Scary government IOUs

Corporatization of Social Security Watch

What people have to remember about the Social Security debate is that there are many in the GOP who have been trying to kill Social Security for decades. And they have been using fear as their argument for a long time now. I remember reading a book by P.J. O’Rourke called Parliament of Whores more than a decade ago, in which he describes the coming crisis in the Social Security funding the retirement for the Baby Boom. O’Rourke, like so many other before him and so many after him, raised the scary boogieman of the idea that the assets of SS exist only as an IOU from the government. Granted, he made the point primarily to talk about the Feds raiding the Social Security fund for the general fund, and also as a way to point out that Social Security is not a big savings plan, a big pile of money. But the implication was there, that because SS only owns a government IOU, that the program was in jeopardy. I remember thinking at the time, “I’ll bet Social Security will collapse before my retirement.”

(Amazon.com tells me that this book was published in 1991, 8 years after Greenspan and Reagan saved Social Security with a whopping increase in wage taxes. So O’Rourke really should have known better than to fear-monger on this issue [unless, as is likely, he was just acting as a loyal GOP foot soldier]. But even in the book he cited 2030 as the year the trust fund would run out of money to pay current levels. Even 2030 [which has been extended to 2042-2052 in current estimates because of the economic boom of the 90s] would have been past the time when a very large portion of the baby boom generation would have passed away. So O’Rourke still should have known better.)

My conclusion was exactly the one that conservative liars have been promoting for a long time, and it’s the one they want (especially young) people to come to. The fact is that Social Security is alive and well, and will be very fine for a long long time. The only way the GOP can kill it is if lot’s of people stop believing that it is alive and well and start looking for alternatives. We really are in a Tinkerbell situation here. All we need to do to save Social Security is believe in it (and clap our hands). And if you actually examine the numbers, there is no reason not to.

But let’s look at the GOP argument about the sscaaaary pile of IOUs which constitute the assets of the SS trust fund. There is a real danger here, and GOP scaremeisters and I agree on what the danger is, but ironically it reveals that the real danger is them. Let’s explore what this “IOU” scenario really implies:

IF at some point in the future, the federal government is so irresponsible with the revenue and spending for the general fund (perhaps for example issuing huge tax cuts for the very rich, income tax cuts for top earners, elimination of the inheritance tax, reduction of taxes on investment income, while at the same time starting massively expensive, unnecessary foreign wars, in which war profiteers misappropriate nauseating amounts of taxpayer money), IF the finances of the general fund are driven into a ditch

AND

IF the government ends up relying so heavily on its wage tax income for general fund expenses that they decide that they need to declare a “crisis” so that they can justify killing off Social Security, allowing the greedheads in charge of the country to screw over retired people (current and future)

AND

IF the people of this country let them do it

THEN Social Security really is at risk if its only assets are IOUs.

(See how if you follow their argument it implicates them? Weird).

The other argument you could make is that if the federal government gets into so much trouble that it needs to DEFAULT ON ITS DEBTS like some kind of third-world junta (I’m looking at you, Argentina), that would first of all be a major crisis the likes of which we have never seen before in this country – it would likely spell the end of our government as we know it. Secondly, if that point is ever reached, why would the government consider stiffing Social Security, which after all represents all of our citizens? Why not decide not to pay back the bonds held by foreign governments or foreign investors or rich domestic investors first? Why target SS bonds? Because they want to kill SS. QED.

Bill Frist, Senate Majority leader, bride-at-the-alter-leaver, cat-killer, and all around hypocrite, has been found on network shows saying SS runs a $10.4 trillion dollar shortfall. This number is if SS expenses are run out to INFINITY based on our current set up. Nice honesty, there, Bill. More details.

Thanks to Gary for finding this article, which was written by the authors of the Social Security: Phony Crisis book, and summarizes their arguments quite nicely.

Also this week found a memo from the GOP outlining their SS “strategy” in which the saving of the plan is not the goal, rather the destruction. The memo is described here and Josh Marshall comments on it.