Thursday, November 15, 2007

Social Security, Prioritization, and Trust

I played a miniscule, nearly zero role in the progressive defense of leaving Social Security alone in 2005, and I am proud of the phone calls I made, the logic and cash flow models that I detailed, and the repeated explanations of acturial assumptions in the High cost, Middle Cost and Low costs cases and how those models are fairly sensisitive to changes in productivity assumptions and immigration rates. And right now, I believe that there are half a dozen Freeze Congress Solid for Two Years issues that need to be addressed before we should even think about talking about Social Security, as realistically, medical costs are the budget buster in the budget, as well as an aversion to actually pay for things with current taxes. Here's the relevant chart from the CBPP:

So when I see Kevin Drum saying the following, I get very frustrated on multiple levels:
But I'll add one thing. I'm on record (several hundred times, probably) saying that Social Security is basically fine and that the best thing we can do is just leave it alone and then revisit it in a decade or so. At the same time, I don't think any of us would (or should) have any serious problem with, say, a 1983-style commission that beavered away for a year and then recommended a basket of modest tax increases and benefit reductions to keep Social Security solvent for the rest of the century.
On a purely wonkish level, there is a reasonably strong argument that the policy of "Do Nothing" and allow for higher than middle case projected productivity growth and immigration to move us very close to the low cost case. The current low cost case has Social Security acturially balanced for another seventy years. On an operational policical level, Social Security will be a monster fight no matter what is put forth as there are so many diverse and opposing stakeholders. Assuming the Dems win the White House and expand their majorities in Congress in 2008, I really would like the one or two big initiatives that have a chance of being enacted in policy by 2010 to be useful initiatives.

Finally, let's take a look back at the 1983 Greenspan Commission and how their results have been used to justify non-progressive policies. The basic idea of the Greenspan Commission was for the Baby Boomers to partially pre-pay their Social Security benefits by increasing capped wage taxes in order to run massive Trust Fund surpluses. So far that portion of the plan has worked fairly well. The surpluses from OASDI taxes have been masssive. The next stage of this plan was to use these surpluses to provide a significant fiscal cushion and reduce future general fund obligations.

One party has tried to run general fund and unified budget surpluses to free up federal fiscal capacity for the highly predictable Baby Boom retirement wave, and had candidates propose 'lock boxes' and bond buybacks with the intent of reducing projected long term interest expenses. And the other party claimed that this was fuzzy math, and that the OASDI Surplus was merely paper, but that the unified budget surpluses morally neccessitated massively regressive tax cuts. And despite his protests of political naivity, guess which party's policies Greenspan effectively endorsed with his Congressional testimony.

So if there was to be another Greenspan commission that recommended slightly higher payroll taxes and a reduction in benefits through either a later retirement age or some type of graduated hair cut in the replacement rates, the Democratic Congress and White House would be paralyzed for most of a year to solve a problem that is not too pressing, and negoatiating with a coaltion of interests that has shown particurly high degrees of bad faith on this particular matter. That is why I oppose a blue ribbon Social Security commission in the next three or four years.

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