By Dean Baker
From the editor: The Social Security Trust Fund is essentially a savings account established on actuarial principals identical to those which determine the solvency of private pension plans. Working U.S. citizens are required to contribute. The trust fund invests its contributions into interest bearing promissory notes issued by the U.S. Government. These notes are perceived to be the safest investments available worldwide. The Social Security Trust Fund owns $2.6 Trillion in U.S. Government debt which makes it the largest single lender to the U.S. Government with substantially more debt than China and the next three largest nation lenders combined.
As we approach budget time we can look forward to another burst of handwringing by the Washington elites, who will once again tell us about the need to cut Social Security and Medicare. News stories and opinion columns will be filled with solemn pronouncements about how these programs must be curtailed before they drive the nation to bankruptcy.
We can look forward to that famously deceptive graph showing how the cost of Social Security, Medicare and Medicaid are projected to soar as a share of the economy over the next two or three decades. Those with good eyes will notice that it is the cost of Medicare and Medicaid that are soaring, not Social Security.
This is primarily due to the projected explosion of private sector health care costs, not the impact of aging on the cost of the programs. That would lead honest people to focus on the need to get U.S. health care costs in line with costs in every other country in the world, but no one ever said that the Washington elites were honest.
But this is old hat. We know that the elites tell stories to advance their agenda. What is worth noting – and celebrating – is that thus far they have failed.
They have been pushing this line for the last twenty years, yet during this period there have been no substantial cuts to either Social Security or Medicare. This is a great victory for the vast majority of the country, the 99 percent, over the One Percent.
This fact is truly an impressive accomplishment. It is not only the Republicans who want to cut these programs; top leaders in the Democratic Party have repeatedly indicated their willingness to cut these programs.
President Clinton was all set to go along with a plan that would have reduced the annual cost of living adjustment for Social Security by as much as 1.1 percentage points. Had he gotten his way back in 1997, many seniors would be getting checks that are more than 10 percent smaller today. This sort of cut could have been devastating for people struggling to survive in the wreckage created by the incredible economic mismanagement of the last 15 years.
More recently, President Obama indicated his willingness to support an increase in the age of eligibility for Medicare and a cut of 0.3 percentage points in the annual cost of living adjustment for Social Security. These cuts would be a great hardship to tens of millions of near retirees who have seen much or all of their wealth destroyed by the collapse of the housing bubble.
In addition to those openly advocating cuts to these programs, Washington is also filled with a large number of “good cops.” These are people who ostensibly support these programs. The good cops tell us that we are better off taking a deal in the long-run, because otherwise the bad guys will come back with even more powerful ammunition and push through larger cuts to Social Security and Medicare.
No one can know the motives among this group of good cops, but the fact is that they have repeatedly been proven wrong. If we had taken their advice back in the 90s, seniors today would already be receiving much lower benefits.
And, there is no reason to think that once cuts were put in place that the elites won’t come back for more. After all, those of us who remember the 2000 presidential race know that any improvement in the budget situation is an argument for more tax cuts. And tax cuts will inevitably mean that we will have more pressure in the future for budget cuts.
The other important part of the argument for delay is the demographic fact that we hear repeated endlessly. The country is aging. The huge baby boom cohort is reaching the eligibility ages for Social Security and Medicare.
This means that the percentage of the electorate directly affected by these programs is rising every year. As hard as it was to make cuts in these 15 years ago, it will be much harder in 2014 or 2016, when the percentage of the adult population eligible for Social Security will be almost 20 percent larger. Better yet, if we can delay to 2020 the Social Security eligible population will be close to 30 percent larger as a share of the adult population.
With older people voting in much higher ratios than young people, there are not likely to be many politicians anxious to support cuts to the programs they depend upon. And, contrary to the stories of the Washington elite, the support of seniors for these programs is not driven by greed. It is driven by the fact that they recognize the importance of these programs in their own lives. They want to ensure that their children and grandchildren will enjoy the same security in their own age.
The moral of this story is that we should celebrate the work of hundreds of thousands of people across the country who have blocked the Washington elite to cut Social Security and Medicare. And remember, the future is on our side.
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