For those who missed it, Senator Reid distinguished himself by saying the obvious
on one of the Sunday talk shows two weeks ago. He said that Social
Security is not contributing to the deficit and that the shortfall it
faces is still distant and relatively minor. He said he was tired of
people picking on this program, which is vital to the financial security
of tens of millions of retirees and disabled workers and their
Truth is rare in Washington, so Senator Reid's comments really stood
out. If the Senator is prepared to hold his ground, he can save the
There is no doubt that the forces arrayed against Social Security are
enormously powerful. The wealthy hate the idea of government money
going to anyone but them, and since the vast majority of Social Security
benefits are going to low and middle-income families, the program is an
outrage to their sensibilities.
The financial industry also knows a cash cow when they see one. It
would take more than $10 trillion in private accounts to generate the
same amount of money as Social Security pays out each year in benefits.
If the financial industry collected just 1.0 percent of this sum in fees
each year, it would mean another $100 billion a year into the coffers
of the Merrill Lynch set.
And, for anti-government conservatives, Social Security is the worst
nightmare imaginable: a government program that really works. Its
administrative costs are less than one-tenth as high as they are for
financial industry. There is minimal fraud and the program does exactly
what it was supposed to do: provide a core retirement income and protect
workers and their families against disability and early death.
For these reasons, it is inevitable that powerful forces would be
looking to ax Social Security. Much of the media, led by the Washington
Post (a.k.a. Fox on 15th Street), have abandoned rules of objectivity in
their quest to paint Social Security as a basket case.
The most common tactic is to lump Social Security in with Medicare
and Medicaid as "entitlements" that will break the budget. Of course,
every budget expert knows that the vast majority of the projected
increase in spending comes from Medicare and Medicaid due to exploding
health care costs, not the modest impact that aging has on projected
Social Security benefits.
Peter Peterson, everyone's favorite Wall Street billionaire, has
committed much of his fortune to gutting the program. He is buying
everything in sight to advance this goal. This includes setting up a new
foundation, paying for scary anti-Social Security documentaries, setting up a fake news service (the "Fiscal Times"), sponsoring rigged public forums (America Speaks), and even playing silly games on the mall.
Can Senator Reid stand up to this massive push?
Well, Mr. Reid has two things on his side: public opinion and the
truth. As far as public opinion, there is no doubt that Social Security
is a hugely popular program. Everyone loves the security that it
provides them, their parents, or their grandparents, and their children.
Its sky-high approval rating is across the board with all demographic
groups and spans the political spectrum from progressive Democrats to
Tea Party Republicans.
The truth is also on Reid's side. One only has to read the Social
Security Trustees Report to see that the program will be fully funded
for the next 27 years even with no changes at all. After that date, it
would still be able to pay almost 80 percent of scheduled benefits
indefinitely, even if nothing were ever done. Furthermore, it is not
difficult to find progressive ways to make up the remaining shortfall.
Just raising the payroll tax cap to where the Greenspan commission set
it in 1983 makes up more than one-fourth of the projected shortfall.
The fixes proposed by the Social Security cutters would involve real
pain, some of it longer term and some of it very immediate. Most notable
is their proposal to reduce the annual cost of living by 0.3 percentage
points. After ten years, this would reduce retirees' benefits by close
to 3 percent, after twenty years the reduction would be 6 percent. This
would be a big hit to many seniors who are surviving on less than
$20,000 a year.
The longer-term plans call for making the program more "progressive."
This generally means cuts for people who earned $50,000 or $60,000 a
year in their working lifetime. That's better than the typical worker,
but it doesn't fit most people's conception of rich.
What is so frustrating in this story is that we are not a poor
country and are not getting poorer. There is plenty of money out there,
if our politicians ever had the courage to confront the rich and
powerful. We could easily raise more than $150 billion a year from taxing Wall Street with a financial speculation tax.
We could save as much on prescription drugs if we started having them sold in a competitive market and adopted a more efficient mechanism for financing drug research. And, we could have the Federal Reserve Board hold the bonds
it is now buying so that taxpayers are not burdened with hundreds of
billions a year in additional interest payments to the wealthy in future
These are items that we would be discussing if the political system
were not so dominated by moneyed interests. So, in this context does
Senator Reid have a chance?
Actually he has a very good chance. There is an important precedent
for Senator Reid's defense of Social Security. In 1997, President
Clinton had reached a deal with Trent Lott, then the majority leader in
the Senate, to reduce the annual cost of living adjustment for Social
Security. Their deal would have lowered the adjustment by about 1
percentage point annually. After 10 years this would mean that benefits
would be almost 10 percent lower and after 20 years they would be close
to 20 percent lower.
This plan might have gone through, except for the opposition of
Richard Gephardt. At the time, Gephardt was the leader of the Democrats
in the House. Even though the Democrats were a minority, everyone knew
that if Gephardt spoke out forcefully against this deal, it would create
too much political heat to carry it through.
This saved the day. As President Clinton said at one of the Peter
Peterson deficit fests last spring: "I wanted to cut Social Security,
but they wouldn't let me."
Let's hope that Harry Reid and the American people also don't let President Obama cut Social Security.