Social Security Surpluses Are Near Their End; Bloomberg's Hassett Notes After 2-Week Media Slumber
Yesterday, in the process of passing on news that bloggers such as Ed Morrissey at Hot Air and outfits like the Heritage Foundation were onto earlier, Bloomberg's Kevin Hassett delivered a stinging indictment of the establishment media for being asleep at the switch (the sole exception appears to be a video report at PBS). But while he does a good job identifying the problem and indicting journalists for ignoring the news, his prescription for a solution is badly wanting.
The news? The days of Social Security surpluses are over, six to possibly eight years earlier than was thought to be the case just a year ago.
Here are excerpts from Hassett's commentary ("Recession Bites Into Social Security’s Surplus"). His first word reveals what he thinks of the nation's political elites, and of the media that are supposed to be watching them:
Criminals know that people who are distracted might forget to keep an eye on their valuables. It’s just happened to us as a nation.
We have all been so busy whining about bonuses at American International Group Inc. and arguing about the so-called card-check legislation that we forgot to watch the Social Security surplus. While we were looking away, that surplus disappeared, eight years ahead of schedule.
Something extraordinarily important was revealed in mid-March and received almost no news coverage. If you typed in the words “Social Security” on Google’s news service last Friday, the top hit was a New York story about a man who kept his dead mother in a freezer ever since she died back in 2007, just so he could continue to collect her benefit checks.
Almost as gruesome is the news about Social Security’s finances. Social Security has for years been the near-term bright spot in the federal budget. Each year the program has raised $50 billion to $100 billion more in payroll taxes than it paid out in benefits (in some years, the surplus was closer to $200 billion; in fiscal 2008 just ended, it was $180 billion -- Ed.). Sure, deficits were expected far off in the future, but the current program was on sound financial footing.
Those days are, for the moment at least, behind us. According to the latest Congressional Budget Office estimate, the Social Security surplus will be only $3 billion in 2010. That number is almost surely too rosy, and the actual realization next year will be a big deficit.
..... Opponents of Social Security reform have tried for years to underplay the problem by stating that the program’s finances are fine. Social Security was, in the most recent report by its trustees, expected to run surpluses all the way to 2017. Why bother to reform something now if the crisis is so far off?
..... (in 2007) Hudson Institute scholar Chuck Blahous, who was leading President George W. Bush’s Commission to Strengthen Social Security, made the compelling case that those predicting a Social Security financing crisis were basing that on sensible assumptions. Blahous was pilloried by the left, but we now know he was far more right than even he could have dreamed.
Hassett goes on to say that those who think Social Security will return to a surplus situation if or when the economy recovers are probably dreaming. I believe he's correct, because that recovery, even if fairly robust, will be starting from an ever-shrinking base.
The Bloomberg columnist, who is also director of economic-policy studies at the American Enterprise Institute, accurately notes that many Americans who are choosing retirement in the current rough economy and beginning to collect Social Security benefits now are not likely to return to the workforce when recovery begins. Hassett didn't mention that there's a reason beyond human motivation why that outcome is likely. Unbeknownst to most Americans, who thought the problem was legislated away during the 1990s, the odious Social Security penalty that reduces benefits by up to 50 cents for every dollar earned from work above relatively small amounts is still in place from Age 62 through Full Retirement Age (currently 66 for today's seniors). Legislation passed in the 1990s only removed the penalty for earnings from work after Full Retirement Age until Age 70.
Hassett's "solution" is really pathetic:
The only responsible course is to do what reformers have been advocating for at least a decade, a step that worked in 1983: Establish a bipartisan commission to recommend fixes to Social Security, and implement them now. The myth that we can postpone reform because everything is just fine has been exposed as such. The time to act is now.
Hassett should know better. The Greenspan Commission didn't "work" in 1983. All it did was give political cover to those who wanted to ratchet up the payroll tax rate and its reach into ever-higher incomes, while at the same holding back economic growth from what it could have been. The Greenspan Commission copped out on what would have worked marvelously and would have prevented the sad arrival of huge annual deficits from happening: private accounts. It may very well be that the Left has succeeded in closing the window for full or even partial privatization, but another "bipartisan" commission would be yet another excuse for giant tax increases -- as if we aren't facing enough of them already.
Cross-posted at BizzyBlog.com.