Obama & Orzag: Protect Social Security

Dear President Obama and Budget Chief Orszag:

Before You Tackle Social Security and Other Budget Issues...

During the campaign, the presidential candidates, the media and even AARP dished out half-truths about Social Security financing. The misinformation will continue and so will pressure to finance bank bailouts by stealing from social programs. But before cutting anything, the president-elect and his staff ought to follow these ground rules.

1. Keep it straight that Social Security and Medicare are separate. Social Security faces at worst a modest shortfall and not very soon. Medicare will run out of money in a couple of years; its expenditures could exceed those spent on Social Security. Medicare needs major surgery, but, as Henry Aaron of the Brookings Institution reminds us, our entire health care system needs mending. About 46 million people lack insurance and there must be another 46 million struggling to pay premiums and deductibles. We need comprehensive health care reform, but however we handle Medicare, its problems are separate from the Social Security question.

2. Stop saying that Social Security is broken. A mini-funding crisis and political realities in the early 1980s convinced conservatives like Ronald Reagan and Alan Greenspan to agree to changes that have generated huge annual surpluses. The surplus is now about $2.3 trillion and it could reach $7 trillion by 2030.

The system will use the surplus to help pay benefits to an expanding group of retirees. Social Security trustees have predicted that the surplus and current worker payroll taxes will provide full benefits through 2042; then the surplus will be gone and D-Day arrives. At that point, officials claim, people might receive only 75% of expected benefits. But let's be honest about these projections: the trustees use low estimates to forecast economic growth and job creation. Perhaps they think they are acting prudently. But they have been wrong in the past. In the 90s, they told us that D-Day would arrive in 2029; now they say it will come in 2042. The Congressional Budget office predicts D-Day for 2052. It may never occur if we get strong economic growth and decent pay raises.

To make certain that there is no D-Day, Mr. Obama once suggested an idea that seemed fair. Currently workers pay SS taxes only on the first $102,000 of annual earnings. Obama wants to add SS taxes on income over $250,000. Of course the bulldogs of the right-wing propaganda machine will claim that affluent individuals will stop investing or that the sky will fall if we tax the rich. But people who made out like bandits in the last three decades need to pay more.

3. Privatizing even a portion of Social Security is a bad idea. For one thing, as even President Bush admitted during his last assault on Social Security, this would worsen long-term financing problems by diverting funds from Social Security to private accounts. Anyway, partial privatization is just step one in the right-wing plan to demolish Social Security. And that is a sick idea. Americans can risk some of their savings on real estate and stocks, but they need to be able to count on the income floor provided by Social Security. Without Social Security, three times as many seniors would be poor as are poor now. Aren't the dangers of privatization obvious in this Age of the Financial Meltdown?

4. There is something that could break the bank on Social Security. The fund's surplus is not stashed under the national mattress; the system loans money to the federal budget and that helps government finance its deficits. But here is the catch: eventually the feds have to repay what they owe Social Security.

In his last attack on the system, President Bush tried to scare people by suggesting that the feds might renege on what they owe Social Security. Obama and other politicians need to tell us whether they agree with Bush. Mr. Orszag seems to. Does Obama believe that the feds need not repay the trillions they have borrowed from Social Security? If yes, why did people pay into the system to accumulate a reserve in order to protect benefits? And while we're at it, will the government renege on federal bonds held by businesses here and around the world?

The feds need to come up with money to repay Social Security, but they need dollars for all kinds of things. The government just registered a record $455 billion deficit, none of it from Social Security. As anti-recession spending continues and tax receipts fall, the problem will grow. The president-elect will be pressured to cut social programs in order to pay for the bank bailouts. I urge Obama not to do the dirty work of right-wing spendthrifts who push up federal deficits and then tell us: "See, we cannot afford new social programs and we must cut Social Security."

I urge Obama to remember that the deficit hawks in his administration did not elect him. As President, Obama should forge ahead with health care reform and job creation. He can get many billions by letting Bush's tax cuts expire. (The richest 400 Americans have a total wealth of $1.6 trillion; about half was swiped from the common treasury during the Bush years; it is time we get it back.) Furthermore, centrists and liberals must tolerate deficits if that is necessary to support new jobs, universal health insurance, and a secure safety net. Why let right wingers, whose ideology led to the current economic crisis, define progressive social policy? Why agree with this: deficits are fine if they accompany an economy that set records for lousy job creation and weak income growth, they are fine to bail out the Robber Barons, but they are bad for programs that improve life for the bottom two-thirds of all American households?

Frank Stricker is Emeritus Professor of History at California State University, Dominguez Hills, and an Advisory Board and Executive Committee member, National Jobs for All Coalition. His book, Why America Lost the War on Poverty–and How to Win It, appeared in 2007.
E-mail: frnkstricker [at] aol.com

Editor's note: This op-ed was submitted by Prof. Stricker to The Drive for Decent Work blog. For more information on Social Security, please visit the National Jobs for All Coalition's Social Security page for fact sheets and educational materials. The coalition believes that "the best insurance for Social Security is full employment--jobs for all at decent pay."

Posted by Chuck Bell at 4:40 PM