In the column that appeared in this space last week, I took the position that none of the mainstream proposals for how to reform the Social Security system currently being debated by the politicians and the pundits violates the Church’s social teachings.
A modern Catholic is free to use prudential judgment to determine what level of privatization (if any) and taxation will bring about social justice, for both the elderly and the taxpayers.
But that does not mean that there are no moral considerations to consider as this discussion proceeds. Honesty matters. The facts matter. We can’t apply the principles of the social encyclicals to the Social Security question if we’ve got the numbers wrong. If there are partisans manipulating this debate for political purposes, it is important for the rest of us to know what they are up to.
Let us leave aside for the moment the question of whether there is a moral dimension to a Catholic employing political spin to further his political party’s interests. I guess if you are convinced that society’s interests are best served by your party’s carrying the day at the ballot box, there is nothing improper about going out of your way to portray its platform in the most favorable light — and the opposition party’s in the worst. If not, every Catholic politician and political commentator in the country would be living in sin. The problem is that it can be difficult for the rest of us to apply prudential judgment to “facts” that are presented to us in that manner.
Let’s look at Republican partisans first. What are they saying that is dishonest? Well, “dishonest” is probably the wrong word to describe the way the Republicans are setting the stage for this debate. Still, it must be said: the Republicans are not telling the whole truth and nothing but the truth about what the Bush administration means by “privatizing” a portion of Social Security. I’ve been listening and I haven’t heard many admissions from the Republicans that the purpose of privatizing is to make it possible to reduce Social Security benefits in the future; that, if you are able to build a private retirement account for yourself with the taxes that are taken from your weekly paycheck, you might not mind it much when the government lowers your Social Security check somewhere down the line. That is what privatization is all about. It still may make sense to do it, but it will not be pain-free. It is dishonest to pretend otherwise.
Now for the Democrats. It is difficult to find a way to justify the liberal Democrats who are making the case that the Bush administration is “manufacturing a crisis” over Social Security because the Social Security “trust fund” will be solvent for the next 40 years. That’s a con-job.
Let me take that back. Maybe there are a few Democratic politicians who believe that to be true. When I hear some of the speeches from the House of Representatives on C-Span, I am willing to believe that there are members of the House who think Elvis is alive and driving a delivery truck in Memphis. I have met seemingly intelligent people — middle-aged people with graduate degrees — who actually think that the money they have paid over the years in Social Security taxes is in an account somewhere with their name on it, and all that they will be doing when they start to collect their benefits is draw down upon it.
But politicians such as Mario Cuomo and Ted Kennedy, and columnists such as Paul Krugman and Molly Ivins, know better. They know that there is no money in the Social Security trust fund, and that there never was. They are using the “surplus” in the trust fund as a smokescreen to disguise what they actually favor: a huge increase in taxes to deal with Social Security in the coming years. Thomas Sowell maintains that by 2030 we will have to raise Social Security taxes by about one-third to maintain the current level of benefits. I haven’t heard anyone take issue with Sowell’s calculations.
The question is whether raising Social Security taxes that high would be a bad thing. Maybe not. It can be argued. But those who favor doing that should be honest about it, instead of pretending that there is no crisis because we can rely on the surplus in the trust fund. I repeat: there is no surplus in the trust fund. Let us take some time to demonstrate why. There is no way for a Catholic voter to ponder how we should deal with Social Security without grappling with the fact of life that the Social Security surplus is a bookkeeping gimmick.
Here is how it works: it is true that the government has been collecting more in Social Security taxes than it needs to pay the benefits of the current generation of retirees. They have been doing that for decades now in anticipation of the day when the baby boomers retire. But here’s the rub: the government does not take that extra cash and put into an account somewhere. The government “invests” it — in government bonds, Treasury securities.
Which means that the government gives government bonds to itself, to the Social Security trust fund, and then takes the cash and spends it on its everyday expenses — everything from the military to farm programs to building roads and bridges in West Virginia. The Social Security trust fund is full of these billions of dollars in government bonds, IOUs that future generations of taxpayers will have to make good on.
Now if you or I had those bonds in our portfolio we would be in good shape. It would mean that the US taxpayers will pay us cash as our bonds mature. In contrast, when the government gives bonds to itself nothing is gained. You can’t invest and spend the same money. It is a ruse to maintain otherwise, one that serves no purpose other than fooling the voters into thinking that the politicians are “doing something” in preparation for the day when the baby boomers retire.
If there were no Social Security trust fund, it would mean that taxpayers in the future would have to come up with the taxes to pay for the benefits of retirees on Social Security at that time. And those taxes will be high taxes because of all the retired baby-boomers. Because there is a Social Security trust fund, taxpayers in the future will have to come up with the taxes to redeem the bonds the trust fund contains. And the taxes will be high because there are so many bonds that have been allocated to create that trust fund “surplus.”
So, in dollars and cents nothing is different, with or without the trust fund. The country is faced with either high taxes to pay directly for the Social Security benefits of the baby boomers, or with high taxes to redeem the bonds in the trust fund, which will then be used to pay for the Social Security benefits of the boomers. Any Democratic politician or columnist who acts as if there is no “crisis” because the Social Security trust fund has a surplus that guarantees its solvency for the next 40 years is trying to mislead us for political purposes.
I can’t think of a passage from the social encyclicals that deals with pulling the wool over the voters’ eyes by talking about social justice for partisan political purposes, but there should be one if there isn’t.
James Fitzpatrick's new novel, The Dead Sea Conspiracy: Teilhard de Chardin and the New American Church, is available from our online store. You can email Mr. Fitzpatrick at [email protected].
(This article originally appeared in The Wanderer and is reprinted with permission. To subscribe call 651-224-5733.)
