The debate on Social Security continues to rage, with scores of new articles, reports, and speeches generated every week. Analysts, economists, politicians and a wide range of others on all points of the spectrum have been holding briefings, discussions, and forums addressing how and when to reform the Social Security investment program. There is bipartisan consensus that at some point in the future, Social Security will need to be reformed. By 2018, when a majority of the baby boomers will be retired and collecting benefits, the amount of money being paid into Social Security will no longer exceed the amount being paid out in benefits. If no policy changes are made by 2052, says the Congressional Budget Office, the Social Security program will only be able to pay about 80 percent of benefits. It should be said the year in which Social Security will not be able to meet all of its obligations continues to move to later years. The Bush administration would like people to believe the Social Security crisis is already here, as baby boomers will begin retiring in droves within the decade. However, what the president won’t tell you is lawmakers already took steps to address this two decades ago. In the early 1980s, with President Reagan in the White House and Democrats in control of Congress, legislators passed laws both raising the age of Social Security eligibility and started taxing benefits in order to increase revenue for the program. Through the prescience of Alan Greenspan, they anticipated the “baby boomer crisis” and planned ahead. These changes resulted in huge planned surpluses in the Social Security program, which will continue to accumulate until 2018. So why is there all this talk of crisis right now? Some analysts, including New York Times columnist Paul Krugman suggest this “scaremongering” is in large part “an effort to distract the public from the real fiscal danger.” In other words, the administration is fabricating a crisis to divert attention from other issues that are potentially much more threatening, such as the cost of Bush’s tax cuts if they are made permanent. As the Center on Budget and Policy Priorities pointed out in recent reports, the cost of the Social Security shortfall over the next 75 years does not come close to the cost of either making the 2001 and 2003 tax cuts permanent or of the newly passed Medicare drug benefit. (See the chart below). Both these policies of President Bush would strain the budget to the breaking point long before Social Security would. As E.J. Dionne pointed out in a Jan. 7 editorial in the Washington Post, many opponents believe, “Bush is proposing a solution that won’t work on an issue that should not be dominating the debate in the first place.” Further, it is striking that the Bush tax cuts were made possible in the first place due to the planned build up of Social Security reserves. The federal government is currently borrowing those funds to finance the deficit. In 2018, when the payout of benefits will exceed the revenues in the Social Security program, the government will need to begin paying back what it borrowed from Social Security. Thus, by 2018, the only real crisis will be an artificial one created by the Bush tax cuts and the additional borrowing necessitated by them. Despite overwhelming evidence that immediate and drastic Social Security reform probably does not deserve such a high place on Bush’s to-do list, the administration and some Republican senators continue to push it as an issue. Last week, an e-mail message surfaced from the White House inner circle, in which the author – senior administration official Peter Wehner – claimed if they succeed in “reforming” Social Security, it will rank as “one of the most significant conservative governing achievements ever.” Wehner went on to state: Our strategy will probably include speeches early this month to establish an important premise: the current system is heading for an iceberg. The notion that younger workers will receive benefits anywhere close to the level they have been promised is fiction, unless significant reforms are undertaken. We need to establish in the public mind a key fiscal fact: right now we are on an unsustainable course. That reality needs to be seared into the public consciousness; it is the precondition to authentic reform. Read the entire message in our Budget Blog. The goals of insiders seem to be twofold: to convince people there is a crisis and the administration’s proposals for reform are the only way out; and to push for reforms that will allow the size of benefits paid to drop drastically. There has been recent discussion that the administration and other various groups are interested in linking Social Security benefits to annual price increases rather than wages. The problem is wages generally rise much faster than prices, so if benefits were linked to prices, millions of people would be depending on payments calculated at a significantly lower cost of living than the rest of the economy. Millions of people would see their benefits decline sharply, and in an ironic twist, the very people Bush is courting the most with his proposal for private accounts – younger workers – would be the most adversely affected due to the fact they will have many more years to have their wages outpace prices. Under this scenario, the Social Security program would no longer be succeeding in pulling people out of poverty – particularly the elderly and the disabled. According to the National Committee to Preserve Social Security and Medicare, for one-fifth of all Social Security recipients, their benefits are their only source of income. One-half of all seniors on Social Security would be living in poverty if they did not receive their monthly Social Security payments. In 2000, Social Security lifted almost 12 million elderly people out of poverty and has consistently been the single most effective poverty prevention program in the history of the United States. Changing the way benefits are calculated will also negatively affect children, as Annie E. Casey’s Michael Laracy pointed out recently in the New York Times. Laracy writes, “If the government changes the way it calculates Social Security benefits, then millions of children would suffer when a parent dies without leaving them generous savings or life insurance.” The fact reforms are necessary to ensure the sustainability of the Social Security program down the road is not a myth. There are many proposals to make small and modest changes to the program that would more than ensure its stability for years. What is a myth is exactly what the Bush administration wants you to believe – that the program is in a crisis right now – and the consequences for such a belief could be drastic. For frequent updates on the debate over the future of Social Security, check OMB Watch’s federal budget blog. * Note: Data for the cost of the 2001/2003 tax cuts, if made permanent, comes from the Center on Budget and Policy Priorities, “The Implications of the Social Security Projections Issued by the Congressional Budget Office,” June 14, 2004, page 2. The estimate of the cost of the tax cuts — 2.0 percent of GDP — is based on estimates by CBO and the Joint Committee on Taxation. Data for the cost of the Rx drug benefit comes from the 2004 Annual Report of the Boards of Trustees of the Federal Hospital Insurance And Federal Supplementary Medical Insurance Trust Funds, page 108. Data for the Social Security trust fund shortfall comes from the Trustees’ report, 2004 Annual Report of the Old-Age and Survivors Insurance and Disability Insurance Trust Funds, page 59.