It really speaks volumes about the nature of politics in Washington that in order to be accepted as a serious participant in the budget debates, it is now necessary to affirm a willingness to cut Social Security. This is bizarre from many different angles.
Of course number one on this list is our little secret -- WE STILL HAVE A HUGE UNEMPLOYMENT PROBLEM. Apparently the folks here in DC aren't on to this one, but close to 25 million people are unemployed, underemployed or out of the workforce altogether because of the downturn caused by the collapse of the housing bubble.
There is now a gentleman's agreement between President Obama and the Republican congressional leadership that we won't talk about the unemployed anymore. We will just have discussions about the best way to reduce the budget deficit. It's sort of like discussing the paint job on the Titanic as the ship sinks.
The second reason why the pledge to cut Social Security is bizarre is that it is not part of the deficit story. Under the law, Social Security can only spend the money in its trust fund and not a penny more. This means that every dollar spent by Social Security was came from dedicated taxes or the interest on bonds purchased with those designated taxes.
In years after 2037 the program is projected to face a shortfall, but even then this would not contribute to the deficit. If nothing is ever done then the program would pay out about 80 percent of scheduled benefits, an amount equal to its projected tax revenue at that point in time. It will not add to the deficit.
The third reason that it is bizarre that Social Security is on the table is that current benefits are not especially generous. The average monthly benefit is just over $1,100 and the maximum is just over $2,300. The benefits are progressive, so higher wage earners already get a low return on their contributions.
Finally, we know that most retirees and near retirees have very little money other than Social Security. One of the main reasons that near retirees have little money is that the Social Security bashers did such a horrible job managing the economy.
Because this crew let the housing bubble grow unchecked, tens of millions of older workers failed to save as much as necessary, thinking that they were accumulating wealth in their home. Now that the bubble has collapsed, the huge baby boom cohort is hitting retirement without defined benefit pensions, with little money in 401(k)s and little equity in their homes. How does it make sense to cut benefits for these people?
But the SS cutters are on the warpath, insisting that you have to support beating up the elderly if you want to take part in the budget debates. But the folks at Social Security Works, a coalition of groups set up to protect Social Security is fighting back. They produced a new video that deserves a wide audience.