Jan
01

Social Security And The Fairness Con

By

Watching the “pincer attack” on Social Security and public employee pensions is like the run-up to the Iraq invasion. It is the fall of 2002 all over. Except instead of Saddam’s imaginary WMDs, Washington insists we must fear budget deficits. And trust them. Again.

Rolling Stone‘s Matt Taibbi explains the new con and lays out “The Set-up” this way:

Let’s be clear about what’s going on here. Social Security was never the cause of the nation’s debt problems. This issue dates all the way back to the Eighties, when Ronald Reagan hired Alan Greenspan to chair the National Commission on Social Security Reform, ostensibly to deal with a looming shortfall in the fund. Greenspan’s solution was to hike Social Security tax rates (they went from 9.35% in 1981 to 15.3% in 1990) and build up a “surplus” that could be used to pay Baby Boomers their social security checks 30 years down the road.

Except, as Taibbi point out, presidents from Reagan to Obama used the funds to pay for goodies and mask the real size of budget deficits. Now comes “The Sting”:

But if all that money is just going into a big pile to be stolen by a long line of presidents who are using it to pay for things like pointless wars and income tax cuts for their rich buddies, the Social Security cap means that this stealth government revenue source disproportionately comes from middle class taxpayers. Add in the fact that the proposed solution to the budget problem now is cutting Social Security benefits, and what you get is a double-screwing of middle-class taxpayers: first they see their Social Security taxes used to fund tax cuts for the wealthy, and then they see cuts to their benefits to pay for the fallout from that robbery.

At Firedoglake, John Chandley takes the Washington Post‘s Robert J. Samueslon to task for pimping Beltway conventional wisdom on Social Security, that “the elderly are unfairly stealing money from their children because — well, because they’re living longer. The only adult thing to do … is to cut their Social Security and Medicare.”

That may seem unfair, Samuelson argues,

“But not making cuts would also be unfair to younger generations and the nation’s future. We have a fairness dilemma: Having avoided these problems for decades, we must now be unfair to someone. To admit this is to demolish the moral case for leaving baby boomers alone.”

Succinctly, here is the developing inside-the-Beltway storyline:

Boomers who dutifully paid into the national pension system are selfish slackers who hate their grandchildren and their country if they insist on receiving the benefits for which Washington made them pay extra for the last thirty years.

The whole point of the Reagan/Greenspan reform was to have boomers pay more up front to ensure their Social Security pensions would be paid for without burdening the next generation. Of course, Washington assumes the rest of the country is Short Attention Span Theater and won’t remember. The trick now is to guilt-trip boomers into acquiescing to their benefits being cut as though they caused the problem that thirty years of higher payroll taxes were designed to prevent.

So were they conning us then, or are they conning us now? Or just again?

It has the feel of a telemarketing scam, the kind of Medicare fraud the FBI is always warning seniors about. Because there are always con artists out there looking to victimize seniors, aren’t there?

In the ongoing effort “to demonize and delegitimize public employee unions,” public pensions plans are also on the chopping block. Proposed legislation would deny states federal bailout funds and allow them to declare bankruptcy, providing, as James Pethokoukis reported, “a golden opportunity to defund a key Democratic interest group.” Newt Gingrich suggests it would force states to renegotiate health and pension plans with government employee unions,

“… and frankly if they don’t want to change, our recommendation is you go into bankruptcy court and let the bankruptcy judge change it, and I would make the federal bankruptcy law prohibit tax increases as part of the solution, so no bankruptcy judge could impose a tax increase on the people of the states.”

These moves, of course, are all about conservative ideological animus towards liberal social programs and unions. Arguing that today’s retirees are “living longer” (the well-off, anyway), conflating Social Security with Medicare/Medicaid, attacking public employee unions and all the rest is just spin and, as Dean Baker put it, “a sleazy case of scapegoating that is intended to divert people’s attention from the real villains in this economy, the Wall Street boys and the inept economic policymakers who took the economy to ruin and seem intent on leaving it there.”

And so it goes. The players are different, but the con game is the same. So is “the mark”: You, the little guy.


Categories : Economy, Social Security

Comments

  1. Tom Sullivan says:

    I’ve quoted these paragraphs from Taibbi twice already, but this just jumped off the screen at me:

    But if all that money is just going into a big pile to be stolen by a long line of presidents who are using it to pay for things like pointless wars and income tax cuts for their rich buddies, the Social Security cap means that this stealth government revenue source disproportionately comes from middle class taxpayers.

    This would include all those middle- and lower-wage workers conservatives dismiss as lesser Americans because they don’t earn enough to pay income taxes into the general fund.

    Simultaneously, they argue that there is no surplus, as Taibbi suggests above. But if there is no “lock box” and middle- and lower-wage workers’ Social Security contributions are being used to supplement the general fund, then the conservative “they don’t pay income taxes” argument is pure bullshit.

    Not that they won’t try to have it both ways.

    Thumb up 8

  2. Tim Schultz says:

    I like your commentary as usual, Tom. I’m definitely not as big of a Taibbi fan as you are though.

    But on a sidenote, I am in my twenties, and I sometimes think that boomers should have reduced benefits or an increased retirement age. Then again, I sometimes may just hate my parents.

    Thumb up 1

  3. Tom Buckner says:

    There is nothing I can say that this does not say better.

    Rate this comment: Thumb up 2

  4. Susan J. says:

    Well, then, let’s do the math for Tim Schultz:

    Late Boomers contributed 15% of $100K=15K x 40 years=$600K contribution to Social Security. Let’s say all Boomers only averaged $50K per year… it is still a $300K contribution toward retirement. You wanna be the one to tell them they can’t have their 300 grand?

    Social Security maximum benefit is $27,876 per year based on retirement at 65 with $106,800 annual earnings limit, or more than 25% return on a 15% investment that will be depleted in 21 years. Therein lies the rub.

    Rate this comment: Thumb up 0

  5. Tim Schultz says:

    I know the math, I was joking.

    Rate this comment: Thumb up 0

  6. Bill M says:

    What about interest on all that money?

    Rate this comment: Thumb up 0