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“Social Security Reform Is Dead” . . .
. . . long live Social Security reform.


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Donald L. Luskin

If Social Security reform is dead, then how come so many people are still trying to kill it?

Oh, sure, the enemies of the Bush administration on the left and right pretend it’s dead. During the most recent State of the Union address, when President Bush acknowledged that his initiative last year to introduce private accounts into Social Security had been thwarted, all the Democrats in Congress rose to their feet and applauded.

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And conservative Bruce Bartlett, in his recent anti-Bush book, acts as though Bush had never even tried to reform Social Security, writing that last year the president “generally avoided talking about stabilizing Social Security’s long-term finances.” Bartlett seems to have forgotten the myriad times last year that Bush talked about the “Social Security problem” — calling the system “bankrupt” — and his photo-op visit to a government vault in West Virginia where he exposed the non-existence of the so-called Social Security Trust Fund.

And as for those cheering Democrats, they didn’t applaud because reform is actually dead. They applauded to embarrass the president of the United States, and make it harder for him to promote reform in the future.

But reform isn’t dead. It can’t die. Reform is inevitable, because the Social Security system really is in crisis, in the sense that the accounting mirage of the Trust Fund doesn’t hold any real assets to pay off the system’s obligations. Even if it did, the assets would be exhausted in a few short decades as the baby boom generation retires.

So the Left remains mobilized to keep reform off the table as long as Republicans are in power. The Left wants to be sure that all the entitlement goodies of their favored constituencies — unions and minorities — are left intact. And the Left wants to be sure that reform doesn’t diminish the size and scope of government interference in our lives, as President Bush’s proposal for individual investment accounts would surely have done.

Consider the bogus scandal that the liberal New York Times has tried to stir up about the fact that the annual reports of the Trustees of Social Security and Medicare missed the statutory deadline of April 1. An editorial three weeks ago fulminated, “it’s information Congress and the public deserve to have. Holding up the reports seems like an attempt to hide the truth.”

What truth? The truth that the so-called trust funds aren’t going to be able to cover promised benefits in the future? That’s precisely what the president said over and over last year — and that’s precisely what the Times consistently denied.

Besides, this marks the first time the Bush administration has missed the deadline. And where was the Times during the Clinton presidency — eight years in which that administration missed the deadline six times?

And the reason why the report is late is because Max Baucus — the ranking Democrat on the Senate Finance Committee — has held up confirmation of the Bush administration’s reappointment of the two public representatives on the Board of Trustees. One of the trustees up for confirmation is a Democrat and one’s a Republican — just as law specifies — and both were originally appointed by Bill Clinton. So what’s Baucus’s beef?

Yes, the committee’s Republican chairman is on record preferring new faces. But Democrats have been the driving force behind the hold-up because they want a new face that will oppose reform. Baucus and Senate minority leader Harry Reid each proposed to the White House a candidate for the Democratic trustee position. The names haven’t been revealed publicly, but both candidates were anti-reform – and Baucus’s was a partisan anti-reform zealot. In frustration, the president finally made “recess appointments” of both the existing trustees last week, while the Senate was off for the holidays.

In the meantime, left-leaning think tanks — and the liberal academics who take their money in the form of “honorariums” and “fellowship grants” — continue to churn out bogus “papers” and “studies” opposing reform. The idea is to put a slick academic veneer on partisan lies designed to preserve the status quo.

Take a look at “African Americans and Social Security: The Implications of Reform Proposals,” a paper published in January by William Spriggs (of Howard University and the union-funded Economic Policy Institute) and Jason Furman (of New York University) under the imprimatur of the Center on Budget and Policy Priorities. The thrust of the paper is to play an anti-reform race card by claiming that the president’s proposal for personal investment accounts is “likely to have an adverse effect on the African American community.”

Spriggs and Furman celebrate how wonderful the Social Security status quo is for blacks. They totally ignore that the punishing Social Security payroll tax consumes any capacity for independent retirement savings that might have been enjoyed by lower-income Americans of any race, leaving them effectively wards of the state in their old age.

Instead, the authors sing the praises of how blacks benefit from the current system’s “progressive” benefit formulas that are skewed in favor of lower earners; how blacks, who are more likely to become disabled, can take greater advantage of the program’s disability benefits; and how blacks, thanks to their lower average life expectancy, benefit more from the program’s survivor benefits.

All those things are true. But Spriggs and Furman lie when they use their academic skills to manipulate statistics to claim that Bush’s proposals do anything but make all those things even more true. (You can find a detailed deconstruction of all their tricks on my blog. Tricks aside, the simple fact is that what the president proposed last year would make the Social Security benefit formula even more “progressive”; it would increase the share of total benefits paid to the disabled and it would increase the share of total benefits paid to survivors.

Spriggs and Furman do admit that the current system disfavors African Americans in one way. Because blacks live shorter lives, on average, they have fewer years in retirement in which to collect their benefits. So you’d think Spriggs and Furman would look favorably on the fact that the president’s personal accounts could be passed on through inheritance. But no. Astonishingly, instead they claim that that would weaken the financial strength of the system. But if that were true, then it’s true of any feature, new or old, that favors African Americans or anyone else — or indeed any feature that does anything but cut benefits or increase taxes. What they don’t like about this feature is that George W. Bush proposed it.

So the battle for Social Security reform rages on, even as the opponents of reform claim to have already won.

And it’s a good thing. When the report of the Trustees finally comes out in a week or two, it will undoubtedly show the existing system’s continuing downward spiral into bankruptcy. When the opponents of reform are done griping that the report was late, maybe they should actually read it, and find out how deep the crisis really is. And for the good of the country, maybe they should forget their partisanship and actually do something about it.

– Donald Luskin is chief investment officer of Trend Macrolytics LLC, an independent economics and investment-research firm. He welcomes your visit to his blog and your comments at [email protected].



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