Grumpy Alan Simpson, the National Commission on Fiscal Responsibility and Reform, and the President who appointed both, plan to protect the lesser people by cutting their benefits and raising their taxes. After reading some of the commentary, including that of our own Scarecrow, it finally dawns on me why this is so infuriating. Uncle Grumpy doesn’t just think we are lesser people, he thinks we’re so stupid we’ll fall for the Greenspan shell game again.
In 1983, Alan Greenspan, the previous incarnation of the fiscal scold who speaks up only when Democrats are in power, chaired a commission to look into the long-run funding of Social Security. Unlike Simpson, Greenspan foresaw the impact of the retirement of the baby boomers, and the related reduction in the ratio of workers paying Social Security taxes to retirees. The Greenspan Commission recommended a switch from a totally pay- as-you-go system to a partially pre-funded system. Social Security taxes were increased, and the excess funds went into the Trust Fund in the form of special Treasury Bonds, so we would have the money on hand when benefits exceeded revenues.
All that money, $2.5 trillion, was spent.
Now the time has come to pay off those bonds. It is earlier than anticipated, because rich people, their financial experts on Wall Street and their pet economists combined to wreck the economy by preaching deregulation. Millions of people lost their jobs. Only workers pay, so annual Social Security revenues have dropped. There’s now a small excess of benefits over revenues. It’s a minor problem; something similar happened four times between 1959 and 1974 without causing a panic.
The big problem is that Simpson and the other deficit hawks on the commission, and by extension, the President who appointed them, don’t want to repay those bonds issued by the U.S. government. Their plan, created by Peter Orszag, the soon-to-depart Director of the Office of Management and Budget, is to raise the current maximum cap on income that’s taxed for Social Security, and cut benefits for the people who have already pre-funded those benefits. Then we’ll put the excess money in the Trust Fund, and pay it out when we need it.
Do they really think we’re that stupid?
There are alternatives. Dean Baker points out that we don’t ask where the money comes from when we repay other Treasury Bonds owned by the Chinese government or Goldman Sachs or Pete Peterson. That is one solution. If and when the Trust Fund runs out of money, that will be soon enough to fix it. See slide 19 of this presentation to the Commission.
Since the deficit hawks are screaming that we have to do something right now, doggone it or we’re all doomed, I have proposed a tax on the richest Americans, the top one percent who benefited from the tax cuts so beloved by Republicans. The deficits that those tax cuts created hid behind all that money from Social Security in the unified budget. The new taxes would be dedicated to paying off the bonds in the Trust Fund as needed, and the excess can be held in the Trust Fund until we need it.
None of that is good enough for billionaire Peter Peterson and his merry crew of wreckers. They think we’ll fall for the Greenspan shell game again. It’s bad enough to say Americans should be taxed twice, once to fill the Trust Fund and again to pay it off. They want us to agree that it’s a good thing to be cheated, and they think we’re so stupid we won’t even notice.