Social Security Is NOT Okay

TW: Headlines earlier this week spoke of trustees for Medicare and Social Security warning their respective funds were depleting faster than anticipated. Such headlines imply something that is not real. Then Reich does something several progressive economists and pundits try to do something else which really aggravates me.

First re the headlines, when one speaks of a "fund" one generally perceives an actual pool of money sitting somewhere. But in the case of the Social Security and Medicare "funds" this is just not true, those "funds" are merely paper numbers. There are no pools of money sitting around earning interest or even just sitting around. When you payroll taxes for Social Security and Medicare are deducted from your check that money goes right into the federal budget where it funds the Iraq War, the EPA, and yes current Social Security benefits. Those "trust funds" are merely paper trails keeping track of what one agency of the government is spending versus another but the money all flows through one bucket. When the trustees warn about the funds, they are saying what we all know, our long-term fiscal deficits are very challenging.

Two and related to the above, Reich and others claim Social Security is basically solvent and could continue to be so with relatively minor tweaks. This is true if one only considers Social Security in complete isolation. But the current Social Security "surpluses" of payroll taxes over benefits being paid out to current beneficiaries is what is funding the rest of the budget (which even then is in deficit). Remove the Social Security "surplus" and the net deficit skyrockets even higher.

The reason Reich seeks to frame the discussion this way is because he is afraid, rightly, that Social Security benefits will be traded away during negotiations to address the overall fiscal challenges facing the country. But Reich is wrong that these benefits should be walled off. Social Security benefits should absolutely be part of the discussions on our future fiscal solvency. To make them sacrosanct would be to memorialize yet another sacred cow and continue the shift of our nation's resources from younger generations to older generations.

From Robert Reich's blog:
"What are we to make of yesterday's report from the trustees of the Social Security and Medicare trust funds that Social Security trust will run out of assets in 2037, four years sooner than previously forecast, and Medicare’s hospital fund will be exhausted by 2017, two years earlier than predicted a year ago?

...Even if you assume Social Security is a problem, it's not a big problem. Raise the ceiling slightly on yearly wages subject to Social Security payroll taxes (now a bit over $100,000), and the problem vanishes even under harsher assumptions than I'd use about the future. President Obama suggested this in the campaign and stirred up a hornet's nest because this solution apparently dips too deeply into the middle class, which made him backtrack and begin talking about raising additional Social Security payroll taxes on people earning over $250,000. But Social Security would be in safe shape if it were slightly more means tested, or if the retirement age was raised just a bit. The main point is that Social Security is a tiny problem, as these things go.

...Social Security is a tiny problem..."
http://robertreich.blogspot.com/2009/05/truth-behind-social-security-and.html