The debate over privatizing Social Security is, at its root, a fight over politics and spin. For Bush and other proponents, that’s a good thing, because if this discussion rested exclusively on a policy debate, opponents of the privatization scheme would have already won in a knock-out.
Pointing to a Paul Krugman column is almost too easy at this point, but it’s important that everyone read his explanation of the fundamental contradiction upon which the privatizers’ argument is based.
[P]rivatizers can rescue their happy vision for stock returns by claiming that the Social Security actuaries are vastly underestimating future economic growth. But in that case, we don’t need to worry about Social Security’s future: if the economy grows fast enough to generate a rate of return that makes privatization work, it will also yield a bonanza of payroll tax revenue that will keep the current system sound for generations to come.
Alternatively, privatizers can unhappily admit that future stock returns will be much lower than they have been claiming. But without those high returns, the arithmetic of their schemes collapses.
It really is that stark: any growth projection that would permit the stock returns the privatizers need to make their schemes work would put Social Security solidly in the black.
It’s really that simple. Bush and his cohorts would have us believe they can take money out of Social Security and into private accounts without hurting Americans’ long-term returns because economic growth will be strong in the coming decades. Simultaneously, they also argue that private accounts are necessary because economic growth will be weak in coming decades.
By any reasonable standard, this is point, set, match. We win, they lose; their house of cards has tumbled. As Josh Marshall put it, it’s this line of reasoning “which, if anyone were paying attention, would stop the whole debate in its tracks.”
And as if Krugman’s explanation wasn’t damaging enough, there’s also the latest news from the non-partisan Congressional Budget Office.
In the CBO’s latest assessment of Social Security’s long-term health, the agency said the system will take in more money annually than it pays out in benefits until 2020. What’s so significant about that? Well, last year, the CBO said the year was 2018. Six months ago, it was 2019. At this rate, by the 4th of July, it’ll be 2022.
As Max noted, it’s this not-exactly-iron-clad estimate that is fueling the White House drive for privatization.
So by all means, let’s have more radical policy changes based on 100 year projections. Hell, 500 year projections! We are so good at making predictions. We produce so many of them.
Senator Gordon Smith (R-Ore.) told the New York Times this week, “A lot of us expressed the view that the president started the debate [over Social Security] and the other side is finishing the debate.” Until that changes, it seems this fight is over before it starts.