Ten years ago, Democrats were demoralized. They had just lost another presidential race to George W. Bush in an election that also saw Republicans add to their majorities in the House of Representatives and Senate.
Then, as 2005 began, President Bush proposed reforming the broken Social Security system and Democrats pounced — pursuing a three-pronged strategy.
First, they denied that the Social Security program was in crisis. Second, they attacked Bush for wanting to destroy Social Security. And third, they avoided releasing their own plan to fix the program’s long-term finances, because they didn’t want to give Republicans a target to attack. The strategy proved effective, representing the start of a Democratic comeback that, within a few years, would see them fully in charge of Washington.
As this year begins, Democrats also find themselves reeling from an election defeat — and they’re hoping that distorting the Republican position on Social Security will once again help return them to power.
“Americans are no strangers to crises manufactured by Republicans in Congress,” Senate Minority Leader Harry Reid, D-Nev., said as he accused Republicans of launching a “sneak attack to undermine Social Security.”
Sen. Elizabeth Warren, D-Mass., has accused Republicans of “inventing a Social Security crisis” and Rep. Jan Schakowsky, D-Ill., has declared, “We are at war right now.”
In reality, what Reid calls a “sneak attack” is an effort by Republicans to make it harder for lawmakers to hide Social Security’s structural financial woes that threaten future generations.
Social Security provides retirement as well as disability benefits. In popular mythology, individuals pay into the system during their working years, and then get their money back as they retire. In reality, workers and their employers are subject to payroll taxes, and the government uses those taxes to pay for current Social Security benefits.
In past years, when the government collected more in Social Security taxes then it paid out in benefits, it spent the surplus on other government functions. Since 2010, however, Social Security has been running deficits (it had a deficit of $76 billion in 2013 alone) and it’s on track to continue running deficits permanently.
Where things get tricky is that in the past, when Social Security was running surpluses, it generated a balance in a “trust fund,” which is basically a Washington accounting contrivance, because it represents money that the federal government owes itself and that it has already spent. In reality, when the federal treasury “owes” money to the Social Security trust fund, it either has to tax more, spend less, or borrow more (the preferred approach).
Despite the myth surrounding the Social Security trust fund, its size does have practical implications — if the trust fund is completely depleted, then the government cannot legally spend money on benefits beyond what is collected from the dedicated stream of payroll taxes. Because the program is now running annual deficits, that will mean automatic benefit cuts once the trust fund is exhausted.
Last summer, the trustees of Social Security determined that the trust fund connected to the program’s retirement benefits would run out of money in 2034. But more immediately, they warned that the trust fund for the disability benefit component of the Social Security system would expire in late 2016 — coincidently, right around the time of the next presidential election.
Democrats, including President Obama, want to sweep the problem under the rug by shifting revenue from the retirement program to the disability program. That way everybody can go back to pretending there’s no crisis with Social Security.
But when Republicans took over the new Congress, they inserted a rule that would effectively block this sort of maneuver unless lawmakers agreed on a plan to strengthen the long-term finances of Social Security.
Seeing an opportunity for political gain, Democrats have distorted this as an attack on Social Security. One of the prevailing Democratic arguments is that Congress has routinely shifted revenue among the programs in the past. But that’s precisely the problem. By relying on accounting gimmicks, lawmakers have only deferred the day of reckoning.
The most prudent approach to the Social Security problem is to pass gradual changes that can be spread out over time, allowing Americans to plan accordingly. But if Democrats get their way and Congress continues to defer action, it will mean severe and sudden benefit cuts or tax increases concentrated on the unlucky future Americans who happen to be standing when the music stops.
In the past, Democrats have been rewarded for their dishonesty and political cravenness on Social Security. For the sake of young Americans, let’s hope their scare tactics fail this time.
