Saturday, January 8

The fight over Social Security

If you're under 30 chances are you probably don't know much about the program's history or origins. Thus a brief summary may help:

1. Almost everyone likes "freebies."

2. Politicians learned a long time ago they could get elected by promising voters more freebies.

3. FDR and the Democrats pushed the Social Security program through.

4. During the debate on the bill's passage, Conservatives of the day (including a few Democrats) warned that the plan was a financial ponzi scheme--one that depended on an ever-increasing number of young workers to cover its outlays--and that absent such endless increases, it would eventually become insolvent.

5. Sure enough, birth rates have fallen sharply, so that fewer workers are making "contributions" into the system, even as more people are retiring and starting to draw benefits.

6. All the money paid in by workers over the years has been invested in government bonds (essentially IOU's). This by itself wasn't particularly bad--although the rate of return is lower than a company, the government is the lowest-risk investment. HOWEVER: a few decades ago Congress decided to write a law allowing it to consider SS contributions part of the "general fund", meaning that there is no longer any "lockbox", and there's nothing in it but IOU's from the government.

7. When the program's monthly payout exceeds the amounts paid in by workers, the difference will have to come from cashing in those IOU's. But since the government almost always runs a deficit itself, this means it will have to borrow money (on the world market) to fund SS obligations.

With this as background, the next few points are easily predictable:

8. Because FDR's critics warned before the law was passed that Social Security was fundamentally a ponzi scheme, most Democrats go absolutely nuts when Republicans warn that the program is headed for trouble, as they predicted from the outset. This "go AWAY, dammit!" response, based as it is in psychology and emotion, is impervious to facts or logic. Accordingly, the denial will almost certainly get worse as the crunch approaches.

9. No responsible Democratic congresscritter will agree that changes must be made to the program to avoid insolvency. To make any concessions is grounds for de-facto expulsion from the party.

10. The Mainstream/Dem-supporting media tend to oppose any GOP efforts to avoid insolvency, mainly because they hate President Bush and the GOP. Even those who are more moderate (all four of them) are understandably suspicious of Republican remedies--just as we would be if the roles were reversed.


Surprisingly, this situation has all the earmarks of a disaster for the GOP: If Republicans succeed in implementing even the tiniest increment of privatization, then Dems will blame them for any problems the system has for at least the next half-century.

Here's what I'd be doing if I were prez: I'd go before the cameras with the GOP leadership and jointly announce that although the best analysis shows the SS system is in trouble and needs to be reformed to avoid disaster, Paul Krugman and the Dems have loudly insisted that no substantive reforms are necessary. I'd emphasize that my advisors--and those hired by congressional Republicans--believe this is completely wrong, but we've jointly decided it's not worth fighting such a *divisive battle* when the Dems are so totally convinced they're right. Sooo....

Then for the next four years, keep mentioning that the Dems have promised the American people there is absolutely no need for SS reform. Eventually one of two outcomes would occur: either the Dems would finally have to come to the table and cooperate on a fix; or else they'd have to watch along with the rest of the country as the slow-motion train wreck played out. In the latter case the GOP would keep replaying video clips of the Dems' assuring Americans "no problem here, citizen."

But that's just me, and I'm--mischievous.

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