February 17, 2005

The party of Social Security  

I'm starting to be seriously concerned about the way the Democrats are approaching the Social Security issue. The calculation seems to be that the Republicans have neither the numbers nor the unity necessary to pass sweeping changes without help; so the Democrats have adopted this uncompromising stance where there's nothing wrong with Social Security as it is now. The problem is, this claim is obviously untrue. Social Security is going to face huge deficits over the next few decades. Whether these deficits are smaller or larger than other deficits (created by the Bush tax cuts, for example) has nothing to do with whether there's a problem with Social Security; it's a sour grapes argument, and it's all we're hearing from the Democrats.

The Bush plan is easy enough to attack, even with the sketchy details we have now. It doesn't fix Social Security's budget problems, which would seem to be a fatal flaw given the way Bush has presented it. It cuts benefits and bases its projections on an overly optimistic return beyond inflation. Most importantly, it's a very un-Republican attempt to publicize the entire retirement account system in the United States -- where any number of retirement account options already exist. Surely this last point is one the Democrats could make forcefully; isn't Bush's program just a massive expansion of government? And one that fails to address the real problems with Social Security?

Taegan Goddard links to a Washington Wire poll indicating that Americans (and even a big chunk of Republicans) want the Democrats to be an opposition party. But heckling the passing parade isn't going to do it. The Democrats need to seize this issue and make it their own -- it's as good a place as any to finally begin to redefine what it means to be a Democrat.

Caleb  {February 18, 2005}

When I've heard Democrats pointing out the deficit caused by the Bush tax cut, I haven't taken it as "sour grapes." Supporters of Bush's SS plan (hee, hee) say that Social Security is in crisis financially and to remain solvent it will eventually have to cut benefits anyway. Democrats say, no, the other way to maintain solvency is to increase revenue, and one way to do that is to reconsider Bush's tax cuts. Aren't the tax cuts then extremely relevant here, or am I missing something?

paul  {February 18, 2005}

The problem is that the debate is about the Social Security program's solvency and not the government's solvency. I'm not arguing that we shouldn't try to fix the latter, but it's the former that's the real problem when you're having a Social Security debate, and in the minds of Americans (and in accounting fact, actually), Social Security is a program that stands alone, unsupplemented by general revenues. The "solution" of raising taxes and using general revenue to pay for Social Security benefits doesn't address the problems with Social Security; it just pays for them, and presumably at the expense of other programs.

By the way, I've actually argued before that we should change the program so that it relies on general revenue rather than FICA, which is a regressive tax. But that's not something that would fix the solvency problem per se -- we'd still have ballooning costs for benefits. It would have to be coupled with changes to the benefit structure -- either out-and-out rate cuts, pushing back the retirement age, or eliminating benefits for those with substantial assets.

Caleb  {February 18, 2005}

I completely agree that somewhere down the line both benefits from and funding for Social Security will have to be revised, and Democrats need to confront this.

But, in the first place, I don't think those problems are as urgent as the Bush administration claims they are. My understanding is that once Social Security becomes insolvent in forty or fifty years, even at that point it will be able to pay out three-fourths of current benefits, and that's based on the most pessimistic projections. So we will need to reform either benefits or funding, but not in the dramatic way that the administration is calling for.

I see your point that increasing general tax revenue will not increase revenues for Social Security; this is a point on which I often get confused. I still think that the tax cuts are relevant in a rhetorical and ideological sense, however. One way of fixing Social Security would be, for instance, to raise the cap on payroll taxes to make the system more progressive. But Bush's commitment to making his tax cuts permanent is consonant with his refusal to consider raising more revenue with payroll taxes. You're right that many Democrats aren't making the connection to the tax cuts this subtly (and I wasn't either in my first comment), which is a problem.

I heard Paul Krugman talking on NPR yesterday, and he was more subtle with regard to the Bush tax cuts. He pointed out that funding Social Security to keep benefits at their current levels for three or four generations would require taxing a fraction of a point of our gross national income, whereas the Bush tax cuts made about two percent of our national income untaxable. (I think I have that right.) That's why it's relevant to point out the tax cuts: not because erasing the tax cuts would fund Social Security, but because it demonstrates that when the Bush administration says it can't afford something, it really just means that there are certain things it's not willing to afford.

BTD Steve  {February 18, 2005}

I think the Dems probably think (correctly) that there is plenty of time to wait on fixing Social Security, so they might as well oppose Bush now. Later, preferably during a Democratic administration, they can tweak it as needed (by raising the cap on contributions) probably and claim credit for solving the problem.

If it were an urgent problem, I think you'd see more acknowledgement that something needs to be done. For now, I think the Dems are wisely using this opportunity to point out that Bush's rhetoric is not supported by the facts.

Carl Nyberg  {February 18, 2005}

I see this as being analogous to Clinton's health care plan.

The crisis in health care is more imminent than in Social Security.

Would I like to see some modest changes to ensure the solvency of Social Security? Yes. But the problem is that if the Dems OK the idea of tinkering with Social Security then they have to fight in the media where they have a disadvantage and they know Bush and company won't play fair and tell the truth.

I say scuttle the whole thing unless Bush comes to the table with something reasonable.

paul  {February 19, 2005}

I take the point that it's important to talk about taxes, but I also think it's parilous to do so without an alternative plan -- and especially so when you've been beaten into the minority as completely as the Democrats have. The reason there is a crisis here is not because there is an immediate financing crisis (although I do think it would be wise to phase in changes over time, and to do that you need to plan well in advance) but rather because George Bush has seized the issue. I don't think in general people realize what this means for the Democrats. If Bush creates private accounts, regardless of the policy implications they will be popular with young Americans, and it will pull away some voters who have trended Democratic in the past. That's the crisis: Bush is triangulating the heart and soul of the Democratic party, which is why Democrats have to reclaim this issue and make it their own again. Strategically, presenting a bold alternative plan is the only way to push their own agenda (as opposed to simply obstructing the president's). Waiting for a Democratic majority is wishful thinking.

roger  {February 21, 2005}

I have to disagree. The democrats aren't powerful enough to push through any reform of social security -- granting that there should be one, for the moment. And, given their track record of being rolled by the Bushies, any attempt they make to propose something will be coopted and attached to some extremely expensive attempt to once again strip the pension assets. In that type of situation, they can huddle, but they can't pass. So they shouldn't.

The real problem, looming like King Kong, is that there is no way that Bush's pay later deficits are going to be going down. And if the direst predictions are true, the red ink after Bush leaves is going to be awesome. This is a much more urgent problem for the Dems, politically.

paul  {February 21, 2005}

I think that Bush's deficits are a huge problem for the Democrats, although I think a successful (and by this I mean popular) personal accounts program will really damage their following among young people and could therefore be more dangerous in the long term.

As far as not pushing an agenda though, I think that's just as dangerous politically as having your agenda coopted. The reason is that the vast majority of Americans have no idea what Democrats stand for, and obstructionism doesn't really send any kind of message about that. If Democrats are going to have any success in 2006 and 2008, there has to be some definition, and what better issue to start with than Social Security?

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