Washington Post economics columnist Robert Samuelson, fresh from forgetting the history of Bush's budget plans, is back with another masterpiece:
The unspeakable truth -- unspeakable because hardly anyone speaks it -- is that benefit cuts are inevitable, because the baby boom's retirement costs will force them. The combined spending of Social Security and Medicare, according to government projections, would require at least a 30 percent tax increase by 2030. "Personal accounts" don't come close to closing the gap. Sooner or later, chances are there will be a political backlash or a budget crisis. The wiser policy is not to wait; it is to pare benefits now.
It's true that some benefit cuts are inevitable. But this passage is a mess. First, Samuelson conflates Social Security and Medicare, but as this chart illustrates, Medicare is a vastly larger problem over time. Second, the tax increase figure from 2030 exaggerates the problem by assuming we do nothing for 25 years; the funding gap in Social Security can be closed with a more modest combination of revenue increases and benefit cuts if we act today. Medicare, on the other hand, is a much more serious problem. Third, it's misleading to say that personal accounts "don't come close to closing the gap"; they don't do anything to close the gap, as even the administration admits. In fact, they make the Baby Boom funding crunch worse by requiring the government to take out trillions in new debt.
What's especially annoying is that Samuelson acknowledged the first two points in a previous column. Unfortunately, the compressed version isn't nearly so clear.
It is wrong to say that revenue increases today will help Social Security's solvency. Social Security is running a surplus, which the government spends on other programs and puts IOUs in the Trust Fund. Therefore raising payroll taxes, or any taxes for the matter, with the intent of helping Social Security's longterm solvency is not possible. Any extra money brought in bewteen now and when the surplus is exhausted, estimated to be in 2018, will be spent on other programs. Anyone who proposes more payroll taxes to "fix" Social Security is merely giving license to Congress and the White House to spend it.
Chris Ullman
Former OMB spokesman, 2/01 to 11/01
cwullman@hotmail.com
Posted by: Chris Ullman | February 11, 2005 at 03:02 PM