John Snow had an op-ed in today's paper: Link
. The subject: Social Security, of course. Quotes and commentary below...
Story link: Link
The trustees' report shows that Social Security's cash flows will peak in 2008 and turn negative in 2017, and the trust fund itself will be exhausted in 2041. The unfunded obligation--that is, the difference between the present values of Social Security inflows (plus the trust fund) and outflows--is $11.1 trillion on a permanent basis, and $4 trillion over the next 75 years
This shows a palmed card which is very common in the administration. They try to create the impression that 'trust fund running out' == 'No Social Security'. In fact, even under the pessimistic assumptions used in that projection, when the trust fund is emptied, ongoing FICA taxes will cover something like 80% of benefits. Under more realistic projections, the shortfall is either smaller or nonexistent.
Just as important to note is the fact that while payroll tax increases have been the standard "solution" to Social Security's problems, they have never solved the problem. Payroll taxes have been raised some 20 times since Social Security was established--and it has failed to make the system solvent.
The system has been solvent for 60 odd years, and even under pessimistic assumptions, it's good for another 40 or so. Note also that benefit cuts, in the form of adjustments to cost-of-living increases and retirement ages have also been part of the tweaking of the system.
President Bush believes that an essential element of reform, in addition to achieving solvency, is establishing personal accounts. He thinks there is a tremendous amount of hope in creating something that would allow younger workers to build a nest egg that they own and control, something the government could never take away from them and spend, and that would tap into the great force of compound interest.
Here, of course, there's another palmed card. They've stopped claiming that personal accounts will create solvency. At the same time, they're claiming that Social Security is DOOOOMED, DOOOMED I tell you!! No actual solutions to the solvency problem are proposed, just a note that a 'terrific conversation' is under way. Discerning readers will also note the absence of any indication of transition costs....
The responsibility to keep the commitments to seniors and meet the needs of our children and grandchildren is a shared one. It is shared across the political aisle and across generations. We should treat this year's Social Security trustees' report as the final warning bell and join together to make sure that next year's report will be different.
Stirring words, but kind of silly. It's hard to say what, exactly, Bush's plan is, but the details that have been released or leaked indicate that even if it were fleshed out and implemented tomorrow, it wouldn't be phased in for several years. I guess next year's report will be more or less the same as this years.
A few interesting overall impressions I had on the article. First and foremost, it seems like the President and his minions are losing ground on this issue. Most of the article focused on the (perceived) need for reform, any reform. Private/personal accounts only got one paragraph, and they've stopped trying to sell the notion that these accounts will fix everything. For that matter, the benefits of personal accounts are touted as "the great force of compound interest", not mentioning that the T-bills in the trust fund enjoy the same force.
Snow talks about the dire effects of raising FICA taxes, but doesn't mention the mirror option of cutting benefits. That must have been thought to be too politically explosive to even bring up as a straw man.
I didn't quote it, but there are a couple of paragraphs about Medicare and how the burgeoning costs of that program are being dealt with by the administration's Bold Reform Efforts (tm). This is probably a reaction to people pointing out that if SS is in bad shape, Medicare is in much worse shape, so why is the administration trying to 'fix' the smaller problem first.
Overall, I think this article is an indication that the administration is running the Red Queen's Race: Running as fast as they can just to stay in the same place.