Phony Social Security “Crisis” Is Fueled by New Report

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Spring has come to recession-era America, which means that all across the nation, millions of old people are emerging from hibernation and hobbling out to their mailboxes in search of their long-awaited Social Security stimulus checks. The first round of payments provided by the American Recovery and Reinvestment Act has just been mailed out. So while the big banks may be raking in their trillions, U.S. elders–along with recipients of SSI and veterans’ benefits–will soon have a whopping $250 to protect them from the ravages of the economic meltdown. 

 And it looks like we’d better make it last, since it’s the only increase we’re likely to see for a long, long time. For the first time in more than 30 years, according to forecasts by the Congressional Budget Office, there will be no cost-of-living adjustment (COLA) to Social Security next year. In fact, because of low inflation, there probably won’t be a COLA before 2013.

And it might not stop there, since the straw man of Social Security “reform” is yet again raising his scruffy head. The phony crusade to “save” Social Security from bankrupting the country and destroying the lives of our grandchildren has gained new traction during the recession. This manufactured crisis is already being used by conservatives (apparently with some cooperation from the Democrats) in a quest to cut old age entitlements–in effect taking money away from elders to pay for the Wall Street bailout.

A report released by the Trustees for Social Security and Medicare will surely add fuel to this manmade fire. The report projects that the Social Security system will remain solvent for “only” 28 years–downgraded from 32 years in the previous report–due to a reduction in payments into the system’s trust fund as a result of the recession’s job losses.

This means that in terms of solvency, the giant government program is still running 28 years ahead of Citibank, Bank of America, and the other behemoth private financial institutions run by the high-paid geniuses of Wall Street (and much longer, if you count the years when the bubble was expanding). In addition, the Social Security trust fund is still in better shape than it was a decade ago, according to the Center for Budget and Policy Priorities

None of this, of course, will stop proponents of entitlement cuts from brandishing the new trustees’ report as a weapon. Within hours of the report’s release, a new post on the Cato Institute’s blog was warning that it “shows that the program’s financial crisis is growing worse while Congress has continued to duck the issue.” As for the proposed solution–even the financial meltdown that has decimated all of our 401(k)s is not enough to avert Cato from its true agenda:

critics of personal accounts for Social Security have pointed to the decline in the stock market over the last few years as an argument against allowing younger workers to privately invest a portion of their Social Security taxes. Yet as the new Trustee’s Report shows, the same poor economy that hurts the stock market, hurts Social Security’s ability to pay its benefits.

In the end, there are only three possible solutions to Social Security’s problems. Taxes could be raised (and the Social Security payroll tax would have to be nearly doubled to keep the program afloat). Benefits could be cut. Or younger workers could be allowed to invest privately.

And there we have it: In two easy steps, we’ve returned to the most cherished–and most discredited–domestic policy objective of the Bush Administration, the privatization of Social Security.

The real worry now, however, isn’t the likes of Cato, but the Democrats’ apparent willingness to succumb to the heated rhetoric of the phony crisis. Obama has several times made references to “entitlement reform.” And as Roll Call reported last week:

In a year already jam-packed with major legislative initiatives, House Majority Leader Steny Hoyer (D-Md.) is breathing new life into the idea of tackling Social Security reform….Hoyer signaled that Democratic leaders may take steps to act on Social Security reform in the fall after Congress advances its two biggest priorities: health care reform and climate change legislation.

“Of our entitlement programs, I believe we would have the easiest challenge in reforming Social Security,” Hoyer said. “Frankly, I believe Social Security is not very difficult mathematically. It may be difficult politically, but not mathematically.”

The Washington Post confirmed that Hoyer is looking to create ”a bipartisan consensus” for “overhauling the Social Security system.” Democrats, the Post reported, ”have found a willing partner in the Senate,” where South Carolina’s Lindsey Graham “has stated his desire to work with President Obama to make changes to keep Social Security solvent.” Even Graham, a longtime supporter of Social Security privatization, is now admitting that dog won’t hunt. Instead, he presents Social Security reform as a “math problem”: “You can do a combination of things, give a little here and give a little there, and get it done,”  he said. 

Anyone who supports the program that lifted millions of elders out of poverty should  be concerned by the ongoing disconnect between the “reform” rhetoric and Social Security’s actual fiscal soundness–and by where it all might lead. Following Hoyer’s announcement, the National Committee to Protect Social Security and Medicare commented

given the long list of critical challenges this nation faces right now…it’s hard to imagine why Social Security would share space at the top of the legislative priority list.…Some worry Social Security will be used as a bargaining chip in the healthcare debate, others see this as part of ongoing efforts to balance the budget through entitlement program cuts.

William Greider, in his comprehensive takedown of the Social Security insolvency myth, issued a more explicit warning: 

Governing elites in Washington and Wall Street have devised a fiendishly clever “grand bargain” they want President Obama to embrace in the name of “fiscal responsibility.” The government, they argue, having spent billions on bailing out the banks, can recover its costs by looting the Social Security system.

By now, we’re all used to witnessing these kinds of bait-and-switch tactics. But according to yet another Washington myth, we’re not supposed to see them coming from the Democrats.

A version of this post also appears on Unsilent Generation, James Ridgeway’s blog on the politics of aging.


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