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Thoughts from a Yellow Dog Democrat living in Olympia, in the great BLUE state of Washington

I am a liberal because it is the political philosophy of freedom and equality. And I am a progressive because it is the political path to a better future. And I am a Democrat because it is the political party that believes in freedom, equality and progress. -- Digby

Sunday, January 02, 2005

Truth From Josh Marshall's Talking Points Memo

As pretty much all the sensible articles on Social Security have made clear, to the extent that we have a problem, it is not a Social Security problem, but an accumulated national debt problem. And this isn't just a looking at one side or the other





of the coin issue, but a category difference.

There are various ways to illustrate this point. But the following, I think, is the best.

The United States has a bit over $7 trillion in accumulated national debt. You can say that's been built up over the history of the country. But overwhelmingly it was borrowed over what happens to be the span of my lifetime -- the last thirty-five years -- and especially over the last twenty-five years.

After 1980 we started borrowing money big-time to finance our deficits -- in large part because of tax cuts on high-income earners. However you want to slice it, we started spending substantially more than we were taking in in tax revenue.

So where'd we borrow the money?

This is from memory, so I may have the numbers a bit off. But I believe about $4 trillion of that debt was borrowed on the open market -- individual Americans have them in their investment portfolios, or pension funds hold them, or the Chinese, Japanese and the Saudis and others have them in bonds.

But about $3 trillion of those dollars we needed to fund the 1980s and 1990s deficits we managed to borrow closer to home. We borrowed it from the Social Security (and a few other government) trust fund(s).

Almost the entirety of President Bush's Social Security phase-out plan comes down to a simple proposition: finding out how not to pay it back.

Now, admittedly, this is an approach that the president is rather familiar with from his own business career at various failed energy companies. But it is, in so many words, a straight up con -- one of vast scale, and one which virtually no one in the media ever frames in just these terms.

Before discussing that aspect of the question, consider a hypothetical. Let's say there'd not been a Social Security -- President Bush's dreamworld. We'd still have had the same deficits. The difference would be that we'd have had to borrow from private borrowers in the US and abroad.

Think we'd just be able to decide not to pay them back? Not likely. The Joneses and the Smiths with their 401ks probably wouldn't like that. And the Japanese and Saudis probably wouldn't like it much either. Of course, defaulting on our entire national debt would also certainly trigger a seismic international financial crisis. So you can probably figure that no one would be a huge fan of it.

So why does the president figure he can get away without making good on the debt to the folks who pay Social Security taxes, who are overwhelmingly low and middle-income wage earners (since no one pays Social Security tax on investment income or wage and salary income over about $85,000 a year)?

Isn't it obvious? Because he thinks they're an easy mark.

If anything, the fact that a sizeable portion of our huge national debt is owed (in the aggregate) to ourselves would seem to be a good thing since it gives us in extremis at least some flexibility on repayment. But to the president this is a reason to abolish Social Security so the money doesn't have to be paid back at all.

As I said at the beginning of this post, the challenges we face over the next several decades aren't really Social Security problems but national indebtedness problems, though the issues are clearly related.

One obvious and immediate way to relieve long-term pressures on Social Security financing is to reduce the national debt ... by ending our habit of running huge annual deficits or even better by paying down some of our accumulated debt (there are complicated macro-economic questions related to this second point; but in general it's correct.)

But what has President Bush done? He's presided over the biggest fiscal turnaround in American history, taking the country from modest annual surpluses to the biggest deficits -- at least in non-adjusted dollar terms -- in American history. And that's only one reason why you can make a decent argument that President Bush has done more than any other president and perhaps any other single American ever to endanger Social Security's future.

Across the board, it's just one big scam.

The guy who's the biggest threat to Social Security says he wants to 'save' it by abolishing the program and replacing it with private accounts.

-- Josh Marshall

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