Monday, September 03, 2012

Bush, Obama, Ryan, and the truth about social security

There is a newsbrief in my local newspaper, one of many trite bits from the snorefest called the Republican National Convention, that Jeb Bush said President Obama should stop blaming his brother for the country’s economic woes.

All other things being equal, Jeb Bush is correct that a real leader accepts responsibility for his own policies. President Obama has cheerfully taken responsibility for his own policies – but rightly declines to take responsibility for the lingering results of President Bush’s time in office.

George W. Bush inherited from President Clinton an unprecedented federal budget surplus, and a debt of $5 trillion. He ran unprecedented budget deficits every year of his two terms, and bequeathed to President Obama a debt over $10 trillion.

George W. Bush doubled the national debt during a time of prosperity and growth, when McDonald’s was advertising “Help Wanted” and paying more than the legal minimum to get anyone to work behind the counter.

He bequeathed to President Obama a nation with its economy in freefall, looking at a very real possibility of Great Depression 2.0, with up to thirty percent unemployment.

Accordingly, it is a real accomplishment that President Obama held the unemployment rate under 9 percent, adding to the debt during a recession only about as much as Bush added to the debt during a period of prosperity.

Jeb Bush may be correct that his brother is a man of integrity, courage, and honor, at least personally. But George W. Bush did a great deal of damage to this country as President of the United States, an office for which he had no significant qualifications.

Now, to be fair, I’ll admit that President Obama’s campaign has something in common with Paul Ryan’s: they are both speaking in vague slogans, failing to be clear, precise and specific with the American people about the real state of the social security trust fund.

Paul Ryan’s social security plan is a solution in search of a problem. The REAL problem is simple to fix – although President Obama would have to admit some errors by Democrats to be direct and forthright about it. The social security trust fund is adequate for many decades to come. Social security can balance with very modest tweaking in tax rates, retirement ages, and benefits.

It is true, we can’t retire earlier, live longer, pay in less, and keep the same benefits for 20-30 years. Currently, I can draw twice the social security benefits if I work until I’m 70 as I will if I retire at 62. Rightly so.

The REAL problem is this: First, the anticipated surplus was invested in T-bills, obviously the safest investment available. But that made the trust fund part of the national debt. In 1968, congress and LBJ changed the bookkeeping, so that the revenue, surplus, and obligations became part of the federal budgets. That may have looked sensible at the time, but it meant taking advantage of the surplus now, when the obligation was much further down the road. The trust fund was no longer a segregated fund that, as President Roosevelt said, the politicians couldn’t touch, because it was self-funded. The politicians had found a way to touch it.

President Clinton understood that budget surpluses, which he generated near the end of his second term, needed to be used to pay down the national debt, particularly to fund the obligations to the social security trust fund. George W. Bush, acting like a kid in a candy store, said “Let’s give the surplus back to the people” as if the people were not $5 trillion in debt. By the time he left office, it was $10 trillion. The social security trust fund was a significant part of that debt. The rest came from the National Bank of China.

Funding social security isn’t difficult. The federal treasury simply has to repay the borrowed money as it is needed. This is not a government subsidy, it is repaying money which the government borrowed, for a time, because it was not yet needed to pay out social security benefits. The FICA taxes to cover this obligation have already been collected, and continue to be collected.

The problem, from a Republican viewpoint, is that paying the government’s lawful debts requires tax revenues, and their mantra is “tax cuts uber alles.” The government doesn’t have any other source of revenue. Its not a business. It doesn’t sell goods for a profit.

The Paul Ryan solution is to assume that government CANNOT repay the borrowed money to the trust fund, therefore, those who rely on social security, now or for their future retirement, will have to take a Greek-style haircut, because God forbid we roll back the Bush tax cuts on millionaires. Better the United States government default on its most important obligation to the American people.

Ryan and his allies deceitfully imply that meeting the obligations of social security would require massive subsidy from taxpayers in order to pay benefits. Not so. It would require repaying a loan, that the Republican leadership would prefer to default on.

President Obama’s campaign is pouring millions of dollars into fluffy TV spots that accuse Ryan and the Republicans (accurately) of trying to do away with social security and Medicare, leaving seniors in dire poverty. What President Obama’s campaign seems to be afraid of is telling the truth, the whole truth, and nothing but the truth, to the American people.

President Obama ought to over-ride the public relations gurus (as he has done before in some of his finest moments), and lay all the facts on the table. That wouldn’t make Jeb Bush’s brother look any better, but it would make President Obama look a lot better than he does right now.

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