Why is Social Security on the Cutting Block?
"We have no choice but to make hard decisions," Oklahoma Rep. Kevin Hern recently said. He leads the Republican Study Committee, a group of more than 160 Republican lawmakers that recently called for making cuts in Social Security.
Among other things, the group wants to raise the age at which a worker can collect full Social Security benefit to 70 from the current 67. (It used to be 65.) And they want to use the threat of a default on the national debt as a means to force "compromise." As Hern put it, "Everybody has to look at everything."
Republican House Speaker Kevin McCarthy, meanwhile, says he wants to "negotiate" cuts in spending as a condition for not crashing the American economy.
Financing Social Security is not without challenges. If nothing changes, the program would be able to pay all promised benefits until 2034 -- and it could pay three-fourths of the scheduled benefits thereafter. But modest changes, such as raising the amount of earnings subject to paying Social Security taxes, could fill any shortfall.
Republicans have launched attacks on Social Security over the decades. Even though nearly every dollar paid out derives from contributions by workers and their employers, Republicans like to treat it as welfare.
In 2005, President George W. Bush tried to advance a plan to privatize Social Security. Back then, the stock market was booming and house prices bubbling, so he and friends used the pitch that workers would have gotten better returns had they put the money in stocks rather than the conservatively financed program. Bush reassured the public he would not let Americans move their retirement savings into risky investments.
About three years later, the bottom fell out of the stock market. Prices cratered for even the finest blue-chip stocks. Imagine the taxpayer bailout that an enraged public, having seen its government-blessed stock portfolios shot to bits, would have demanded.
It's true that the accounting for Social Security has been a bit scuzzy. That has given some conservatives an opening to argue that they don't have to pay these benefits because, oops, the money is gone. This con centered on the claim that the securities in the Social Security Trust Fund were worthless pieces of paper -- or, in the words of Bush, "just IOUs."
But in 2001, then-Federal Reserve Chairman Alan Greenspan was asked whether the trust fund investments were real or not. He responded, "The crucial question: Are they ultimate claims on real resources? And the answer is yes."
Actually, the investments held by the trust fund are, like other Treasury securities, basically loans made to the government. Had the Treasury not been able to get this money from Social Security, it would have had to borrow more from the public by issuing additional debt.
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