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ARRRRGGHHHH!!!!! I tried very hard to get my own response to Greenstein in
the Nation, but to no avail. Printed below for all interested parties.
Ellen FRank
Reasonable people may disagree on whether the retirement of
baby-boomers will burden the Old Age Survivors and Disability
Insurance (OASDI) program years down the road. But before Congress gears up once again to plot Social Security “reform” strategies, reasonable people should stop disagreeing
on what needs to be done. Developing a progressive agenda for OASDI will, however, require some rethinking of the nature of the problem.
The OASDI program is funded through a regressive tax on wages. Many progressives find this acceptable, since the benefits themselves are mildly progressive. For some time, though,
the Social Security Administration has been collecting taxes far in excess of what is needed to pay benefits - nearly one-third, or $125 billion, of OASDI revenues will be unneeded this year -
making the overall impact of OASDI highly and needlessly regressive. In fact, the OASDI system is fast becoming an instrument for redistributing national income upwards, taking from wage-earners
and giving to creditors. All proposals now on the table to fix the
Social Security system would greatly exacerbate this upward redistribution, while contributing nothing to the long-term burden of baby-boomer retirement.
The essential issue for progressives to grasp is that it really does not matter whether Social Security will or will not face
financing problems in 10 or 30 or 50 or 100 years. Advocates of
reform base their case on the following two propositions: (1) Baby-boom retirement benefits will eventually outstrip revenues from the OASDI payroll tax; (2) To prepare for this
future shortfall, we must start saving today. The first statement may or may not be true. But the second is simply wrong. Whatever the fate of future OASDI revenues, saving money today can not help. The real economic burden of caring for retiring baby-boomers can not be borne until the baby-boomers retire.
No financial provision made today will reduce the need to collect taxes in the future.
Funds collected for OASDI today are spent today - whether on war, tax cuts, or debt reduction - and replaced with IOU’s from the Treasury. Funds needed to pay benefits tomorrow will have to be raised tomorrow or benefits will be cut. This is a simple economic fact, well understood by commentators on the right. Right-wing
fear-mongering about the impending bankruptcy of OASDI and
the need to save more are merely subterfuge to deflect attention from the increasingly regressive federal tax and expenditure system,
which collects taxes on each and every dollar earned by the lowest-paid workers and turns one-third of these moneys over to, under Clinton’s most recent proposal, Wall Street.
Right-wing economists like Milton Friedman have characterized the OASDI Trust Fund (where surplus revenues are ostensibly saved up)
as a chimera and a fraud. They are correct. The Heritage Foundation
points out, also correctly, that the Trust Fund contains no “real assets.” Heritage wants to use excess taxes buy stocks instead but, of course, stocks aren’t “real assets” either. They are merely paper shares, implying no guarantees of future economic value. If progressives are worried
about the potential cost of caring for retired baby-boomers, let them take up Heritage’s crusade. Invest the surpluses in “real assets” - housing, schools, environmental clean-up - or give the taxes back to people who paid them.