Friday, March 11, 2011

Obama’s Social Security Hoax

Everyone knows entitlements need to be reined in. Social Security is an easy fix. Republicans should go for it. If the voters are uninformed enough to believe anything Obama would say in the campaign, then the people deserve him. His track record, words vs. action, is almost zero.

Everyone knows that the U.S. budget is being devoured by entitlements. Everyone also knows that of the Big Three — Medicare, Medicaid, and Social Security — Social Security is the most solvable.

Back-of-an-envelope solvable: Raise the retirement age, tweak the indexing formula (from wage inflation to price inflation), and means-test so that Warren Buffett’s check gets redirected to a senior in need.

The relative ease of the fix is what makes the Obama administration’s Social Security strategy so shocking. The new line from the White House is: no need to fix it because there is no problem.

So when Jack Lew tells you that there are trillions in this lockbox that keep the system solvent until 2037, he is perpetrating a fiction certified as such by his own OMB. What happens when you retire? Your Social Security will come out of the taxes and borrowing of that fiscal year.

Why is this a problem? Because as of 2010, the pay-as-you-go Social Security system is in the red. For decades it had been in the black, taking in more in FICA taxes than it sent out in Social Security benefits. The surplus, scooped up by the Treasury, reduced the federal debt by tens of billions. But demography is destiny. The ratio of workers to retirees is shrinking year by year. Instead of Social Security producing annual surpluses that reduce the federal deficit, it is now producing shortfalls that increase the federal deficit — $37 billion in 2010. It will only get worse as the baby boomers retire.

That’s what makes this administration’s claim that Social Security is solvent so cynical. The Republicans have said that their April budget will contain real entitlement reform. President Obama is preparing the ground to demagogue Social Security right through the 2012 elections. The ad writes itself: Those heartless Republicans don’t just want to throw granny in the snow, they want to throw granny in the snow to solve a problem that doesn’t even exist! Vote Obama.

Read full Charles Krauthammer article here.

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