Creating a Social Security “Crisis”: Bush and His Deficits

After months of barnstorming around the nation to drum up support for his proposals to privatize Social Security, President Bush appears to have lost support rather than gained it. Even within his own party, there is little enthusiasm for Bush’s proposals to effectively do away with Social Security.

Last week, in order to try to mobilize fear in support of his proposals, Bush began warning that trouble with the current Social Security system is not 20 or 40 years away but less than four years away.

Here is the new argument: Right now payments by current workers into the Social Security Trust Fund far exceed payments being made to retirees. In fact, not only is the Social Security Trust Fund growing, but the growth is larger and larger each year. Beginning in 2009, however, the growth in the Trust Fund will begin to slow down. That Bush tells us is the beginning of the end for Social Security.

Note that Bush is not asserting that the Trust Fund will be depleted in 2009, nor is he saying that the Trust Fund will begin to decline in 2009. Neither of those will take place for decades to come. All he is saying is that the Trust Fund will not be growing as fast as it did in the past. For most of us, if the growth in the balance of our savings accounts were to slow modestly, we would not announce a crisis dooming our future retirement. But Bush sees a crisis nonetheless.

Here is the problem Bush sees. Currently Bush has been borrowing all of the money flowing into the Social Security Trust Fund that is not needed to make payments to current retirees to finance the huge deficits he has been running in the federal budget. Those deficits exist because he has engineered massive tax cuts for the wealthiest of Americans at the same time he insisted that the country engage in an endless and costly war. Breaking with the historical tradition of raising taxes to fund the sacrifices war demands and breaking with the Republican promise of fiscal responsibility, Bush has insisted on cutting taxes and boosting federal spending. The results are federal deficits as far as the eye can see and the need to borrow money to cover those deficits.

Fortunately, for Bush, a growing Social Security Trust Fund was sitting there ready for him to use to fund his deficits. Each year Social Security taxes provided him a larger and large flow of funds he could take and spend on tax cuts for the rich and military adventures around the world. But beginning in 2009, the growth in payment to retirees will begin to reduce the growth in the trust fund. Bush will not be able to rely on those Social Security taxes to fund as much of his deficits. That is the crisis he sees.

With reduced access to Social Security Trust Funds, the federal government will have to borrow more money from actual people at home and abroad to fund its excesses. That might well put upward pressure on interest rates, causing economic expansion to slow. The alternative would be to make deep budget cuts in non-military programs such as food stamps, education support, block grants to cities and states to fund basic infrastructure, farm programs, etc.

That we are told is the impending near-term Social Security “crisis.”

Note that this has nothing to do with a crisis in Social Security. If the Bush Administration had continued the balanced budget it inherited from the Clinton Administration, all of this borrowing would not be necessary. The Social Security tax revenues would be paying down past federal debt, financially strengthening the federal government and its ability to support Social Security. Instead, Bush cut taxes on the wealthiest American, went to war without raising the funds to do so, and increased other domestic spending. He funded these excesses by using the Social Security tax revenues and by borrowing heavily from other countries, including the Peoples Republic of China.

This is not a Social Security crisis. It is a massive financial problem consciously created by Bush. He told us that we could have both “guns and butter,” that we could “have our cake and eat it too,” that there were “free lunches” galore to be had. All of this was as true as his tales of Iraq’s weapons of mass destruction.

There is no crisis in Social Security, only fiscal irresponsibility in the White House. Very modest changes, implemented slowly over time, can completely eliminate the problems that Social Security will face many decades out in meeting its promises to retiring workers. The tools available include slowly increasing the cap on the wages and salaries on which Social Security taxes are paid, increasing modestly the level of the payroll tax funding Social Security, slowly raising the income level at which Social Security payments are taxed, slightly reducing the planned real growth rate in Social Security benefits, continuing to slowly extend the age at which Social Security payments are received, and increasing the incentives for people of Social Security age to continue to work. Practical, very modest changes in the Social Security program make the long-term problems now projected for Social Security disappear.

If Bush were interested in “saving” Social Security, he would be focused on these modest, practical, solutions. His failure to do so and his trumpeting of a risky and costly replacement for Social Security clearly tell us what his real objective is: the elimination Social Security despite its 70-year record of successfully protecting our seniors from poverty.