At a press conference on yesterday’s release of the latest Trustees’ report on Social Security and Medicare, Treasury Secretary Henry M. Paulson and the rest of the Bush Administration’s usual suspects called Social Security “financially unsustainable” because of “the coming demographic bulge” and because in 2017, Social Security will need to “draw upon general revenues” in order to pay benefits.
The Bush Administration, John McCain, the financial services industry, and other advocates for privatizing Social Security have long used cries of “unsustainable” and “bankrupt” to shake public confidence and try to scare folks into accepting privatization.
In reality, the Social Security system is on sound financial footing. What the Trustees Report says is that, even if we did absolutely nothing -- even if we took a 30-year nap -- Social Security will continue to run surpluses until 2027, and will be able to pay 100% of promised benefits until 2041. And even after 2041, when Social Security’s liabilities start to exceed its assets, it will be able pay three-fourths or more of all the benefits promised, because of the FICA taxes still rolling in from workers.
So in essence, Social Security will be financially stable for three more decades, with a gap opening up only after that time. And that gap is one that the Center on Budget and Policy Priorities rightly calls eminently “manageable”, given the relatively small size of the shortfall and the long lead time we have to address it. (For some perspective on exactly how long, remember that 33 years ago Gerald Ford was President and Captain and Tennille were burning up the charts.)
Manageable? Absolutely. Paulson’s “demographic bulge” is the baby boom generation. However, the retirement of the baby boomers is not a surprise to anyone -- least of all to the Social Security trustees, who have known for decades that the large size of the boom generation would require advance planning to handle. So, unsurprisingly, they did that planning, which is why that 2041 projection assumes the bulging boomers are coming down the pike.
And as for the concern about “drawing upon general revenues,” that wouldn’t be such a big deal if Bush’s Treasury hadn’t already borrowed $2.2 trillion from Social Security’s reserves and trillions more from China and other countries to finance their Iraq war and tax cuts for the wealthiest 1%. Piling up mountains of debt in order to pay for those policies – that’s what’s really unsustainable.
Repealing just the Bush tax cuts that went to the top 1% would just about cover the entire Social Security shortfall. If Secretary Paulson was really all that concerned about Social Security’s sustainability, he would focus his attention there.