In August 26th’s New York Times, One Liberal Voice Dares to Say, Cut the Budget, by Matt Bai. Bai’s piece frames the federal debt as almost entirely the fault of Social Security, with cutting Social Security the only real way to fix the problem.
Bai claims that “liberal groups” are unhappy with attacks on Social Security because elements of both parties are attacking the program. He writes that the money been set aside to pay for people’s retirement are “a pile of Treasury Bills — often referred to as i.o.u.’s” and writes,
“… the only way for the government to actually make good on these i.o.u.’s is to issue mountains of new debt or to take the money from elsewhere in the federal budget, or perhaps impose significant tax increases — none of which seem like especially practical options for the long term. So this is sort of like saying that you’re rich because your friend has promised to give you 10 million bucks just as soon as he wins the lottery.”
It is really like loaning an extremely wealthy friend 10 million bucks and expecting to be paid back. Social Security taxes were raised in 1983. The money was put into a “trust fund” to pay for people’s retirement. That fund has saved up trillions, but the money was used to give tax cuts to the rich. Now it needs to be paid back to cover people’s retirement as promised. Some are trying to get out of the deal, and keep those tax cuts rather than pay for those retirements.
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On whether the trust fund is just “i.o.u.’s” that don’t need to be paid, Economist Dean Baker writes,
The piece includes the bizarre assertion that Treasury bonds are “often referred to as i.o.u.’s.” … Bai’s opinion is radically at odds with perceptions in financial markets. These markets view it as almost inconceiable that the government will not honor its bonds, which is why the interest rate on long-term bonds is near its lowest level in the last 60 years.
My earlier piece today on democracy vs plutocracy, summarized what is going on,
These battles over cutting Social Security and extending tax cuts for the wealthy expose the competing worldviews of We, the People democracy vs corporatist plutocracy. Is our country a community of the people, by the people and for the people? Or are we “the help,” only here for the benefit of the wealthy few.
In the democracy worldview we should be increasing Social Security’s benefits because people really need it. In the plutocracy worldview the wealthy deserve tax cuts and the parasites shouldn’t be getting Social Security checks at all.
Bai’s piece demonstrates his buy-in to the plutocracy worldview: Cutting the program that keeps millions of elderly – the help – out of poverty is OK because it avoids taxing the super-rich – the achievers – or cutting military spending. The idea of cutting spending on citizens is fine, noble. But to “the villagers” in Versailles the most terrible thing that could happen is asking the wealthy to start paying back some of the people’s cash that Reagan and Bush transferred to them from the US Treasury.
It is amazing how much ignorance there is about how Social Security is funded. In 1983 the program’s funding was changed and people started paying more into it, building up a huge reserve — “trust fund” — that was set aside for future retirements. Because of this the program is completely funded until 2037 when it might – MIGHT – run a bit short for a while. (Economist Paul Krugman writes that this whole discussion is really saying that we have to cut future benefits to avoid cutting future benefits.)
Compare Social Security’s huge trust fund — those “i.o.u.s” — to, say, the huge military budget with $1.3 trillion in yearly spending on various related programs. This is completely unfunded, forcing the government to borrow huge amounts every year. Compare it to the huge Reagan/Bush tax cuts for the wealthy, which led immediately to huge deficits, and built up a huge debt on which we pay interest every year.
But this is being engineered so that Social Security, which spent on helping the elderly avoid absolute poverty, is the program under discussion. Not military, not tax cuts for the wealthy, but the most important program that benefits regular working people.
This is about people looking for ways to break the deal – the Social Contract – that asked working people to put money aside for retirement, and instead spent it on tax cuts.