Sunday, November 18, 2007

Long-run budget math and Social Security - Paul Krugman

Conservatives and even moderates have been fed so much propaganda on the failing Social Security system you have to beat them over the head repeatedly with the real truth. Social Security may not have any problems this century. The problem is medicare and health expenses and Bush's enormous budget deficits. Demographic shifts and the number of workers are a minimal problem for Social Security. Social Security was fixed under Reagan, badly by America's largest tax increase in history falling only upon workers, but fixed. The only way Social Security has a problem in ten years is if politicians refuse to honor the Social Security trust fund, which the GOP will like to default on.

I hate to sound partisan but the truth is if there develops a problem with Social Security it is because of the Republican politicians. Are the Republicans saying that Al Gore was right, Bush stole all the money in the Social Security lock box and they won't pay it back?

See also Dean Baker on the Washington Post's war on Social Security which is a follow-up to this. I will add part of R. Timms comment from there:
The real crisis is readily apparent when you look at the rest of government expenditures and income. Taking Social Security (SS) out of the picture the FY07 Gov revenues were 1.667T and outlays were 2.277T. A 610 Billion deficit. Closing the deficit will take a 40% increase in revenues or 27% cut in spending or some combination.

Conservatives see that the unified budget has a much smaller deficit due to the SS surplus. They think it is great that we are using workers SS money from a regressive tax to fund government. But the problem is this can only go on so long. Once boomers retire they want their SS money that has been used to fund government operations. In order to keep funding government with a regressive tax after boomers retire conservatives will have to make cuts to SS or increase SS payroll taxes or both.
Tom Redburn at The New York Times - Obama fighting to fix a non-broken Social Security.

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