The Merits and Politics of Addressing Social Security On Its Own

Since President Obama released his budget, we have seen two kinds of reaction on the count of social security: conservatives are deriding the President for not addressing it in the context of his budget, and many on the ideologue Left assuming the President gave into their "pressure." Both seem to think that the President has decided not to address the long term challenges of social security at all. But what both extremes are failing to understand is the precise reason why social security is not addressed within the President's budget proposal. It's because social security has a budget of its own, a dedicated revenue stream, and it is by law forbidden from taking money from the general fund - as it stands now.

Anyone who believes that President Obama does not plan to tackle the structural problems in social security is deluding themselves. Indeed, the discussions to tackle that challenge have already begun, according to Obama. So why didn't he put it in his budget? Some say it's the fear of liberal backlash if tough measures are included. Some say it's the fear of conservative criticism of not doing enough. Yet others say that social security remains the political third rail, and even Obama does not dare touch it.

I think it's none of the above. I believe that there was a conscious decision by the White House to address social security as a separate item from the yearly budget battle. And that's with good reason - both political and policy-wise. On the policy front, dealing with social security on its own is the proper way to do it, since social security is a program with a dedicated revenue stream and defined benefits. It is not a matter of the general fund, and it should not get muddled with the rest of the budget bru ha ha. Politically, that very separation gives social security new ammunition from the conservative plots to destroy it. Let me explain.

The policy: focusing on social security on its own

Despite the fact that social security may need innovative revenue sources, and ultimately draw from non-traditional revenue sources(and I am a proponent of diversifying social security's revenue stream), focusing on social security separately from the rest of the budget process makes clear two things: first, social security does have a structural problem that needs to be dealt with in order for us to carry out this generational commitment of ours as a country; and second, social security does not contribute to the federal budget deficit as it stands.

These are very important sides of the same coin. Those who deny social security's structural funding problem are no less misguided than those who perceive it as a part of the current deficit. The first group is in denial about an upcoming crisis that, if left alone, will cause an across the board 22% cut in social security benefits. The second group is so blind that in their zeal to take a hatchet to the federal budget, they don't stop to consider just what exactly the culprits are contributing to the deficit. That is, assuming that they, unlike their leaders in Congress and state houses, are not cynically attempting to dismantle social security while the budget deficit is just an excuse. Just as it's wrong to ignore a looming structural deficit in social security, it doesn't make much sense to jam it into a year-to-year budget process either.

Jacob Lew, the Director of the Office of Management of Budget, puts one part of it succinctly: don't confuse the long term structural issues in social security with the year-to-year budget deficit and the current national debt, because social security has nothing to do with it.
According to the most recent report of the independent Social Security Trustees, the trust fund is currently in surplus and growing. Even though Social Security began collecting less in taxes than it paid in benefits in 2010, the trust fund will continue to accrue interest and grow until 2025, and will have adequate resources to pay full benefits for the next 26 years.

For years, the surpluses in the Social Security trust fund have helped to mask our deficits elsewhere. Now that we are paying Social Security back, the problem is not with Social Security, but with the rest of the budget. In 2001 and 2003, Washington cut taxes for the wealthiest Americans and later expanded Medicare without paying for it. Blaming Social Security for our fiscal woes is like blaming you for not saving enough in your checking account because the bank lost all depositors' money.
This is right on the money. The budget deficit is a real crisis and tough choices need to be made to bring it under control, but the cuts need to go to areas that are responsible for ballooning up the deficit and the spending that's not making us any bang for the buck. In even more areas, we must learn to use our resources more efficiently. But our deficit is not a result of social security, which is a self sustaining program at the moment.

This, however, is not to say that social security will be just fine if we leave it alone. It won't. After 2037, social security will only be able to pay 75-80% of promised benefits if nothing is done. That is a long term challenge to address, and the sooner it is addressed, the less drastic the steps will need to be. There is no excuse for putting it off till it becomes an emergency. But the problem with discussing it in the context of a year-to-year budget is that it becomes just another program in which taxpayers spend money. Its uniqueness is lost, and it gets wrapped into just another "entitlement" program. And since "spending" is the culprit to the deficit - i.e. spending more than tax revenue, it becomes victim of that midset. And this is where the political brilliance of separating it comes in.

The politics: rescuing social security from right wing plan to drown it in the proverbial bathtub.

It's not a secret that the political right would like to do away with social security and all other public new deal programs. If they are able to attack social security under the rubric of "cutting spending," their job is a lot easier. If, on the other hand, the American people understand that social security is not the problem when it comes to today's deficit, they will not consent to dismantling the program so easily.

Separating social security helps focus attention on social security. And we know from experience what happens when people focus on social security by itself. The more Republicans campaign on dismantling it (I mean, reforming it), the less Americans like, the more they understand what's behind it. Hey, if Republicans want Americans to remember George Bush's plans for privatization, who am I to stop them?

This also has an added benefit: this might cause people to get smart about what is and isn't causing the deficit as they hear a barrage of coverage about the deficit and the Neanderthal Republican plan to fix it. They might figure out that closing corporate tax loopholes may be a more effective way to address the deficit than to cut off funding for job training programs or making us breathe unsafe air. This might get people asking questions about whether their kids really need to be crammed into a classroom that's falling apart while their state spends an inordinate amount of money on privatizing their prison industry. They might just start asking why the federal government needs to cut off funding to implement health reform while oil companies continue to receive massive taxpayer subsidies. That wouldn't be very good for the Republicans.

This is why Republicans want it addressed in the overall budget debate, and whine about "entitlements." President Obama is smart enough to realize that and force them into tackling the problem on its own. Which he knows very well they cannot do. He just screwed up their plans. Again.