We're Being Conned on Social Security -- How We Could Easily Raise Benefits or Allow People to Retire Earlier
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Allow me to take a moment to fix that whole “Social Security crisis” that has everyone in Washington gnashing their teeth. When you see how easily it’s done, you may begin to realize that whenever our elites start chattering about “tax-gaps," they’re almost certainly trying to rip you off -- making a slick grab for something to which you are, ultimately, “entitled.”
But why stop there? Why play defense? After we fix the program, why don’t we increase Social Security benefits? Why not lower the age of retirement? With unemployment hovering around 10 percent, and some economists, like James Galbraith, arguing that at least some of those lost jobs are never to return, why not open up some jobs for the young ‘uns and put a dent in the number of Americans who are out of work? Maybe with more demand for workers, employers would see their way to raising wages a bit, bucking the long-term trend of stagnation that the majority of Americans have endured over the past 30 years. Think about it: if you enter the labor market at age 20, isn’t busting your ass for four decades long enough to merit a dignified retirement? We are a wealthy country -- we can afford it.
According to Bruce Bartlett, in an incredibly typical scare-piece in billionaire granny-basher Pete Peterson’s Fiscal Times, that’s not true. Social Security’s problems are immense. “The 2009 report of Social Security’s trustees,” Bartlett writes, “showed a long-term actuarial deficit in that program of $15 trillion.” That is an almost unimaginably large number, given that the entire annual output of the United States was only $14 trillion last year.
But what does it really mean? Well, it turns out that Bartlett’s not even referring to the dubious 75-year projection of the Social Security “gap.” His terrifyingly big figure actually represents the program’s “shortfall” stretching out to infinity. That’s right-- it’s the program’s “unfunded liability” if everything remains as projected forever, and assuming the earth isn’t destroyed by a moon-sized meteor at some point before forever arrives. (The geeks at the American Academy of Actuaries have suggested that the “infinite horizon” measure is complete nonsense.)
According to the 2010 Social Security Trustees’ report, the 75-year gap is estimated to be $5.4 trillion -- still a big number. But there’s another way to express it: it equals just 0.7 percent of our projected economic output over that same period. That’s less than one penny on the dollar.
So if we, as members of a nominal democracy, want to live in a society where older people aren’t mired in poverty -- it’s estimated that four in 10 would be without Social Security benefits -- then all we have to do to close the gap is increase overall taxes by less than a single percentage point of GDP. Problem solved! And we didn’t even require an august commission.
But, we are told, that’s not the case. Fixing it isn’t that simple -- and increasing benefits or dropping the age of eligibility are just crazy ideas -- because we can’t afford any of it. Raising taxes, no matter how modestly, supposedly kills jobs and destroys economies. But ask yourself: where would those jobs go? To Somalia or Papua New Guinea? Our firms compete with companies from other advanced economies, and the United States has one of the lowest tax burdens in the developed world. In 2007, our overall tax burden ranked 26th out of the 30 countries in the Organization for Economic Cooperation and Development, dubbed the “rich countries club.”
As I write in my forthcoming book, The 15 Biggest Lies About the Economy, budgeting comes down to a simple question of priorities. Do we want to live in an America where the elderly are forced to eat cat food? If not, we can pay a bit more in taxes, or bring defense spending in line with other advanced countries or eliminate the cap on payroll taxes so higher earners kick in the same share of their paychecks as everyone else.
According to the Center on Budget and Policy Priorities, the 75-year “Social Security gap” represents the same dollar figure as those Bush tax cuts that were targeted at the top 2 percent of American earners projected over the same period of time. For much of Washington’s cognoscenti, one is an imminent crisis, and the other is something we simply must keep in place in order to retain our economic edge. That should tell you all you need to know about the nature of our Social Security “crisis.”