Put Social Security on the table — clearly and irrevocably. Protecting retiree benefits is the left's political equivalent of the right's "no new taxes" pledge. Congressional Republicans are abandoning their untenable position. Now it is time for President Barack Obama and congressional Democrats to do the same. As long as they don't, they aren't bargaining in good faith, or in the national interest.
Supporting retirees is now the federal government's main activity. There's a huge redistribution from young to old — a redistribution that will be made worse if retiree programs are largely excluded from deficit reduction, as many liberal groups urge. Either taxes will rise steeply or other federal programs (defense, food stamps, environmental protection) will be cut sharply. The young will pay more and get less. Or, given these unpalatable choices, true deficit reduction won't happen.
Doubters should ponder the numbers. In fiscal 2012, non-interest federal spending totaled $3.251 trillion. Of that, $762 billion went for Social Security, $469 billion for Medicare (insurance for the 65 and over population) and $251 billion for Medicaid (insurance for the poor — two-thirds goes for long-term care for the aged and disabled).
Altogether, that's 46 percent of non-interest spending. Defense, $651 billion and declining, was 20 percent.
As baby boomers retire and health costs rise, this spending will mount. In 2010, there were 40 million Americans 65 and older. By 2020, that number is projected to be 55 million; by 2030, 72 million.
All these trends are old news; I have repeatedly written about them. If we had begun cutting benefits years ago, changes could have occurred slowly. People would have received ample notice. Now we lack the luxury of time. Benefit cuts will be unfair to retirees; but avoiding cuts will be unfair to the young. That we have arrived at this juncture indicts our democratic system and many Democratic politicians, who have obstructed constructive change in retiree programs. Obama continues this short-sighted tradition.
What could justify it?
One argument is that most elderly are poor; benefit cuts will further impoverish them. Not so. The Administration on Aging reports that in 2010, 25.9 percent of households headed by someone 65 or older had incomes exceeding $75,000; 19.4 percent had incomes from $50,000 to $74,999; and 18.8 percent had incomes from $35,000 to $49,999.
Another argument is that recipients "earned" benefits through their payroll taxes, which (many believe) were saved. But they weren't saved; they paid the benefits of earlier retirees. Even had they been saved and earned interest, they typically wouldn't cover lifetime Social Security and Medicare benefits, estimate the Urban Institute's Eugene Steuerle and Caleb Quakenbush. A couple with average wages retiring in 2010 would receive $966,000 in benefits against taxes of $722,000.
Finally, it's often said that Social Security — no one makes this argument for Medicare — doesn't add to the budget deficit because benefits are still covered by payroll taxes. Again, not true. In 2010, benefits exceeded taxes and are expected to do so indefinitely. The Congressional Budget Office estimates the gap to average 10 percent over the next decade and to be 20 percent by 2030. This bloats deficits.
Democrats have made Social Security into government's largest "earmark," supposedly unrelated to deficits and the nation's budget problems. Social Security should be excluded from any deficit negotiation, because it "does not add one penny to our debt," as Senate Majority Whip Dick Durbin of Illinois said last week. Aside from being technically wrong (Social Security contributes to deficits), this view is philosophically bankrupt.
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