Wednesday, December 22, 2004

Ending Social Security As We Know It

My column was held from the weekend because the editor wanted to devote the "Lack of Perspective" section on Sunday to a brawl about the role of religion in public life--and I wasn't invited. So I got rolled over to today. I love the term, "Symington-style scam." I hope you like "end Social Security as we know it," too. Maybe that phrase will help.

I leave tomorrow for Ukraine to observe the re-run of the presidential runoff election. I think I'll be in the provinces away from Kyiv, so I may not have Internet access during most of the trip. My next column will probably be about those elections. For those of you in Phoenix (or if the paper posts the piece on its website), I have a piece coming out in Friday's Jewish News of Greater Phoenix which I won't be able to post until I return. I explain that instead of dim sum and a movie, this Christmas I'm helping democracy in Ukraine. It's not the usual Jew-substitutes-for-Gentile-on-Christmas story, but it'll have to do.

In run-up to the Rock 'n Roll Arizona Marathon news, my time at the Desert Classic 30K last weekend was about 2 minutes behind last year's; I finished in 3:00:11, having lost time on the turns or something. Hopefully I've now learned enough about running a marathon that it won't take me about as long to run (well, more walk than run) from the 30K mark (18.6 miles) to the end at 26.2 miles. I also hope that borscht (and the Ukrainian winter) is good for my blisters.

Social Security
'Reform' plan a Symington-style scam

East Valley Tribune, Dec. 22, 2004

President Bush wanting to “end Social Security as we know it” should seem familiar to Arizonans. The mumbo-jumbo required to get people to trade a defined-benefit plan for pie-in-the-sky defined-contribution promises resembles the real estate shenanigans of former Gov. Fife Symington.

Yes, people who missed having their retirement sunk into the Mercado now can let GOP politicians use their pensions for fun and games -- without knowing how to operate heavy construction machinery.

First, the Social Security “crisis” is based on a very long-term estimate. An administration that has budgeted exactly zero dollars for the wars in Afghanistan and Iraq -- because, they claim, it’s just too hard to predict what will happen during the next 12 months -- can predict exactly future trends in population and economic growth, immigration, and productivity 40 years out.

Congressional Republicans stopped their budget office from issuing 10-year budget projections, formerly standard, claiming that anything longer than 5 years is just too uncertain. (Actually, the real reason was that 10-year projections show exactly how awful the still-phasing-in Bush tax cuts and Medicare drug benefit spending makes the deficit.)

But these same “don’t make me estimate more than 5 years out” types are rock-solid certain that they know what’s going to happen to Social Security in 2042.

And that 2042 date? Keep in mind that in 1994, the Social Security trustees issued a report saying that, under the worst of their three long-term projections, current revenues and redemption of trust fund bonds would not fully meet promised benefits in 35 years. Ten years later, under the same worst-case scenario, benefits don’t exceed revenues and bond redemptions until 2042.

In other words, 10 years later, “doomsday” is now 3 years farther out. That’s their crisis.

And that “doomsday” -- what would happen is that after redemption of the bonds we’d purchased with our excess FICA taxes not needed to pay current benefits, Social Security revenues still will cover 81 percent of promised benefits.

Compare that to the Bush administration’s current budget practices; right now General Fund revenues cover only 68 percent of non-Social Security spending. But, says the President, we can grow and borrow and pretend our way out of today's General Fund crisis, and the real problem is a smaller gap three or four decades from now!

Of course, the greatest risk to the Social Security trust fund is repayment, with interest, of today’s government borrowing to fund current spending. Remember how Bush inherited a surplus, then turned it into a deficit? Well, you’re supposed to forget and pretend it’s all Social Security’s fault.

There’s more! It’s the Medicare trust fund that’s facing the real crisis, one accelerating with increases in healthcare costs and changing demographics. The same trustees say the Medicare trust fund will be exhausted in 2019, and that date keeps moving closer.

But there’s no real money for Wall Street in Medicare, and solutions are much tougher; better to fake a crisis in a program that’s actually in pretty good shape, that needs only minor tinkering, because as Willie Sutton said about robbing banks, that’s where the money is.

But back to Symington. The Bush administration plans to “fix” what might happen to Social Security in 2042 by how? By borrowing -- but we won’t call it borrowing, it’s an investment! -- trillions. We’ll borrow now, people will invest it, and we have lots of really cool projections showing that in 40 years we’ll have repaid the loans and have oodles of extra money besides.

That’s exactly how Fife justified using different financial statements depending on whether he was borrowing or trying to avoid repaying. If it was repayment time, he used real numbers; he had no cash and no equity. If he wanted to borrow money, he talked about how much money his real estate was going to be worth in the future, you should live so long.

That’s what Bush wants to do with your Social Security: Borrow it like Fife did, then “transform” the program into “Symington Security.” If you swallow this sodden political pastry, you’ll deserve the resulting retirement heartburn.

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