Charles Krauthammer
writes in today's WaPo about how Bush is being
so brave in his proposals for Social Security, and the Dems are being cowardly and trying to cut him off for 2006 political gain.
Later, he claims that 2009 is the point where the surplus starts shrinking, and we'll need to cut benefits then or raise taxes under the current system.
Big problem with his thinking: this wouldn't be a problem if Bush hadn't been slashing taxes so much. The estate tax and his higher bracket tax cuts alone would cover most, if not all, of the shortfall.
There's more dissonance, along with full text of the column, after the jump.
The Same Old Saw On Social Security
By Charles Krauthammer
Friday, May 6, 2005; Page A23
Having lured the president out onto a far limb on Social Security, the Democrats have begun sawing. Democratic leaders immediately rejected the president's plan and stood up for all that is good and true and saintedly Rooseveltian -- without, of course, offering any alternative.
To be sure, the president started all this on his own, first proposing personal accounts. Democrats objected that this did nothing about the really important issue, namely solvency. So Bush offered five solvency alternatives in his State of the Union address (four first proposed by Democrats) and welcomed any other ideas. The Democrats answered: "You go first." On April 28 the president did go first, proposing a remarkably progressive reduction in the rate of growth of benefits.
The Democratic leadership, supported by misleading headlines around the country, denounced these "cuts" as the work of a party that never did believe in Social Security and now wants to kill it.
Yes, these are cuts, but only in the growth of promised benefits in the future -- based on formulas written in the pre-baby boomer retirement era that so inflate benefits that they are entirely unsustainable. They cannot possibly be paid by the taxes of the fewer workers in the future who will be supporting the many retirees.
To simplify somewhat, the amount of your first check upon retirement is based on your average wages during your lifetime. Then a formula adjusts that number to wage inflation -- which generally amounts to price inflation plus about 1 percent annually. The Bush proposal is to preserve this ever-increasing, ever-compounding benefit formula for poorer Americans, while gradually phasing out the extra 1 percent as you move to wealthy wage earners.
No one gets cut -- either in nominal or real dollars. Everyone gets at least as much or more than any retiree today, with the poor getting progressively more every year.
This is about as fair and progressive a plan as you can find. Even the inveterately, reflexively, often apoplectically anti-Bush Michael Kinsley expressed admiration -- and indeed puzzlement that the president would offer it without any prospect of short-term political advantage.
Leave the quest for short-term political advantage to the Democrats. They have finally gotten a Republican president to openly propose "cuts" in Social Security and they intend to win seats in 2006 running all-out against them.
The White House seems to think that this obstructionism will not work. The Democrats will be blamed for doing nothing. But if A accuses B of doing nothing, and B accuses A of destroying the one social program that everyone supports, who do you think wins?
And Democrats have a wonderful smoke screen. These "cuts" are not only destructive but unnecessary, they claim, because the insolvency does not kick in until sometime in mid-century -- the Democrats' latest comically precise number is 2052 -- when the "trust fund" runs out. (So much for their month-ago concern about solvency.)
As I have been writing for years with stupefying redundancy -- and obvious lack of success -- this idea is a hoax. There is no trust fund. The past Social Security surpluses were spent the year they were created. The idea that in 2017, when the surpluses disappear, we will be able to go to a box in West Virginia to retrieve the money we need to make up the shortfall (between what Social Security takes in and what it pays out that year) is a deception. There is no money there. It will have to be borrowed or garnered from new taxes.
But things are worse than that. The fiscal problem starts to kick in not in 2017 but in 2009. The Social Security surplus, which Congress happily spends every year, peaks in 2008. Which means that starting in four years (and for every year thereafter) a budgetary squeeze begins, requiring new taxation or new borrowing.
If in 2010 tax revenue and spending remain exactly the same as in 2009, the Treasury will not end up with the same size deficit. It will end up with a larger deficit, because the amount of money it was receiving free and "borrowed" from the Social Security surplus will have shrunk.
That surplus shrinks from its peak in 2008 to zero in 2017 and goes negative after that. That is a very serious fiscal problem that starts not in 50 years, not even in 12 years, but in four.
Time for action, you might think. Ah. But before all those years comes 2006. And a chance for power. A chance for Democratic politicians to once again hear that most mellifluous phrase: "Mr. Chairman." Hence, that sawing noise.
Okay, Chuck, let's go over this. They have been off on these projections forever. We can't say for certain when the surplus ends. In fact, if the surplus is going to run out earlier than previous projections, that isn't the fault of Democrats. It's the fault of the continued tax cuts (and remember, these GOP boneheads added more cuts in this year's budget). Perhaps if they slice the budget so bad with tax cuts, the trust fund will be expired by 2008!
Next up, the "trust fund myth." Krauthammer drinks the Kool-Aid on this one, "As I have been writing for years with stupefying redundancy -- and obvious lack of success -- this idea is a hoax. There is no trust fund. The past Social Security surpluses were spent the year they were created. The idea that in 2017, when the surpluses disappear, we will be able to go to a box in West Virginia to retrieve the money we need to make up the shortfall (between what Social Security takes in and what it pays out that year) is a deception. There is no money there. It will have to be borrowed or garnered from new taxes."
Yes, there is a trust fund. That fund was promised by the U.S. in response to borrowing from the surplus for years and years on end. The government, by using Treasury bonds (remember, Greenspan and Reagan signed onto this plan, Republicans both), said that the full faith and credit of the United States would repay that surplus money that had been used to help make budgets year after year. The GOP-led government continues to use surplus money to make the deficit seem less than what it actually is, all the while claiming that the surplus is going to run out. Here's an idea: Stop using the surplus to fund your useless deficit spending! Stop cutting taxes on the rich!
Finally, this gem, "If in 2010 tax revenue and spending remain exactly the same as in 2009, the Treasury will not end up with the same size deficit. It will end up with a larger deficit, because the amount of money it was receiving free and "borrowed" from the Social Security surplus will have shrunk."
Chuck, funny that you picked the date that the estate tax cut was going to expire, but now grows even further thanks to your party. Tax revenue is going to shrink even further because you guys can't stop cutting taxes and spending. At least your old bugaboo "tax and spend" Democrats were being more fiscally responsible by ensuring revenue would exist. Y'all spend like there's no tomorrow, raid the trust fund to do it, then lie like hell to us and say Social Security is going to run out of money and us twenty-somethings won't get it because it'll be "bankrupt." The only thing bankrupt here, Chuck, is your party's moral standing to govern and your ideology as well.
If you and the GOP want to truly fix Social Security, something I highly doubt, then restore the estate tax, restore those high-end tax cuts, and stop using the trust fund as your deficit-spending credit card. That will fix it in a way that those ridiculous private accounts ever could.