, but I happen to like test taking so there's that. And I knew ahead of time that I would score in the liberal/libertarian quadrant of the test, but I'm more liberal/libertarian than Gandhi. Go me. I'd be wearing my kurta and my dhoti but it turned chilly overnight and cool today. I washed my warm winter slippers two days ago and I'm still waiting for them to dry so I have cold feet today.

Tomorrow I'll do my rave review of the movie, Soloist (it's a great movie). And I'll tell you all about the lunch date. The Med. Cafe gets a mixed review, in case your waiting to make lunch plans at the Med Cafe and can't wait for the full review.

To take the test go to politicalcompass.