SalemNews.com, Salem, MA

April 20, 2013

Shribman: Social Security, 21st-century style

David M. Shribman
The Salem News

---- — Can it be that the Democrats are succumbing to the same sorts of intra-party tensions that have bedeviled the Republicans since the November election?

Ordinarily it’s the party that loses an election that dissolves into factions, with party members hurling intemperate charges against their putative allies, calling into question their colleagues’ integrity and questioning their loyalty to long-standing party values. That’s why no one was surprised when the Republicans started throwing tea cups at each other after former Gov. Mitt Romney lost the presidential election.

But fighting among the victors? Seldom happens. They’re usually content to build a new administration, or to consolidate gains made after a president is re-elected.

Not this time, though. In the past 10 days, the Democrats have been at each other’s throats, and at the president’s, all over a concept that almost none of them can describe but many of them deplore.

That concept is the chained consumer price index for all urban consumers, which insiders call the C-CPI-U, not that that helps explain things. Also known as the chained CPI (there’s no end to the horrifying jargon in the entitlement world), it’s a different way to calculate cost-of-living adjustments for Social Security payments, essentially assuming that changes in prices produce changes in consumer behavior. It smooths out the peaks of consumer spending, the effect of which likely would be cuts in increases in Social Security checks by one quarter of 1 percentage point.

That’s the economics. The histrionics are quite different.

True to its definition, the histrionics in this case are indeed deliberate displays of emotion for effect. Cries of betrayal. Moans of despair. Plus this: Complete blindness to the peril that Social Security poses to the nation’s economy.

The fundamentals of Social Security, 21st-century style, are well known: too few people contributing funds to support too many people drawing benefits. The response of many Democrats to changes in Social Security is well known, too: Oppose it.

Social Security is what is known as a pay-as-you-go system. Remember all those times you read about the Social Security Trust Fund? There isn’t one. The money comes in from payroll taxes and goes right back out in payments. You can’t go to Washington or Fort Knox and see the little drawer where the government keeps the money that’s been withheld from your paycheck week after week. It’s been spent already, and there isn’t any little drawer.

The great political sin, or miscalculation, is that it is a Democratic president who is at the head of the chain gang to change cost-of-living adjustments, which, by the way, weren’t even made in 2010 and 2011 because inflation was so low. Barack Obama floated this idea in his budget proposal and immediately the lions pounced, proclaiming him an apostate, saying he had broken faith with the elderly, claiming that he had betrayed a glorious line of Democratic presidents going back to Franklin Delano Roosevelt.

Hold it right there. Social Security was President Roosevelt’s brainchild and perhaps his most precious child. But when Social Security went into effect, there was no talk of cost-of-living adjustments, chained or otherwise. In fact, the first cost-of-living adjustment was implemented under a Republican president, Gerald R. Ford. (It was a whopper -- an 8 percent increase. The cost-of-living increase implemented this January was 1.3 percent.)

The Social Security Act was a radical departure in American life, but its features were far more modest than its current incarnation. In fact, when FDR signed the legislation in 1935, he had this to say:

“We can never insure 100 percent of the population against 100 percent of the hazards and vicissitudes of life, but we have tried to frame a law which will give some measure of protection to the average citizen and to his family against the loss of a job and against poverty-ridden old age.”

Ironies abound in the Social Security debate, none of them redounding to the credit of those at the center of the dispute.

Consider the chairman of the National Republican Congressional Committee, Rep. Greg Walden of Oregon, who described the Obama plan as a “shocking attack on seniors.” That was a beaut; chairmen of the National Republican Congressional Committee have grown accustomed since 1982 of defending themselves against charges that they were mounting shocking attacks against seniors. In fairness to the GOP, House Speaker John Boehner of Ohio praised the Obama plan, which bore remarkable similarities to the speaker’s own initiatives.

Now, consider some of the Democrats who rushed to criticize the president’s proposal, many of whom would be the very first to criticize as monstrously regressive any taxation scheme like the very one that underwrites Social Security, which exempts income above $113,700 from taxation. Where are the cries of outrage over that?

Otherwise, the usual suspects are behaving in the usual ways. The AARP is complaining that applying the chained CPI would cut $146 billion in benefits, which if you think about it is the whole point. “AARP believes that Americans deserve better than shortsighted cuts to their hard-earned benefits,” the group says.

It used to be that Social Security was one of the great bargains in American life. Back in the early Reagan years, when a bipartisan committee set out to create the first comprehensive overhaul of Social Security, a two-earner couple making an average wage would pay an estimated $192,000 in lifetime taxes and reap $452,000 in lifetime benefits. The situation is reversed now. That couple today would pay more than $611,000 in taxes in exchange for $560,000 in benefits, according to the Urban Institute.

So any plan to rein in benefits is going to increase that imbalance. But this whole subject is an exercise in colliding fairnesses. Is it fair for the rich to pay so much less proportionately than the poor? Is it fair for the payroll taxes of the poor to underwrite as much as $37,000 a year in Social Security benefits for a wealthy family?

Then there’s this one: Is it fair for today’s elderly and baby boomers to rake in billions from the young, endangering the economy and fostering a massive inter-generational transfer of wealth?

Politics, said Bismarck, the original architect of old-age pension plans, is the art of the possible. Obama’s onetime allies are trying to make an overhaul of Social Security impossible. But the president, the Republicans and some Democrats know the truth. It is imperative.

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North Shore native and Pulitzer Prize winner David M. Shribman is executive editor of the Pittsburgh Post-Gazette.