Romney/Ryan: Missed Debate Opportunities on Social Security
At the first presidential debate on October 3, aka Barack Obama's Denver Debacle, the president, when asked by moderator Jim Lehrer whether he saw a major difference between his position and that of Republican challenger Mitt Romney on Social Security, gave this response: "I suspect that, on Social Security, we've got a somewhat similar position. Social Security is structurally sound."
At last Thursday's vice-presidential debate, incumbent Joe Biden, who probably set new all-time debate records for rude, obnoxious, interrupting, and inappropriate behavior, clearly believed he was scoring political points -- and unfortunately probably did -- when he told challenger Paul Ryan that "if we had listened to Romney ... and the congressman during the Bush years, imagine where all those seniors would be now if their money had been in the market."
Though both members of the GOP ticket won their respective debates on substance, each wasted an important opportunity to more fully inform the public about how the Obama-Biden administration's historically awful economic stewardship hastened the arrival of Social Security's currently dire circumstances, and how partial privatization can still, even at this late date, be a factor in saving it.
Contrary to what the president claimed, Social Security is not "structurally sound." Vice-presidential debate moderator Martha Raddatz, who apparently never told the presidential debate commission which selected her that Obama attended her 1991 wedding, and who to absolutely no one's surprise ended up being a de facto third debater Thursday, probably thought she was making a daring statement when she said that it's "going broke." No ma'am; it already is.
Five years ago, Social Security was taking in over $180 billion a year more in taxes than it was spending on benefits and administration. Though that annual surplus was doomed to dwindle as the wave of baby boomers began to retire, Social Security's trustees estimated that surpluses would continue for another decade, and that triple-digit cash deficits wouldn't arrive until many years after that.
That's before the Community Reinvestment Act-driven, Fannie Mae and Freddie Mac fraud-accelerated recession kicked in, followed by the worst so-called recovery since the Great Depression. Just a few years later, the system began running annual cash deficits. The trustees now estimate that the calendar year 2012 cash deficit (i.e., "the deficit of tax income relative to cost") will be $165 billion. The only reason it won't approach $300 billion is that the rest of the government is kicking in about $120 billion to offset the current-year effect of the two-point reduction in payroll tax withholding which took effect in 2011. Team Obama dishonestly demagogued against allowing that unsustainable reduction to expire earlier this year. Regardless of who wins the presidency for the next four years, and despite the soaring national debt which threatens to swallow the entire economy, restoring Social Security withholding to its prior 6.2% level will be extraordinarily difficult.
Well, that's okay, because Social Security's "trust fund" assets will cover those annual cash deficits for many years to come, right?
Surely you jest. That "trust fund" consists almost entirely of IOUs from the rest of the government, which in case you missed it, has officially run its fourth consecutive fiscal year deficit of over $1 trillion. That's because past congresses and presidents have "borrowed" (i.e., siphoned off and spent) previous system surpluses. To prop up the already broken system, the rest of the government has to cover the system's cash deficits -- today.
Despite that clear and present reality, Romney remained totally vague about Social Security, only saying that "I've got proposals to make sure Medicare and Social Security are there for them without any question," while Ryan acted as if the problem is decades down the road:
... if we don’t shore up Social Security, when we run out of the IOUs, when the program goes bankrupt, a 25 percent across-the-board benefit cut kicks in on current seniors in the middle of their retirement.
No sir. The problem is now -- and I should also note that we will, using Ryan's words, "run out of IOUs" in only a decade or so if the economy continues to perform as badly as it has during the past four years.
If the majority of the American people knew (as they currently don't) that we are burdening our grandchildren and generations yet unborn with hundreds of billions of dollars a year in debt right now so that current and future Social Security recipients can continue to receive uninterrupted and unaffected benefits, the political landscape surrounding the program and federal finances in general might be vastly different. We'll never find out unless and until those who know the truth make the necessary points and arguments publicly.
As to Biden's blithe blather about the dangers of privatization and the stock market, George W. Bush's partial privatization proposal never involved forcing current seniors to invest in the stock market; in fact, it never required anyone to do so. Instead, it gave current workers well over a decade away from retirement the ability if they so wished to invest two percent of their gross pay in one or more passively managed stock, bond, or cash-equivalent mutual funds which would replicate the overall returns of their underlying indices.
As seen here, if someone making $50,000 a year had begun investing that 2% of earnings at the beginning of 2007 in an S&P 500 index fund, at the end of 2011 they would have had an estimated account value of over $5,200. That's an annual return of less than 1 percent, but it's not some kind of disastrous loss -- and it occurred, as noted earlier, during the worst economy since Franklin Delano Roosevelt. Imagine how that account value could grow with a combination of several decades of continued investment and responsible leadership genuinely interested in growing the economy in Washington.
There is a significant political benefit to instituting partial privatization. Giving people the opportunity to invest a portion of their Social Security taxes could dramatically change the mindset of voters, who would become more interested in having the government pursue policies that would unshackle and grow the economy, better enabling their investments to continue growing.
Rest assured that the policies favored by the new investor class would not include continuing to give food stamps to people with more than adequate financial assets or whose incomes are way above the poverty line, passing out "Obama Phones" like candy to people who can afford to buy their own, and easing work requirements associated with traditional welfare. That's what Obama, Biden, and Democrats, who do not hold "a somewhat similar position" to Romney and Ryan, really fear -- an end to almost five decades of relentless Democratic vote-buying and cronyism.