Social Security's Fake Crisis- UPDATED

Digby points me to this article about how the media has changed the shaping of the narrative around Social Security to reflect the talking points of right wingers who are opposed to the program.  It reminds me again about how idiotic the whole debate is around Social Security in the US.

There are lots of problems here that are really hard to solve.  Medicare is projected to break the bank if we can't rein in spending, for example.  But Social Security is easy, and there are a bunch of ways we can take its solvency past 2036 (it doesn't run out of money until then).  We can:

1. Raise the ceiling of contributions for people making more than $106,000 (currently we only pay SS taxes on the first $106K of income- if we raised that to the first $140K we could solve the problem right there, nice and clean- that's my favorite solution).  But if you don't like that, we could:
2. Raise the retirement age
3. Decrease benefits to 80% of current levels
4. Raise the contribution for everyone
5. Means-test the program (my least favorite solution- the program is now for all of us, which helps all of us support it)
6. Some combination of 1-5

So there's just no crisis.  Simply put, there is a problem with many solutions, all of which would work, but all of which have positives and negatives.  Unfortunately, the media and the Common Wisdom inside the beltway keep dragging us through the crisis swamp.

UPDATE: Just stumbled upon this post from Kevin Drum explaining ways to fix social security.

Choices, Choices...... and Dilemnas

I was talking this week with a young woman I know who is a political neophyte.  She knows she is a Conservative, as her father is conservative and she senses he is right about stuff, but she's just contemplating getting more educated and figuring out why she feels the way she does (I hope that doesn't seem mocking at all, because it's not intended to be- we all start someplace politically, for no better reasons than what she has). 

Anyway, we were talking about entitlements, and she talked about how we "can't afford" the Social Security and Medicare benefits that we are promising right now.  This got me to thinking again about the different categories of government spending; there are some things that governments legitimately can't afford, and there are other things that governments and societies decide not to pay for.  And there's a difference between those two.

Greece, for example, is screwed.  They mismanaged their debt so badly, along with a dash of fraud to keep creditors coming a few years too long, and now they're in a hole so deep and wide that there's just no way out.  They can't keep spending what they were spending.  They have to raise much more in taxes than they have been raising.  And the austerity measures needed to get the budget in line are so crushing that they're destroying the entire economy in the country and pushing unemployment to record levels.  They're in a vicious circle in which further austerity just makes the economy worse, which in turn depresses tax receipts and continues the cycle further.  And they're so far in the hole that even Keynesian deficits are totally unsustainable because creditors (rightly) won't fund the deficits.  There's no way out it seems, except for Germany and others to just give them money.  This is an example of stuff "we can't afford".

Back home, on the other hand, we have a looming Medicare and Medicaid crisis.  Health care costs are rising much faster than inflation, and there seems no end in sight to this.  Overall health care spending as a percentage of GDP is rising.  Something has to change.  This is a really hard problem to solve, in that we can raise Medicare and other taxes in the short term, but in the longer term we just have to find a way to stop the explosion of health care costs.  ObamaCare has a commission that is tasked with doing that, though it's hard to predict whether that will work.  Conservatives want to do it by unleashing the free market, but Liberals point out that health care is already a free market in the US, one that seems to work differently from, say, the auto market. (Picture you're going for a knee replacement, and you get a marketing call from another hospital offering to do the same surgery for 25% less money.  Would you do it?  Most people wouldn't take those sorts of risks when it comes to their health, so they trust doctors to decide- it just doesn't work the same).  So this crisis is really hard to solve, but not impossible.

Then you have the problems that are easy to solve- we just have to decide how to do it.  Social Security is my favorite example.  Baby Boomers are retiring, the population is getting older, the ratio of workers to retirees is getting worse, and the math no longer works for making Social Security solvent in the long term.  This isn't because of bad government or poor administration- it's just demographics.  But the good news is that we have a huge buffet full of possible solutions!  We can:

1. Cut benefits to retirees by a modest amount
2. Raise SS taxes in all our paychecks
3. Raise the ceiling so that rich people pay more SS taxes while leaving the rest of us unchanged
4. Increase the retirement age
5. Make SS means-tested so rich people don't get benefits
6. Some combination of any of these

There are probably more solutions I haven't thought of too.  And I hate some of these solutions (4, 5) and would fight hard against them.  But Social Security fits clearly in the category of stuff that has a solution.  We just have to pick one of the plans and implement it.

The Manufactured Social Security Crisis

Amidst all the forecasts of doom regarding the budget deficit, I keep hearing about how politicians have screwed up social security so badly that it's out of money and we have to make huge changes to fix it.  We got some of this from Simpson-Bowles of course, and I keep hearing it from my conservative correspondents too.  Social Security is paying out more than it's taking in!  The Trust Fund is a fiction!

But think about it this way: Social Security is just a Math problem, and a really simple one at that.  We pay a certain rate to Seniors.  Workers pay a certain percentage of their salaries to fund benefits.  A percentage of people get on Social Security Disability at a younger age.  All of these formulas can change.  So the ways to fix Social Security are:

1. Increase the tax rate for FICA for everyone (we just lowered the rate in 2011 from 6.2% to 4.2% as part of the lame duck tax deal)
2. Increase that tax rate for high income people only (currently we only tax the first $106,800 of income- we could increase that)
3. Decrease the benefit level slightly
4. Increase retirement age
5. Means-test benefits, so rich people don't get paid out
6. Toughen up requirements for disability

And of course we could go with some combination of more than one of the above solutions.  These are tough choices of course, and my preference is to go with #2, but reasonable people could disagree.  I am strongly opposed to #5, which would lead to erosion of support for Social Security over time as it would come to be seen like welfare, in which poor people are seen by the Right as sponging off the hard-working. The reason SS has been so successful for so long is that we're all in it together.

So there's really no "crisis" in Social Security.  There's a demographic change because baby boomers are retiring and the population is going to get much older, so there are fewer workers to pay benefits.  That's not because we've become a lazy country or there's some moral failing- just blame those WW II GI's making all those babies at the same time when they got home.

So yes, Social Security needs to be fixed, and can't be left as is.  But there are lots of ways to do it, all of which will definitely work.  It's just a question of enough people in Congress and the President agreeing about our priorities.  All big problems should be so easy and un-complex.