But first . . .
HOW FAR CAN A CARTOON BUNNY GO?
Just last week, as her first official act, Bush’s new education secretary, Margaret Spellings, an evangelical Christian, launched an attack on the PBS series Postcards From Buster, which stars an 8-year-old cartoon rabbit who travels the country visiting real kids in real-life settings. Spellings blasted ‘Sugartime,’ an episode in which Buster the rabbit visits a Vermont family and their 11-year-old daughter, Emma, to learn about making maple sugar. But Emma has two mommies – Karen Pike and Gillian Pieper, two 40ish women from Hinesburg, Vermont, who were united in a civil union in 2001. And that’s what created trouble.
Although lesbianism and civil unions weren’t even mentioned in the episode – which focused entirely on getting sugar from maple trees – the images of a happy kid being raised by two loving parents who both happened to be women were too much for Secretary Spellings, who denounced the show …
So what was PBS’s reaction to Spellings’ censorious rant? PBS president Pat Mitchell … capitulated and canceled the Buster episode.
And now . . .
3 SIMPLE THINGS TO REMEMBER ABOUT SOCIAL SECURITY
It is not in crisis. It would be a good idea to tweak it. Private accounts are not the right tweak.
Yes, there were 41 workers for every Social Security recipient when the system was inaugurated compared with just three today . . . headed down to 2 as the baby boomers bulge the number of retirees. But at just three today – down from 41! – Social Security runs a large annual surplus.
With just two workers instead of three, the system would be able easily to provide more than two-thirds the benefits it does today. How? Well, first, there would be the money pouring in from the two workers – two-thirds as much as if there were three. If three workers can handle the job with $200 billion to spare, surely two workers can come fairly close – especially with trillions of dollars in accumulated surpluses built up to help get the system past the demographic baby-boom bulge.
I’m sure by now you’ve heard the estimates – that even if we do nothing, and even once the surpluses we’ve been accumulating are exhausted, sometime between 2042 and 2052 (depending on which estimates you believe), Social Security will be able to pay benefits equal to about 75% of what has been promised.
But not only is 75% not nothing, it is – after allowing for inflation to put it in today’s dollars – actually more than 100% of the modest sums that retirees receive today.
Yes, you read that right. This is because what has been promised is not ‘the same kind of Social Security checks people get today, adjusted for the cost of living’ (otherwise known as price inflation) but, rather, something better – starting benefits, at retirement, adjusted for wage inflation, which should be higher.
There are good reasons for making that more generous promise, and it should not be lightly abandoned. But if we did nothing, retirees in 2050 and 2060 and 2070 and 2080 could expect to get more than 100% of what they get today, adjusted for inflation.
For President Bush to call this a crisis is . . . well, don’t get me started.
That said, it would be much better if today’s young workers could expect to receive 100% of what is currently promised rather than just 75%.
To make that happen, there are three things we could do, all rotten: raise taxes, cut benefits, extend the retirement age. But by starting now rather than waiting four or five decades . . . and by doing just a tiny bit of all three . . . the pain would be barely noticeable.
Here is the sort of thing that would be involved. Judge for yourself:
- Continue to allow early retirement at 62, but warn today’s kids that, 40 years from now, instead of retiring with full benefits at 67, as currently planned, it would be 68.
- Drop the 6.2% retirement payroll tax down not to zero on pay above $90,000, as we do now, but to 1%.
- Use the more generous ‘wage inflation’ formula on the first $30,000 or $40,000 of a worker’s income, but use the less generous ‘cost inflation’ calculation on the rest.
If we did these three things, the ‘crisis’ – which is not a crisis – would be over.
Or we could fail to do them, in which case today’s young workers would be more strongly advised than ever to save for their retirements, because – although they could expect to get from Social Security more than retirees get today (adjusted for price inflation) – they would get less than the current formula promises (because it promises to adjust their initial benefits for wage inflation).
Should we privatize this nation’s retirement system? We already have! The Social Security safety net is already supplemented by trillions of dollars in IRAs, 401Ks, 403Bs, SEPs, SIMPLEs and Keogh Plans. If you don’t have one, set one up! Contribute to it!
The irony is that, if we did siphon money out of Social Security for private accounts, as the President insists at every opportunity we must, we would not only weaken the safety net, by diverting money from the Trust Fund, and weaken America, by plunging us yet another trillion or two in debt – we might very well weaken the incentive to save through private accounts.
Right? Why set up an IRA or contribute to a 401K, some would surely rationalize, now that I’m saving via this new, partially privatized Social Security system?
And there are other reasons not to privatize Social Security, ranging from the administrative cost (setting up and maintaining 200 million new accounts) . . . to the problem of risk (what if the market should crash just as you are retiring?) . . . to the prospect of higher interest rates (if we don’t buy Treasury bonds with the Social Security surplus, the Treasury will need to pay higher interest rates to attract other buyers).
Our country does face crises – Iraq . . . terrorism . . . looming Medicare insolvency . . . inadequate education to meet the challenge of foreign competition for our jobs . . . a giant budget deficit.*
*The budget deficit, indeed, is not the $427 billion that is reported, but more than $600 billion when you include, as you must, the $200 billion we are borrowing each year from the Social Security surplus. If that is not clear to you – it seems not to be clear to the news media – think of it this way. You and your spouse take in $950 a week in pay plus another $50 a week in dues that your bowling club entrusts you with. You spend $1,000 a week. Uncle Sam would call that a balanced budget and NBC News would dutifully agree. But clearly, you are running a $50 weekly deficit, making up the difference with borrowings from the bowling club. Uncle Sam is running a $600 billion deficit, but calls it $427 billion by not counting the surplus entrusted to it by Social Security.
The Social Security retirement system, by contrast to these other much more difficult problems, is neither a crisis nor all that hard to fix.
Quote of the Day
We're not trying to outsmart the smart guys. We're trying to sell bonds to the dumb guys.~alleged remark of the head of a Wall Street mortgage-bond group
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