October 24, 2009 in Opinion

Social Security ‘raise’ unwarranted

Froma Harrop
 
Tags:column

Social Security is a glossy piece of paper on which nearly every politician wants to finger-paint an agenda. But Social Security has no need of ornament. It is a very grown-up program. Put some other toy into the political playpen.

Come January, for the first time since 1975, Social Security payments will not be ratcheted upward for inflation. The reason is simple: no inflation.

But now President Barack Obama is pushing Congress to send every senior a $250 check to compensate for … for … for what? For the fact that some Social Security recipients expect a “raise” every year, whether or not it is warranted? They saw a 6 percent hike in their benefits last year. But that was not a “raise.” It was a cost-of-living adjustment to maintain (not increase) the buying power of their monthly checks.

If the president wants to hand out checks to stimulate the economy, why make them age-specific? Money sent to low-income people, whether young or old, would make far more sense. And the still better stimulus is government spending on roads and other worthy projects. That money gets shot right into the economy.

Sending an extra check to Social Security beneficiaries is also about pandering to older voters. But politicians should first ask themselves, “How many other Americans got 6 percent ‘raises’ last year?”

There is another proposal to cut payroll taxes. The plan is foolish and reckless – and has drawn bipartisan support. These taxes pay for Social Security and Medicare. Cutting payroll taxes puts those programs in jeopardy, which is why some liberal economists, such as Robert Reich, should hang their heads in shame for wanting to monkey with them.

On the right, meanwhile, there is growing affection for the idea. First off, many conservatives hold that cutting taxes solves all problems. (That did wonders for the deficit, didn’t it?) Secondly, fooling with payroll taxes could undermine the public’s faith in Social Security by lending ammo to the false charge that the program’s trust fund is all a fraud.

You see, the Social Security taxes now paid by workers and their employers support current beneficiaries. What’s left over goes into the trust fund to be tapped in future years, when a surge in retirees puts pressure on the program. It’s been a conservative talking point that the Social Security trust fund doesn’t exist; the government has spent the money.

Not quite. The Treasury bonds in the trust fund are real IOUs representing real money taken from real workers for more than 25 years. No matter what the federal government did with that borrowed money, it still has to pay it back.

Make the argument, if you must, that the Treasuries sitting in the trust fund’s file cabinets are not like the super-safe government securities traded around the world – that the Treasury doesn’t have to make good on them. The truth is that these special Treasury bonds are different, but they still cannot be defaulted upon without a vote by Congress.

So here’s an assignment for anyone who calls the trust fund’s Treasuries “worthless pieces of paper”: Find me one member of Congress, Republican or Democrat, who vows to vote against Washington’s promise to honor them. I’ll buy lunch.

According to the Social Security trustees’ latest report, payroll taxes will cover all of the retirees’ promised benefits until 2016. After that, the trust fund can make up for any shortfall until 2039. That is 30 years from now. We can worry about Social Security’s finances in 20 years.

You know what children with paint want to do with a clean sheet of paper? They want to mess it up. Social Security is a clean program. Let’s keep it that way.

Froma Harrop is a columnist for the Providence Journal.

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