The Economic Realities of Social Security


It is remarkable that Social Security hasn’t been a more prominent issue in the presidential race. After all, Governor Romney has proposed a plan that would imply cuts of more than 40 percent for middle-class workers just entering the labor force. Since Social Security is hugely popular across the political spectrum, it would seem that President Obama could gain an enormous advantage by clearly proclaiming his support for the program.

But President Obama has consistently refused to rise to the defense of Social Security. In fact, in the first debate he explicitly took the issue off the table telling the American people that there is not much difference between his stand on Social Security and Romney’s.

On its face, this is difficult understand. In addition to being good politics, there are also solid policy grounds for defending Social Security. The Social Security system is perhaps the greatest success story of any program in U.S. history. By providing a core retirement income, it has lifted tens of millions of retirees and their families out of poverty.

It also provides disability insurance to almost the entire workforce. The amount of fraud in the system is minimal and the administrative costs are less than one-twentieth as large as the costs of private sector insurers.

In addition, the program is more necessary now than ever. The economic mismanagement of the last two decades has left the baby boomers ill-prepared for retirement. Few have traditional pensions. The stock market crashes of the last 15 years have left 401(k)s depleted and the collapse of the housing bubble destroyed much of their housing equity, which has always been the main source of wealth for middle-income families.

It would be great if we had reason to believe that the generations that followed had better retirement prospects, but we don’t. Even in good times the 401(k) system does more to enrich the financial industry than to provide a secure retirement income. Any reasonable projection indicates that Social Security will provide the bulk of retirement income for most middle-class retirees long into the future. In this context, the idea of cutting back benefits even for younger workers seems misguided.

But there is another set of economic considerations affecting the politics of Social Security. These considerations involve the economics of the political campaigns and the candidates running for office.

The story here is a simple one. While Social Security may enjoy overwhelming support across the political spectrum, it does not poll nearly as well among the wealthy people who finance political campaigns and own major news outlets.

The predominant philosophy among this group is that a dollar in a worker’s pocket is a dollar that could be in a rich person’s pocket. And these people see Social Security putting lots of dollars in the pockets of people who are not rich.

Cutting back benefits could mean delays in repaying the government bonds held by the Trust Fund. The money to repay these bonds would come primarily from relatively progressive income tax revenue. The wealthy certainly don’t want to see changes like raising the cap on the wages that are subject to the Social Security tax, which is currently just over $110,000.

For this reason a candidate who comes out for protecting Social Security can expect to see a hit to their campaign contributions. They also can anticipate to be beaten up in both the opinion and news sections in major media outlets. While in principle these are supposed to be kept strictly separate, the owners and/or top management of most news outlets feel no qualms about removing this separation when it comes to Social Security and using news space to attack those who defend Social Security.

There is also the flip side to this story. Politicians, especially Democrats, who speak up for cuts in Social Security can count on lavish praise from the media. Political figures of no obvious stature, like former Louisiana Senator John Breaux or former Indiana Senator Evan Bayh, were lionized in the media for their willingness to cut Social Security benefits. After leaving the Senate, both took lobbying positions where they were almost certainly earning well over $1 million a year.

This is the fundamental economics of Social Security that explains why it has not figured more prominently in the presidential race. If President Obama were to rise in defense of the program he could count on losing the financial backing of many supporters. He would also get beaten up by the Washington Post and other major news outlets for challenging their agenda.  Such are the hard economic facts with which President Obama and other politicians must contend.

Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of Plunder and Blunder: The Rise and Fall of the Bubble Economy and False Profits: Recoverying From the Bubble Economy.

This essay originally appeared in the Guardian.

Weekend Edition
October 9-11, 2015
David Price – Roberto J. González
The Use and Abuse of Culture (and Children): The Human Terrain System’s Rationalization of Pedophilia in Afghanistan
Mike Whitney
Putin’s “Endgame” in Syria
Jason Hribal
The Tilikum Effect and the Downfall of SeaWorld
Paul Street
Hope in Abandonment: Cuba, Detroit, and Earth-Scientific Socialism
Gary Leupp
The Six Most Disastrous Interventions of the 21st Century
Andrew Levine
In Syria, Obama is Playing a Losing Game
Louis Proyect
The End of Academic Freedom in America: the Case of Steven Salaita
Rob Urie
Democrats, Neoliberalism and the TPP
Ismael Hossein-Zadeh
The Bully Recalibrates: U.S. Signals Policy Shift in Syria
Brian Cloughley
Hospital Slaughter and the US/NATO Propaganda Machine
John Walsh
For Vietnam: Artemisinin From China, Agent Orange From America
John Wight
No Moral High Ground for the West on Syria
Robert Fantina
Canadian Universities vs. Israeli Apartheid
Conn Hallinan
Portugal: Europe’s Left Batting 1000
John Feffer
Mouths Wide Shut: Obama’s War on Whistleblowers
Paul Craig Roberts
The Impulsiveness of US Power
Ron Jacobs
The Murderer as American Hero
Alex Nunns
“A Movement Looking for a Home”: the Meaning of Jeremy Corbyn
Philippe Marlière
Class Struggle at Air France
Binoy Kampmark
Waiting in Vain for Moderation: Syria, Russia and Washington’s Problem
Paul Edwards
Empire of Disaster
Xanthe Hall
Nuclear Madness: NATO’s WMD ‘Sharing’ Must End
Margaret Knapke
These Salvadoran Women Went to Prison for Suffering Miscarriages
Uri Avnery
Abbas: the Leader Without Glory
Halima Hatimy
#BlackLivesMatter: Black Liberation or Black Liberal Distraction?
Michael Brenner
Kissinger Revisited
Cesar Chelala
The Perverse Rise of Killer Robots
Halyna Mokrushyna
On Ukraine’s ‘Incorrect’ Past
Jason Cone
Even Wars Have Rules: a Fact Sheet on the Bombing of Kunduz Hospital
Walter Brasch
Mass Murders are Good for Business
William Hadfield
Sophistry Rising: the Refugee Debate in Germany
Christopher Brauchli
Why the NRA Profits From Mass Shootings
Hadi Kobaysi
How The US Uses (Takfiri) Extremists
Pete Dolack
There is Still Time to Defeat the Trans-Pacific Partnership
Marc Norton
The Black Panthers: Vanguard of the Revolution
Andre Vltchek
Stop Millions of Western Immigrants!
David Rosen
If Donald Dump Was President
Dave Lindorff
America’s Latest War Crime
Ann Garrison
Sankarist Spirit Resurges in Burkina Faso
Franklin Lamb
Official Investigation Needed After Afghan Hospital Bombing
Linn Washington Jr.
Wrongs In Wine-Land
Ronald Bleier
Am I Drinking Enough Water? Sneezing’s A Clue
Charles R. Larson
Prelude to the Spanish Civil War: Eduard Mendoza’s “An Englishman in Madrid”
David Yearsley
Papal Pop and Circumstance
October 08, 2015
Michael Horton
Why is the US Aiding and Enabling Saudi Arabia’s Genocidal War in Yemen?