Tuesday, February 22, 2011

Telling the Truth about Social Security

It was refreshing to see President Obama's OMB director telling the truth about Social Security in, of all places, U.S.A. Today. As Joan McCarter at DailyKos (whose post brought this to my attention) points out this is a welcome act for Democrats, which we need more of.

It is true that Social Security is now paying out more than it takes in as Baby Boomers start to retire, but it is also true that those Boomers paid in a lot when they were working and the result is a huge surplus in the Social Security Trust Fund, enough to keep the program solvent till at least 2037. The problem is that there is no money in the trust fund, just government bonds that need to be cashed to pay for Social Security. It is paying off those bonds that causes the problem. The question then is how to do that. One way is to cut Social Security in the future, which would both hurt the neediest most and hurt future growth as people with less money spend less. Another solution would be to raise revenues to pay our bills, but President Obama took that off the table for at least two years with his terrible tax deal in December.

As Paul Krugman pointed out recently, the real driver of the deficit in the long term is health care costs. As Krugman correctly noted, the health care bill did have some measures to contain those costs, but not enough. While the cuts proposed by both Obama and the Republicans will hurt real people and probably stunt economic growth, their impact on the deficit is barely visible to the naked eye. Beyond a couple of Op-Eds and blog posts there does not seem to be any really serious conversation about these rather basic facts.

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