In Reforming Social Security the Problem is Not How Good the Country Is, the Problem is How Good the Political System Is

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Tuesday, 29 March 2011 04:19

Ezra Klein criticizes Social Security supporters for being reluctant to have Social Security reform taken up by Congress at the moment. He argues that Social Security and the retirement system more generally could be restructured to better serve the bulk of the country's workers. Klein notes the fears of Social Security supporters that this could open the door to serious cuts and then responds to these fears, "this country is better than that."

Of course that is true, but also irrelevant. Social Security enjoys overwhelming support from the public. Polls repeatedly show that people across the political spectrum strongly support the program and would even be willing to pay higher taxes to protect the program, but the public as a whole will not directly decide the program's fate.

Congress and the president will decide the future of the program. These politicians live in a world where a willingness to cut Social Security is routinely referred to as a sign of seriousness. Those who do not support cuts are taunted as being unrealistic and weak. Politicians who want to protect the program can expect much less campaign funding from business groups and ridicule from the media.

In this debate, the untrue or misleading claims of Social Security opponents are routinely passed along unchallenged. For example, Wall Street investment banker Peter Peterson has repeatedly said that the $2.6 trillion Social Security trust fund does not exist. Rather than being treated as the equivalent of a flat-earther for denying an obvious truth, Peterson regularly appears as a featured guest on news show and was even invited to a summit on fiscal responsibility at the White House.

It is also absolutely standard for reporters and politicians to lump in Social Security with Medicare and Medicaid as "entitlements" that are unaffordable. This is in spite of the fact that everyone knows that it is the cost of Medicare and Medicaid, driven by exploding private sector health care costs, that is the basis for the large projected budget deficits in future decades.

Klein himself falls into the trap of passing along misinformation about Social Security. He touts a report by Christian Weller at the Center for American Progress without noting that it actually calls for substantial cuts to Social Security. This report calls for significant cuts to be phased in for middle-income retirees (people with incomes over $50,000 a year) and across the board cuts for all retirees.

The latter set of cuts reduce the annual cost of living adjustment for beneficiaries by roughly 0.3 percent a year. This would mean that by age 80, when the plan calls for a bonus payment to kick in, a worker who started receiving benefits at age 62 would have seen a reduction in their benefits of more than 5 percent.

To put this number in context, there is almost no wealthy person in the country who would see their income reduced by as much as 5 percent if the Bush tax cuts on the wealthy were repealed. Yet this proposal has led to massive opposition from the wealthy. Close to a third of the elderly rely on Social Security for 90 percent or more of their income. Two thirds rely on it for more than half of their income. Weller's proposed benefit cut would have more of an impact on the living standards of most Social Security beneficiaries than repeal of the Bush tax cuts on the wealthy would have on their living standards, yet Klein does not even mention it.

It is also worth noting that anyone proposing to cut Social Security benefits to more affluent retirees is targeting nurses and teachers. Because the program is progressive, the wealthy get a small share of the benefits from Social Security. It doesn't matter at all if we take away Warren Buffett's Social Security. To have any impact on the program's finances it is necessary to cut benefits for very middle income workers. People who don't think that high living nurses and school teachers are one of the country's major problems tend to object to seeing these people denied benefits that they paid for.

In principle there are many ways in which Social Security can be improved. However a political and media environment that is dominated by opponents of the program, in which false assertions are deliberately propagated (the vast majority of people under age 50 don't believe that they will get any benefit from the program), is not the best place to have a debate over reform. There needs to be more progress on exposing the misinformation and discredited the people who spread it before the country's most important social program gets a makeover.