There’s some discussion going on at the moment (here’s one example, and I heard something on a combined Al Franken/G Gordon Liddy podcast (ooh look, see the cool blogger dropping buzzwords!) I listened to recently) about the idea of a Social Security Trust Fund.
How about that for mangling an opening sentence? Anyway, the discussion centers around whether there is such a thing as a SS Trust Fund. At the moment we’re paying more in Social Security taxes than claimants are, erm, claiming. The excess is deliberate, the result of government action back in 1983 when politicians realized that the baby boomers were going to start blowing up the delicate balance between collections and claims as they approached retirement age.
The idea was simple: collect more money now (much of it from the baby boomers who were getting ready to cause the problem), stash it away somewhere, and when the rainy day arrives we would have enough built up to see us through. One of the principles behind this was that this was a one-off; the baby boomers were a temporary spike, and once they had passed by (i.e. passed on) we could go back to something like the ‘normal’ self-sustaining system. I’m biased, of course, but I don’t think anything I’ve said so far is controversial – it may not have been what some many republicans wanted, but it is the what and why of what was decided.
One of the other key principles. which sadly is a lot more problematic, was that little idea of stashing the money away. We’re talking some pretty serious coin here – about 2.6 trillion dollars at its peak – so it wasn’t something that the government could stash in its checking account. And there’s some genetic flaw in politicians of all stripes that makes a pile of cash that big just impossible to resist. So, naturally, they lent it to themselves, in the form of government bonds. At the risk of patronizing at least 50% of the two people who read this blog, these are basically IOUs with interest: You (Social Security Administration) lend me (the rest of the government) $2,600,000,000 now, and I’ll give you $2,700,000,000 in 30 years time (or something like that).
And this is where the party differences begin, but not where I at first thought they did. Republicans are very keen to point out that this money doesn’t exist – the government has spent it – so to start paying it back we’ll need to raise taxes. For various reasons they’d rather not do that, so their preferred option is not to have to pay the money back, which means cutting benefits. Essentially this means that the people who will have paid in extra between 1983 and about 2020 (when Social Security will need to start cashing those IOUs according to the Congressional Budget Office) will have financed the additional spending that has happened in that time. That’s not an unreasonable thing to require in itself (that spending was mainly for their benefit, after all), but does break the ‘sacred compact’ of Social Security.
The Democrats, on the other hand, say that with pretty minor tweaks the system can be self sustaining for as far as the eye can see, but only if the Trust Fund pays out. Clearly anything that requires 2.6 trillion dollars from the government is a problem, but the Democrats argue that it’s a problem of government funding, not one of Social Security funding (SS is just the issue that brings things to a head).
So the issue isn’t really Social Security, it’s government spending and funding. Social Security is just a handy, and desparately important, battlefield