The first team having failed to generate even a first down in the big Social Security showdown, the Bush administration this week sent the second unit to Arkansas in the person of Treasury Secretary John Snow. As far as we could tell, the yard marker never moved.
But if personnel were the problem, President Bush was at least as good a quarterback as Snow. Both had their lines down and were as peppy as anyone would want. The object is to persuade a considerable number of Arkansans that Social Security will collapse if we don’t begin to privatize it. Then people will prevail on U. S. Sen. Blanche Lincoln to support the president, she being the only member of the Arkansas delegation who seems the least shaky on Social Security.
No, the problem is the game plan itself. The more the president calls attention to the long-range funding problems of Social Security, the more people learn about it and the more certain they are that the president’s notions would make the problems far worse much quicker. The polls reflect that every week that the president is on the stump preaching Social Security collapse and the wonders of privatization the more unpopular his idea becomes.
In their closely scripted and cloistered Arkansas appearances, Mr. Bush and his treasury secretary warned ominously that Social Security was headed over a cliff. By now, nearly everyone knows the facts. In about 13 years, unless the economy has a robust job-creating streak, benefit payouts will begin to exceed current payroll taxes. Then, sometime after 2042 — after 2052, according to the Congressional Budget Office — the mammoth surplus in the Social Security trust fund will have winnowed away and monthly benefits will have to be cut significantly (although still considerably more than current retirees’ benefits, even adjusted for inflation).
That is all uncontested, but even people in the president’s camp — the vice president, for example — acknowledge that the president’s plan to allow people under the age of 55 to divert two-thirds of their payroll taxes to closely circumscribed private investment accounts would not delay the 2042 or 2052 crisis by even a single day. It would, in fact, speed that day of reckoning.
The still unspoken part of the president’s plan that would address that issue is a reduction in benefits.
Neither Bush nor Snow nor anyone else in the administration will take questions about that, although it is the central feature of the option to which the president vaguely alludes from time to time. A deep reduction in benefits, which would begin in a few years, would not play well in these forums, so it is just left unmentioned.
But while Snow was making his pitch for Arkansas support at Fayetteville, Federal Reserve Chairman Alan Greenspan let the cat out of the bag in Washington. Regardless of what happens to the president’s privatization plan, he said the country would either have to make adjustments in Social Security taxes or reduce benefits. His preference is to cut benefits.
Greenspan got to the heart of what the sudden Social Security “crisis” is all about. Reining in Social Security payouts will make the country’s deficits shrink. Since soon after Bush took office, the government has been using Social Security payroll taxes (about $170 billion a year of it now) to pay for the wars in Iraq and higher defense and homeland security spending. And that is true as far as the eye can see. The crisis in Social Security will make it easier to do the dirty work of cutting benefits, which will help pay for his extravagance in spending and tax cutting for the wealthy.
And where do private accounts fit in all this? If Bush can sell the idea of great wealth accumulation from private accounts, people will just shrug off the reduction in the regular pensions. But think about this: What if the George W. Bush era and not the Bill Clinton era is the real harbinger of markets in the next 25 years?
Stocks had a fantastic run yesterday, but the Dow Jones still closed below the average on the day of Bush’s election nearly four and a half years ago. The NASDAQ was only about 65 percent of its Nov. 7, 2000 close.
Who would stake her sunset years on that prospect?
