Social Security Doomed! Not True, But It Is a Bad Master Narrative

By RJI on October 15, 2008 0 Comments

by Jon Margolis

Jon Margolis, former chief political reporter for the Chicago Tribune and the author of "The Last Innocent Year: America in 1964," lives in northeastern Vermont, where he writes and teaches.

Toward the end of last week’s debate between Barack Obama and John McCain, moderator Tom Brokaw transmitted a question e-mailed from someone named Langdon in Ballston Spa, N.Y., about “the huge unfunded obligations for Social Security, Medicare and other entitlement programs that will soon eat up all of the revenue that’s in place and then go into a deficit position.”

Because the debate rules were “pretty loose,” Brokaw said, he would elaborate on Langdon’s question.

 “Instead of having a discussion,” he said, “let me ask you as a coda to that: Would you give Congress a date certain to reform Social Security and Medicare within two years after you take office? Because in a bipartisan way, everyone agrees, that’s a big ticking time bomb that will eat us up maybe even more than the mortgage crisis.”

No, everyone does not.

Dean Baker, for openers, does not. Baker, an actual economist with a Ph.D. from the University of Michigan, is co-director of the Center for Economic and Policy Research in Washington and the author of several books on economics. In his “Beat the Press” blog the next day, Baker pointed out that had Brokaw made a similarly “false statement” about a private company, he would have risked being sued for libel. But because anyone may “freely impugn the financial health of a government program,” Baker said, “Brokaw knew that he could imply that Social Security is going broke, even though it is not true. Social Security cannot sue Brokaw even if he deliberately tells explicit lies about its financial health.”

Like so many bloggers, left and right, Baker appears indifferent to the charms of understatement. Brokaw, who has been an honorable reporter (and a good one) for decades, would no more deliberately tell explicit lies about anything than Dean Baker would go to work for one of the pharmaceutical companies he regularly condemns. Left and right, there seems to be diminished awareness of the possibility that someone can be honestly wrong and that error does not constitute proof of duplicity.

In an unfashionable burst of humility, this exercise will even stop short of declaring Brokaw to have been honestly wrong. Maybe he was right. There is a case to be made that Social Security is in deep doo-doo, facing a future in which it will not have enough to pay benefits on schedule, or will bankrupt the country if it tries.

The Peter G. Peterson Foundation contends that the government faces a “$53 trillion federal financial hole,” projecting that in the future, Medicare will owe $34 trillion more than it has on hand, while Social Security will face a $7 trillion shortfall.

And in a paper bearing the imprimatur of the relatively liberal Brookings Institution, Peterson, two former U.S. senators and Robert Bixby of the Concord Coalition point out that “Social Security, Medicare and Medicaid already constitute 40 percent of the federal budget” and that “the ratio of workers paying into Social Security and Medicare relative to the number of beneficiaries will fall by roughly one third.”

Sounds kind of scary, doesn’t it?

But for now, it matters not whether Brokaw or Baker has the better argument about Social Security and its future. What matters is that there is an argument. It also matters that Brokaw's question was not posed as if Social Security’s potential deficit was a debatable proposition. It was posed as though it were undeniable truth. It is not.

Neither is it undeniable truth that the extra 700 big ones the U.S. government is in the process of borrowing to bail out the financial system will require big cuts in the federal budget over the next few years.

But in the first debate on Sept. 26, moderator Jim Lehrer seemed to think so.
“As president, as a result of whatever financial rescue plan comes about and the billion, $700 billion,” he asked Obama, “what are you going to have to give up, in terms of the priorities that you would bring as president of the United States, as a result of having to pay for the financial rescue plan?”

Underlying the question was the assumption that, if elected, Obama would have to “give up” proposed investments in alternative energy, health care or education because the new bailout is going to make the federal budget deficit and the national debt bigger than the economy, or perhaps the electorate, can tolerate.

Could be. Adding an extra $700 billion on top of an existing $455 billion budget deficit would seem to lead to a trillion-dollar plus deficit. That sounds like a lot to owe, especially considering that during the Bush administration, the national debt has just about doubled to some $10 trillion.

But “could be” does not equal “QED.” As with Social Security, the contention that the bailout will require spending cuts is an argument, not a certainty.

First of all, in relation to the size of the economy, today’s deficit isn’t all that alarming. It’s 3.3 percent of the Gross Domestic Product. It was much higher in the 1980s. Furthermore, if the government goes about its business with minimal competence (about as much as one can expect), the net cost of the bailout will be lower than $700 billion, perhaps a lot lower.

Besides, according to almost all economists, we are entering an economic slowdown, perhaps a severe slowdown. “Under these circumstances,” wrote former Labor Secretary Robert Reich in a New York Times op-ed piece Oct.8, “deficit spending is not unwelcome. Indeed, as spender of last resort, the government will probably have to run deficits to keep the economy going anywhere near capacity, a lesson the nation learned when mobilization for World War II finally lifted us out of the Great Depression.”

No doubt there are economists who would argue with Reich, who would insist that the best policy now is to cut spending to cut the deficit and perhaps allow for lower taxes.

That’s a dispute for the economists. For us journalists, the point is that the journalists who moderate these debates ought not base their questions on assumptions that are debatable, if not downright dubious.

Alas, the problem goes far beyond these two questions in these two debates. For years, if not decades, too many journalists have been too willing to accept one side of the debates over Social Security and Medicare, the side of those who would like to abolish both programs. Somehow the established, respectable, position on these issues has become the one sounding alarms, alarms arguably masking a political agenda.

Too often, both on the air and in print, reporters have echoed, as though there were no doubt about it, the contention that the Social Security system was in danger of “going broke.”

It is not. As long as Americans keep working for a living, they and their employers will continue to pay into the system. It will never go broke. It may face a period in which it cannot pay all of its scheduled benefits. This is not an inconsequential problem. But according to the Congressional Budget Office, the system will be able to pay full benefits until 2049. That should be ample time to deal with a problem that at any rate seems manageable without scuttling the entire program, perhaps even without making major changes to it.

Then take a look at that language in that Brookings-sponsored report that the ratio of workers-to-beneficiaries “will fall by roughly one third,” a point often expressed with alarm by journalists as they write about Social Security or interview politicians about it.

Apparently an accurate statistic. But statistics can be misleading or can be used to mislead. If those workers in tomorrow’s labor force, fewer though they may be relative to the number of beneficiaries, produce more wealth and earn more money, it makes no difference that there aren’t as many of them. There already aren’t as many as there were decades ago, but the Social Security Trust Fund is doing fine. Proclaiming the program “unsustainable” seems at the very least premature, if not downright incorrect.

Medicare’s problems are more acute and more immediate. According to the most recent official projections, in only three years, the trust fund that pays for hospital benefits will spend more money than it takes in and will run out of money altogether eight years later. Absent some changes, by 2080 Medicare could cost so much that it would gobble more than 15 percent of the gross domestic product.

But there is a case to be made that Medicare’s problems are not intrinsic to it but are associated with the entire health-care financing system, of which Medicare is a part, a system that might be accurately called dysfunctional. The “Medicare crisis,” then, might not be Medicare’s crisis as such, but simply a component of the predicament of the larger health-care system.

The intent here is not to defend every detail of Social Security and Medicare. They are policies, not holy writ. As human inventions, they are flawed, and no doubt could be improved in various ways. Debates about how to improve them – or even whether to abolish them – are legitimate ingredients of political debate.

But it isn’t the job of reporters, whether acting as debate moderators or writing stories, to accept without skepticism the “facts” presented by one side of these debates. They’re not holy writ, either.

And although his columns might be considered holy writ, he's open to a discussion; tell Jon Margolis what you think.