The Social Security Dilemma

The experts at the Tax Foundation fret that the current debate about extending the debt ceiling has lost track of the fact that Social Security is a major contributor to our growing deficit and debt crisis.

They may be right about the fiscal ADHD on Capitol Hill, however, let’s make sure we are keeping track of the right discussion. It is true that both the growing deficit and long-term stability of Social Security are valid concerns that should draw the attention of Americans. These issues deserve the attention of all voters — just not in the same sentence.

There is a structural difference between the challenges implied by the debt ceiling discussion under consideration on Capitol Hill and the financial imbalances of Social Security. The former is a matter of how much money Congress spent in the past that we didn’t have, while the other is a problem of how much money the program will not spend in the future.

Typically, not spending money does not drive deficits.

So, there is a bit of sleight of hand. The experts of today are worried that voters at some point in the future might decide to pay beneficiaries scheduled benefits regardless of the program’s ability to pay them. The politicians of today on the other hand are worried that voters won’t step in, leaving a generation of voters wondering what happened to the sacred trust of which politicians are so enamored.

It is possible that voters in the future will take on the obligations of the past. If it happens, the ensuing deficits are a matter of public choice. You can’t blame Social Security entirely if voters in the future voluntarily turn off the kill switch.

That decision carries a pretty big price tag. Based on the last trustees report, Social Security expects to reduce benefits to the level of revenue received by the program in 2033 (2032 if you ask CBO). That means that a woman turning 80 years old today generally expects to live long enough to see benefits reduced by 24 percent.

None of this is really surprising news. Pretty much all Americans have known for 30 years that Social Security would come up short in the 2030s, a prospect that has earned annual reminders. If Congress does nothing about the future path of the program, beneficiaries of the present day will get checks reduced if Washington follows the current path.

That is the promise, and has been for 30 years. From the latest report, trustees recommended that “lawmakers address the projected trust fund shortfalls in a timely way in order to phase in necessary changes gradually and give workers and beneficiaries time to adjust to them.”

Yet the voters have elected Congress after Congress to stand to the side as the program’s finances have continued to unravel. At this point, congressional inaction accounts for roughly 2/3rds of the problem we face today. We vote for people who do nothing.

You may not like the outcome where your check shrinks, but ultimately the blame starts in the mirror. Whoever you are, and wherever you live, most voters have played an integral role in the stagnation of Social Security reform over the past 40 years. We have voted for the guy who promises to keep us from getting what we are promised. Right now, many Americans are lining up behind a presidential candidate who has promised to stand to the side.

Given these choices, no one can really be surprised if future voters allow the program to keep the promises it has made.

Voters generally do not like the promise that they have. So, they tend to ignore it. They have also ignored the terms of Social Security, which the Supreme Court clarified in 1960. If you contribute today to cover the cost of current retirees, maybe a future generation will do the same when you are too old to work.

Politicians by and large want to protect seniors from getting what they were promised. To that end, they are talking about passing the benefit reductions currently promised to current seniors on to future retirees. Essentially, let’s agree with ourselves that our children will take the benefit cuts that we will not discuss. It is genius — provided that our children do not notice.

As it is, I am not worried that voters or policymakers in Congress have lost sight of the staggering costs that Social Security might add to the government’s fiscal crisis. What worries me is the number of people who believe that Congress will step in at the last moment with fairy dust and Easter eggs to prevent older voters from getting what they have been promised.

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