Advanced maneuvering for the coming White House sellout on Social Security is well under way. The only question remaining is will the legacy-desperate, Iraq-beleaguered president succeed in bamboozling members of Congress into launching a totally unnecessary, strategically disastrous pre-emptive strike on Social Security to raise taxes and cut future benefits in the name of heading off a non-existent “solvency crisis?”
A worrisome sign the White House might actually pull off this scam came last week when one of the president’s biggest cheerleaders for his last pre-emptive strike — the Editors of National Review — said they were willing to take personal accounts off the table and accept a Social Security tax increase. Here we go again.
Another indication that the sellout is well advanced came earlier this week when outgoing chairman of the House Ways and Means Committee, Rep. Bill Thomas, California Republican, reportedly told an American Enterprise Institute forum on tax havens and tax competition that the people he talks to inside the Bush administration are clearly signaling their willingness to acquiesce with a wink and a nod to higher marginal tax rates as part of a larger fiscal deal.
The administration’s advance guard of Chicken Littles, such as the nonprofit FOG Brigade (For Our Grandchildren) — call them neosolvents or “neosols” — are fanning out through the Halls of Congress spreading fear about the program’s solvency and propagating the urgency of cutting a deal with the Democrats before this president leaves office: It’s the legacy, stupid. It looks like the president hopes to tempt Democrats into participating in what might be called “Operation Trinity,” a pre-emptive strike on Social Security that forgoes use of conventional personal accounts in favor of three nuclear options: tax increases, benefit cuts and increases in the retirement age.
When confronted with the suggestion the president has taken the conventional option of personal accounts off the table, the White House reacts as it does typically when crossed and starts trashing its critics and placing calls to Capitol Hill twisting the arms of conservative members who would dare to throw a monkey wrench into their carefully calculated strategy to bring solvency to Social Security. “Of course, personal accounts remain on the table,” the administration insists, but what they don’t say is that the accounts they have in mind are add-on accounts financed not by Social Security surpluses but by a tax increase, a k a another new Bush entitlement program: Mission Accomplished.
By actuarial standards applicable to any private pension fund, the Social-Security Ponzi scheme already is insolvent, papered over by IOUs Congress has written to itself. Social Security’s near-term cash-flow situation, however, is quite good, scheduled to remain in surplus until 2017; until 2027 if the annual interest due the Trust Fund is taken into account, as it should be. Therefore, higher tax revenues today that enlarged and extended the surpluses would not improve the program’s solvency; they would only paper it over with more IOUs and magnify the size of the theft Congress perpetrates on the Trust Fund each year. If Congress wants to do something serious about Social Security’s solvency, it should stop the raid on Social Security, not expand it.
Rather than rush to the nuclear options of raising taxes, cutting future benefits and raising the retirement age, if Congress would only stop stealing the Trust Fund surpluses and get about actually paying the Trust Fund the annual interest owed it and then start using those surpluses and interest payments to begin prefunding future retirees’ retirement, Social Security could be made solvent for decades to come without raising one new dollar in taxes or cutting a single dollar in future benefits or making old people work one year longer.
Here’s a modest proposal: Why doesn’t the new Congress get itself straight with the American people, stop the raid on Social Security, begin paying the interest it owes to the Social Security Trust Fund and devote those interest payments along with the annual payroll-tax surpluses to financing a refundable tax credit to anyone opening a retirement account for a child younger than 18? Call them Head Start Retirement Accounts.
Lawrence A. Hunter is former staff director of the congressional Joint Economic Committee.
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