November 17, 2006
Friday

OK, congressional Democrats, here's your chance - find a way to fix Social Security in bipartisan cooperation with President Bush and the Republicans, and then reap the blessings of voters because you helped improve what FDR started.

The last thing you want to do, now that you've captured the House and Senate, is to keep playing the demagogic, obstructionist game in which you bash every proposal anyone comes up with while refusing to commit yourself to any ideas whatsoever, or refusing to concede - as some of you do - that there's really much of a problem at all.

Believe me, there is a problem, summed up by the fact that the number of Americans over 65 will double over the next quarter of a century - as some observers have put it, we are on our way to being a nation of Floridas. The entitlement bill will be enormous if nothing is done to restructure Social Security and Medicare, either requiring that workers pay incredibly high taxes, that we vastly reduce virtually every other program in the federal budget or that we borrow ourselves into economic obliteration.

Social Security is the lesser of these two big entitlement problems, but a hugely important program in American life, and a huge, multi-trillion-dollar problem on its own. The good news is that it can be fixed without enormous harm to anyone - much more easily than Medicare - if we quit kidding ourselves about an imaginary trust fund or supposed solutions that will only lead to further rescue attempts as the years pass.

The trust fund of all those surplus Social Security taxes paid over the decades is an accounting device. To get money out of it, you have to either tax more or borrow more or take the dollars from general revenue funds now going to other purposes. That's also how you get the supposed interest it is earning. When you understand that and some of the various other ways in which optimists underestimate the funding shortfall, you begin to see that raising retirement ages or getting rid of a $90,000 income limit on how much is paid in payroll taxes don't begin to be enough to get the job done.

Both these proposals were put forth in a recent USA Today editorial. It said you could make good on one-third of the shortfall by raising the age of full retirement benefits from 65 to 67 for everyone right this minute, gradually making the age 70. Nope, says a sophisticated source immersed in this issue; you would merely delay the year when payroll taxes are no longer sufficient to pay all benefits from 2017 to 2019 and lower long-term shortfalls by 28 percent.

Scotch the income ceiling, says the editorial, and you could solve everything once and for all. Hardly. The same source says you would only delay the Social Security deficit year to 2023 and reduce the long-term shortfalls by 24 percent.

Then USA Today mentioned a proposal that would work. If you increased benefits each year at no more than the cost of inflation, instead of inflation-plus-more as now, you would terminate the long-term problem. As the editorial noted, President Bush once proposed a version of this idea in which lower-income recipients would get increases on the same formula as now while higher income recipients would get just benefits plus an inflation adjustment each year. Some of the same Democrats who curse "tax cuts for the rich" seem to think unneeded benefit increases for the "rich" just fine.

But since some of these Democratic members of Congress have gone on the record about a willingness to negotiate on any way that might reasonably solve the problem - presumably including the crudely misrepresented but solid Bush call for individual retirement accounts - perhaps they will now do just that. Bush has made a similar pledge, as have a large number of Republican members of Congress. If everyone means it, the federal government can do an important favor for the American people and the two parties can do an important favor for themselves.

And after that?

Well, watch out Medicare.

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