Save Social Security From its 'Saviors'
Lately, I’ve been writing about Social Security (here and here). With everything else that’s’ commanding our attention at the moment, it’s not a topic that feels particularly urgent. It soon will.
The debates have already started, and I expect them to heat up after the midterms. Just think back to what happened after the midterm shellacking in 2010, when a newly-emboldened group of republicans lawmakers joined forces with a group of so-called “moderate democrats” to push for cuts to Social Security as part of a “Grand Bargain.”
Of course, no one ever comes right out and says they want to CUT Social Security. That would be political suicide. Instead, lawmakers—democrats and republicans—describe their positions as well-intentioned and grounded in the harsh reality of budgetary math. They want to SAVE Social Security.
Robert Eisner, who spent most of his career as a professor of economics at Northwestern University, was onto this charade.
In 1998, Eisner published an article called “Save Social Security from its ‘Saviors’.” I strongly encourage you to read the entire thing.
In addition to that article, Eisner wrote a number of books and op-eds about Social Security. He was frustrated by the policy debates, which he saw as entirely misguided. Here’s the closing sentence from an op-ed he published in The Wall Street Journal in 1997.
Politicians and pundits should stop playing games with a confused public, and focus on total spending and total taxes, how they affect the economy, who gains and who loses.
If you go on to read the article I recommended, you’ll see that Eisner echos this little-known fact made by MMTers like Warren Mosler.
Eisner’s main message was that the obsession with Social Security’s Trust Funds (OASI and DI) is a distraction. To borrow a phrase from Gertrude Stein, “There is no there there.” The trust funds exist merely as accounting entities. We don’t need them to carry a positive balance—or any balance whatsoever—in order to preserve Social Security for future generations. Here’s Eisner:
Expenditures alleged to be related to trust funds are often less than their income—witness the highway and airport funds as well [as] Social Security. There is no particular reason they cannot be more. The accountants can just as well declare the bottom line of the funds’ accounts negative as positive—and the Treasury can go on making whatever outlays are prescribed by law. The Treasury can pay out all that Social Security provides while the accountants declare the funds more and more in the red.
The only conceivable problem, as I explained last week, is with the way the enacting legislation was written.Congress could “fix” Social Security simply by amending that legislation to grant the Old-Age and Survivor’s Insurance (OASI) and Disability Insurance (DI) programs the same federal backstopping that already guarantees program solvency for the Supplemental Medical Insurance (SMI) Trust Fund.
If for some reason we choose to perpetuate the myth that the trust fund balances are vital to the program’s “solvency,” Eisner had this to say:
For those concerned, nevertheless, about the ‘solvency’ of the trust funds, there are simple, painless remedies for this accounting problem.
What he strongly opposed were the kinds of “remedies” that are often proposed in the name of “saving” Social Security—means-testing, raising the retirement age, reducing cost-of-living adjustments, diverting payroll contributions into privatized accounts, etc.
The proposed nibbling away of Social Security, including that by some of its presumed friends, is disingenuous and misleading. Even some of its defenders seem all too ready to accept ‘minor’ cuts in benefits to achieve prospective fund balance.
Eisner might have tweaked an old adage, “With saviors like these, who needs executioners?”
Under current law, OASI, DI, and HI are authorized to pay statutory benefits—i.e. what beneficiaries are entitled to under the law—only if there are adequate financial resources to cover those obligations.
"Constraints on spending are entirely political."
~ Warren Mosler
Wasn't the American Rescue Plan of 2021, which sent $1,400 rebates to taxpayers, $2,800 for joint returns, and $1,400 for each taxpayer dependent, a major reason that we are now suffering 8.6 percent inflation? That is, we spent too much. This seems a real problem, not just a political constraint.
Isn't our bloated defense budget also a real problem? Can we just ignore it?
"Funding ever more generous entitlement programs could push the economy beyond its real resource constraint, specifically, full employment, and thus fuel inflation."
~ Stephanie Kelton
That's MMT pointing out that government spending does have restraints. Yes, endless money can be created by a few keystrokes at the Fed, but that's not the point or the problem. When those computer-generated dollars are spent by taxpayers and government entities in real time, our money supply will be flooded, which seems to be where we are at right now, and yet we're some distance from full employment.
What am I overlooking or misunderstanding?
What you're describing is monetary sovereignty, that is fiat creation of money by accounting entries. You're correct in your article. However, MMT and the rest of the very well considered monetary/economic/theoretical reforms still have not consciously recognized the new monetary
paradigm concept or the specific expression of that new paradigm in the specific places in the economic process that will make the economy flow like time.