Monday, March 15, 2004

A Multi-Trillion-Dollar Bait-and-Switch

The Tribune runs a bricks-and-bouquets feature at the bottom of the editorial column, throwing the appropriate "b" words at people for brief reasons. Last Sunday, they fell for the Social Security nonsense by Greenspan, so hence my column this week. Newspaper version is available here.

Quote of the day is from Frank Deford: "I don't play golf. It's amazing what you can do if you don't play golf.".

East Valley Tribune, Mar. 14, 2004

Last Sunday, the Tribune gave a brick to “the majority of members of Congress, who lack the political courage to cut federal spending and begin dealing with the looming problems of Social Security.” That editorial was wrong about the program, the problem, and the timing. Give yourself a brick, Tribune.

There’s no “looming” Social Security crisis. Major payroll tax hikes proposed by Alan Greenspan and approved by Ronald Reagan mean Social Security collects more in taxes than it pays in benefits until 2018. Current projections then show that 35 years of surpluses, invested in special Treasury bonds, cover benefits through 2042.

That’s nearly 40 years from now, and somehow people who won’t believe 10-year budget projects (they’re too uncertain, except when used to justify tax cuts for those making over $200,000) get all lathered up about is about to happen -- in 2042.

For those zealots claiming the Social Security trust funds are “accounting fictions” and those Treasury bonds merely “worthless” paper, here’s a challenge: If they’re worthless, give me some. I’ll even take bonds that don’t mature for 30 years. “Fiction,” my eye. Just don’t be stingy about the face amount.

The Tribune forgot the code used by conservatives intent on gutting Social Security: Don’t discuss just Social Security. Instead, discuss the “looming problems of Social Security and Medicare."

The Medicare program is a sick puppy -- one made more ill by the ill-conceived, ill-financed, and indescribable prescription drug benefit. (Yes, the one where the Bush administration ordered its chief actuary to keep accurate cost estimates secret from Congress until after the bill passed. That’s one problem with the Bushies -- they only like bad intelligence.)

Even if you extend the time horizon to 75 years, Social Security represents only 16 percent of any projected shortfalls in the entitlement programs. Five-sixths of the problem comes from Medicare, and cutting Social Security benefits doesn’t help much. (These estimates assume we can project what health care costs in 2079, nice work for people who can’t do 10-year budget projections.)

Despite that projected shortfall -- which assumes no unpredicted increases in birth rates, productivity, seniors working, or immigration -- keeping Social Security benefits intact requires increasing federal spending by about 2 percent of GDP over the next 30 years. Sounds significant, but such an increase would make public-sector spending a smaller percentage than during the presidencies of Reagan and Bush 41.

The “crisis” is a fraud, and the first villain is Greenspan. In 1983, he recommended hiking payroll taxes to create a surplus to help fund baby boomers’ retirements. Payroll taxes are regressive, falling much more heavily on the workers and the middle class than on the rich. Somebody making $200,000 (or more) annually pays not one penny more than somebody making $87,400.

So in 1983, Greenspan helped raise taxes on the middle class, to build a Social Security surplus. Then in 2001, Greenspan endorses using that surplus for Bush’s tax cuts, which mainly benefit people making over $200,000.

Now that the GOP can’t control government spending and revenues have collapsed (which, contrary to the Tribune’s belief, causes the great majority of Bush’s deficit -- not any increased spending), Greenspan wants to give more tax cuts to the rich and cut Social Security benefits instead.

The other villain? Bush promised we could have his tax cuts and protect Social Security. In 2001, Bush claimed his budget saved the entire Social Security surplus and that none would be used to fund other spending initiatives or tax relief. Also wrong, wrong, wrong.

Bush and Greenspan are running a trillion-dollar bait-and-switch scheme here. It’s a fraud, and they’re the ones who deserve many, many bricks.

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