The Lincoln Plawg - the blog with footnotes

Politics and law from a British perspective (hence Politics LAW BloG): ''People who like this sort of thing...'' as the Great Man said

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Wednesday, February 09, 2005

Social Security - forked tongues on both sides, apparently

A Newsweek piece explains the stretchers employed, more plausibly than most, to this layman.

Under the Bush plan,
In the first 10 years of private accounts, according to the Center on Budget and Policy Priorities, a Washington think tank, the government would have to borrow $1.3 trillion (including interest) to make up for wage taxes no longer available to pay Social Security benefits. (This assumes two thirds of eligible workers opt for the accounts.) Over the first 20 years, borrowings would total $4.5 trillion. This is serious jack. The Bushies like to compare these borrowings with what they claim is a $10.4 trillion gap between Social Security's obligations and the resources available to pay them. But the shortfall—let's not quibble about its size—would be eliminated by cutting the benefit formula. We'd be borrowing trillions to cover bets in the stock and bond markets for a system with "security" in its name. Given that foreigners are financing almost all our budget deficit, we'd be hocking ourselves even more to lenders—such as the central banks of Japan and China—whose long-term interests may not be the same as ours.

But the Dems are lying, too:
The current system is clearly unsustainable, despite what Democrats say about it being sound until the 2040s. Today's workers support current Social Security retirees, and the next generation is supposed to support them. The ratio of workers to recipients has fallen from 16-1 to the current 3-1, and will fall to a future 2-1. Keeping the current system afloat would require some combination of cutbacks in future benefits, more money from workers or taxpayers, or both.

And the trust fund that they wax lyrical about is nothing more than an accounting entry - the very use of the term (it's a Clinton-era scheme, I seem to remember) is calculated to mislead. Unlike, say, the trust funds that finance the lifestyle of the Heinz Kerrys, there is no separate pot of assets, stocks and real estate owned by trustees on behalf of beneficiaries: the only 'asset' in the social security 'trust fund' is a pile of IOUs from Uncle Sam.

Social security outlays exceed income from 2018 onwards. That is the Micawber moment - rather than the Pollyanna-ish suggestions of 2052 and the like from the Dems - at which social security becomes bankrupt - according to the definition of being unable to pay its bills as they fall due.

(The suggestion that a system - as in 2052 - that can pay 70% of benefits due is not bankrupt is in Swift Boat Veterans for Truth territory.)

The piece suggests that the shortfall is fixable
by putting more money into the system by raising wage taxes a tad, taking less out by increasing the retirement age and trimming benefit formulas and setting up private accounts funded by wage earners, not by government borrowings.

But neither side is interested in a fix: the Dems think they can actually win one for a change (with the help of Josh Marshall's Conscience Caucus).

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