A Cease-Fire on Social Security Demagoguery?

Senator Lindsey Graham (R-SC) and Representatives Charlie Stenholm (D-TX) and Jim Kolbe (R-AZ) have drafted a letter urging a halt to political attacks that mischaracterize Social Security reform proposals.

That is a worthy goal, because Social Security reform is essential to keeping the budget under control, not now, but in 20 or 30 or 40 years when the baby boom generation has retired.

But the goal will be hard to achieve until two political preconditions are met.

First, Democrats must give up their stale and unpersuasive rhetoric that entitlements can somehow be “saved” by rescinding tax cuts and allocating the savings to the programs’ “trust funds.” Yes, reducing the federal debt (or slowing its growth, the way things stand now) would put the government in a better position to borrow when the entitlement bills come due. But no, it’s simply not enough. Even if we balanced the budget today, the future budget crunch would only be delayed a little, not avoided.

Second, Republicans must cease their endless tax cut demagoguery. Yes, tax cuts can be important to stimulate a sluggish economy, and some tax cuts might even spur long-term efficiencies under the right conditions. But no, tax cuts do not pay for themselves, now or in the future.

Continued tax cuts are incompatible with entitlement reform. Properly reforming Social Security will require hundreds of billions, even trillions of dollars in transition costs. The tax cuts of the last 3 years haven’t starved the government’s spending appetite, as many conservatives had hoped. Instead, they have starved the possibility of real Social Security reform.

Social Security reform generally involves three things: (1) leave current retirees alone, (2) create and fund personal accounts for working people, and (3) reduce promised benefits for current workers. Therefore, most current workers (except those with very low incomes) would get a lower payment from Social Security’s traditional benefit when they retire, but they would be able to offset that reduction from funds in their personal accounts.

The result is higher government spending now, when we can afford it (at least demographically), and lower government spending later, when we can’t.

However, the deal works only if the government has the funds to create people's accounts in the first place.

Ending the demagoguery and the dumb (but no doubt effective) political attacks is an important first step. But to truly reform Social Security, Democrats will have to stop claiming that the do-nothing approach is a feasible alternative, and Republicans must stop pretending they can reform the program without spending any money.

Links:
Graham/Stenholm/Kolbe "Cease Fire" Letter
Centrists.Org No-BS 30-Year Budget Baseline

Posted by Jeff Lemieux at July 22, 2003 07:26 PM