Social Security is doomed

In the Sunday New York Times Magazine, former Commerce secretary (and fellow Republican) Peter G. Peterson excoriates the Republicans for abandoning fiscal responsibility: “Among the bedrock principles that the Republican Party has stood for since its origins in the 1850's is the principle of fiscal stewardship -- the idea that government should invest in posterity and safeguard future generations from unsustainable liabilities.” But that all changed with Reagan, says Peterson, and George W. Bush is carrying on the legacy of irresponsible tax cuts threatening government entitlements.

Peterson has been a long-time activist for fiscal sanity in government and a dogged crusader to save Social Security for future generations. I’ve been something of a fan: the only “60 Minutes” transcript I ever purchased was when Peterson was arguing his case about saving entitlements and I even picked up a copy of “Facing Up”, Peterson’s manifesto about how shifting demographics will overwhelm Social Security unless critical reforms are made. But sometime in the middle of the Clinton administration, I decided that there was no hope to save Social Security, no matter what the numbers or demographics or pundits suggest.

Practically nobody with half a brain believes that Social Security can survive long into the 21st century without significant – perhaps sweeping – reforms. Once baby-boomers start retiring, the deluge of entitlement spending (Social Security and Medicare – forget about a prescription drug benefit) will overwhelm the federal government. Either benefits will have to be cut, or crippling taxes will have to be forced on younger workers.

In my mind, Bill Clinton had this one chance to save entitlements. Just as only Nixon could go to China, only a Democrat could reform the cornerstone of FDR’s New Deal. Clinton could have proposed modest changes to Social Security such as increasing the retirement age or adjusting the cost-of-living allowances (COLA), but he chose not to face the problem and instead used Social Security has a cudgel to beat the Republicans. Budget surpluses gave Clinton room for fiscal maneuvering, but it was much more useful to Clinton to keep entitlements alive as a political issue.

George W. Bush dared to touch the “third rail of American politics” by proposing individual accounts to stave off the bankruptcy of the Social Security system, and he was pounded relentlessly in 2000 by the Gore campaign. Now nobody wants to talk about Social Security, least of all the Democrats who only want to use it for political football. Here’s Peterson from the same article:

I have often and at great length criticized the free-lunch games of many Republican reform plans for Social Security -- like personal accounts that will be ''funded'' by deficit-financed contributions. But at least they pretend to have reform plans. Democrats have nothing. Or as Bob Kerrey puts it quite nicely, most of his fellow Democrats propose the ''do-nothing plan,'' a blank sheet of paper that essentially says it is O.K. to cut benefits by 26 percent across the board when the money runs out. Assuming that Democrats would feel genuine compassion for the lower-income retirees, widows and disabled parents who would be most affected by such a cut, I have suggested to them that maybe we ought to introduce an ''affluence test'' that reduces benefits for fat cats like me.

To my amazement, Democrats angrily respond with irrelevant cliches like ''programs for the poor are poor programs'' or ''Social Security is a social contract that cannot be broken.'' Apparently, it doesn't matter that the program is already unsustainable. They cling to the mast and are ready to go down with the ship. To most Democratic leaders, federal entitlements are their theology.

Such is the state of our government: the Republicans cut taxes and the Democrats propose more spending. Meanwhile, there’s this huge elephant in the room that nobody wants to talk about. The Republicans are silent because they keep getting accused of kicking Grandma into the street; the Democrats strategy is to blankly repeat the mantra “All is well, all is well” as Social Security slips inexorably below the surface.