Burnt Orange Report

"Cut"

By Jim Dallas

I've always found Social Security discussions to be a fun parlor game. So please forgive me for continuing on with my half-baked musing on the topic.

The real battle-line right now seems to be forming over the re-indexing of benefits, from wage indexing to price indexing. Because we're told (although I'm somewhat suspicious given recent economic conditions, and because I am an awful pessimist) that wages will grow faster than prices, changing from one to the other will necessarily result in a reduction, over time, of promised benefits.

We're apparently calling this a "cut", although that's sort of like George Bush calling not-making-his-tax-cuts-permanent a "tax increase." At any rate, I'm satisfied in knowing that fixed benefits for someone of my age will probably be less under any Bush plan than under the status quo (with or without an influx of cash). For what it's worth, though, current seniors probably won't see much of a difference if the only reduction in benefits comes from a change in indexing, since the difference takes years - decades - to accrue.

Ironically, for many moons we have heard that Social Security privatization was about "saving the children," but the children will end up bearing most of the cost of "reform." Although "reduced" benefits may very well end up being about the same as today's, I would prefer to think that the world is getting better.

Anyway - I think there's an important nuance that's getting missed though in the current debate over indexing, and it is this -- that not once in the history of Social Security (or any other program that I can think of) has the United States government made a reform that stuck for 60 or 70 years.

From the 1940s until the late 1970s, Congress made an almost-annual ritual out of increasing the genrosity of Social Security benefits, and in fact this may very well of helped keep Democrats afloat for so many years. These expansions were not entirely done in a fiscally responsible manner, and the result was the last Social Security crisis, which was actually a crisis, in 1983.

For twenty years Congress has been amazingly steadfast in not tinkering with Social Security (except around the margins); but of course as Groucho Marx noted, "politics is the art of looking for trouble, finding it, misdiagnosing it and then misapplying the wrong remedies." And that leads us to the current situation in Washington.

How long, exactly, does any reasonable person think that any new "grand consensus" (which, given the high likelihood of near-total Democratic opposition)would survive, before Congress raised benefits or did someother such pandering (for better or worse)?

Talking about the distant future is always going to be a parlor game, because you've got several intervening generations of politicians to muck everything up.

Incidentally, where's my bleepin' flying car? And why haven't robots enslaved humanity (yet)?

I'm sure 70 years from now, we'll all look back (god willing I'm still here) and laugh about how ridiculous the entire 2005 Social Security debate was. Provided of course that we haven't been enslaved by robots (yet).

Please keep this in mind.

At any rate, I think a more compelling argument for rejecting private accounts as a silver bullet is that it relies on incoherent, internally contradictory economic assumptions.

Why debate the detailed merits of a program that casual observation would suggest won't even get off the ground? This is like debating how far a penguin can fly.