It’s nice to see The New York Times catch up to what Ed Morrissey and I have been noting since September (with the first alarm bells rung in May), and what the Associated Press noticed ten days ago. I’ll go with Ed’s take on the catch-up:
We’ve been writing about this for the last few years, and when we wrote about it, we presented the entire political backstory, including how Barack Obama’s OMB Director Peter Orszag predicted in 2008, while running the CBO, that this day would come — in 2019. We included mentions of how Harry Reid and other Democrats insisted in 2005 that George Bush was scaremongering when he attempted to reform SSA through partial, elective privatization, and how they assured us that Social Security was safe for decades without reform.
Does the Times mention any of this? Not exactly. In fact, the name “Orszag” doesn’t appear once, nor does the name “Reid.” Guess how many times the name “Greenspan” appears in this article by Mary Williams Walsh? Five:
One thing Ed left out of that – in the FY2010 budget prepared by Orszag, he predicted there would be a $21 billion primary (cash) surplus in Social Security. Depending on whether one believes the OMB or the Congressional Budget Office, the primary deficit is somewhere between $29 billion and $34 billion, or a miss of $50 billion-$55 billion in a program with somewhere around $700 billion of cash outflow.
One more thing – that CBO $29 billion estimate might yet be low – it is unclear whether the money to pay for the second round of $250 pay-o…er, “stimulus” checks that Obama wants to hand out would come out of the “Trust Funds” or the general fund. If it’s the former, it would add another $12 billion to the former estimate, making that hole $41 billion.
Back to Ed:
Forget those two years of black ink, too. That will only happen under the rosiest of scenarios for economic growth and employment. As the recession’s effects continue, people will continue retiring earlier or not going back to work. SSA’s revenues will continue to plateau before dropping steeply as the rest of the Baby Boomers leave the workforce and demand their benefits.
Some people predicted this day would arrive at about this time; those were the people Democrats accused of attempting to frighten seniors out of their benefits. Some predicted that this day wouldn’t come for almost a decade longer than it did and argued that reform wasn’t necessary in 2005, when it may have helped extend SSA’s life. Those are the people making the economic decisions in the White House now.
The country’s in the best of hands.
That leaves Social Security, the other big entitlement benefits program and one that Mr. Obama has suggested in the past that he is willing to tackle. While its looming problems are not of the scale of those afflicting Medicare, it now stands as the likeliest source of the sort of large savings needed to bring projected annual deficits to sustainable levels, many budget analysts agree.
And, they say, packaging future reductions in the retirement program that Democrats zealously defend with tax increases that Republicans typically oppose would have the makings of a grand compromise to shrink the debt.
“You would think that there ought to be a way to get together and talk about a balanced package of some changes in benefits and some increases in revenues that would actually help Social Security,” said James R. Horney, the director of federal fiscal policy at the Center on Budget and Policy Priorities, a liberal-leaning research organization….
Yet Representative Steny H. Hoyer, the moderate Democrat who is the House majority leader, gave a speech this month in which he called for the two parties to compromise on a mix of tax increases and benefit reductions to avert fiscal chaos. Among his options were proposals to gradually raise the retirement age for future Social Security recipients and to reduce benefits for those with high incomes.
I’ll ignore the misapplication of “moderate” to Hoyer. This was tried in 1983, with benefit reductions (in the form of taxation of benefits, and a raising of the “full-benefits” retirement age from 65 to 67) and tax increases (a 14% increase on both sides of the withholding tax and a 64% increase in the self-employment tax). At the time, it was deemed a “forever” fix. That “forever” fix has lasted 22 years on a combined yearly cash-surplus basis, almost certainly won’t last 30 years for the Disability Insurance portion of Social Security, and likely won’t last 50 for the bigger Old-Age and Survivors Insurance portoin.
I’ll go back to what I said last month when Obama floated the idea of lifting the cap on those taxes out in Henderson, Nevada:
As for Obama’s claim that eliminating the cap would make Social Security solvent long into the future, let’s take a quick look at that. Assuming that it has no effect on on the economy, removing the cap would increase the FICA/SECA tax take by roughly 21%. Some very-back-of-the-envelope number-crunching refreshes my memory of a semi-forgotten study that found that lifting the cap entirely would only delay the inevitable decline and collapse of Social Security by roughly 15 years. Ever-so-conveniently, that would move fund exhaustion barely beyond Obama’s life expectency.