Friday, March 28, 2008

The Scoop on Social Security

from the Financial Times:

Politicians understand that, with the Social Security Trust Fund surplus declining, they will no longer be able to borrow from them under the table while announcing fictitiously smaller deficits to justify continued expenditures and tax cuts. And they will have to generate funds from other sources of revenue to redeem the bonds after 2017. Rather than admit too much was borrowed recently, and must now be repaid, they want to reduce Social Security benefits. This puts much of the burden on the middle class, who created most of the surplus that has been used to hide the real size of the deficits.

Fundamentally, the Social Security issue is not one of "entitlements" but of the obligation of our government to honour its debt and not reduce Social Security benefits.

People my age talk about the impermanence of Social Security like it is a law of nature, but like any other public initiative, it merely requires adequate funding to exist. The postal system would be "in crisis" too if they never changed the postage rate or otherwise secured funding from the government, after all.

Social Security will exist as long as the public recognizes its importance and does not allow it to be dismantled by interests who stand to gain from its dismantling.

Really though, my view is that even if the government somehow "got rid of" social security, they would have to reinstate it again immediately, because leaving people no guarantee of income does not exactly lead to a "harmonious society," as the Chinese like to say. This is why even under the Bush privatization plan, Americans would have been highly restricted in how they invested "their" retirement funds: Uncle Sam knows whose door gets knocked on when large numbers of people lose everything in an economic downturn. Wiser observers in the government and corporate world already understand this: it is not good for business to have a national riot. This is why an article like this will appear in The Financial Times.

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