Social Security has built a long-term financing gap that just keeps growing. The Democrats led by Senator Elizabeth Warren (D-MA) have a novel idea to address the imbalances: spend more.
The gap between promises and resources of the system is enormous. The Trustees of the Social Security’s Trust Funds estimate that the system carries roughly $25 trillion dollars of promises for which the system does not expect to generate cash.
Warren’s proposed amendment has drawn much more media coverage than more detailed proposals from Rep. Larson (D-CT) and Senator Sanders (I-VT). Megan McArdle published probably the most worthwhile article on Bloomberg. Salon, AEI, Mother Jones, as well as Michael Hitzlik all weighed in to varying lesser degrees of success at informing the public.
Senator Warren’s proposal doesn’t deserve this much coverage. It isn’t serious. Her goal isn’t to fix Social Security. Her purpose is to change the subject which for years has been focused on the need to reduce benefit levels. As McArdle points out, the best defense is a good offense.
Given all the media attention to her proposal, the debate strategy may work. Her plan for Social Security won’t. The math is simple to understand. Social Security created 900 billion in unfunded liabilities simply because the clock moved forward by a year. That is more than the system collected in all forms of revenue. In English, every penny of benefits paid in 2013 came at the projected expense of a future retiree.
If you take her at her word, we are simply throwing a future granny under the bus. No matter how you cut the promises of Senator Warren and her allies, the increased spending on today’s retirees comes at the expense of future retirees. While it is possible to collect more revenue within Social Security, that incremental revenue changes only the timing of the crisis.
The system can use incremental revenue to pay people today or reserve it for future beneficiaries. Senator Bernie Sanders, for example, has a proposal which raises enough revenue to make Social Security solvent for a projected 75 years. Instead of making the system secure for future retirees, Senator Sander’s plan expands benefits for existing voters.
Warren and her allies would reshape how Social Security allocates benefits. Today Social Security is a contributory benefits system which connects benefit level to how much you contribute through a complex formula. The largest benefit goes to the person who contributes the most. Senator Warren wants politicians to replace contributions as the determinate of benefits.
The reasoning for the relationship between benefits and contributions dates back to FDR, and is a bedrock principle of the system. FDR insisted upon contributions so that workers would have a ‘legal, moral, and political right’ to their benefits. He didn’t want benefit levels to be set by politics in which the needs of seniors would have to compete for resources with other priorities – such as student loan reform another priority of Senator Warren.
Senator Warren is simply one of the damn politicians that FDR warned us about. For the last decade, she and those on the far-left have pushed the cliché that the GOP insists on destroying Social Security in order to save it. Now the Democrats want to destroy Social Security so that they can control it.