“We know who our real opponents are,” Sen. Michael Bennet proclaimed at the recent Democratic state assembly. “They’re the ones who say Social Security is a Ponzi scheme and want to privatize it . . . . And they’re the ones who want to cut taxes for the highest earners, borrow money from the Chinese to pay for it, and stick everybody’s children with the bill.”
It’s a bit rich for Bennet to be stoking anger over federal debt given his own unflagging support for wildly expanded federal spending. But let it go. The most curious part of his tirade (Bennet “shouted” those words, according to this newspaper) is his reference to a Ponzi scheme. Back in March, it seems, Republican Senate candidate Jane Norton suggested Social Security “has turned into a Ponzi scheme. The money that people pay into it should be there for when they are ready to retire.”
Norton didn’t say she wants to “privatize” Social Security. Like most candidates, her position is long on broad “principles” and short on specifics, as I learned this week when I spoke to her. But dubbing Social Security a Ponzi scheme has incensed some Democrats, who seem to believe it is un-American to suggest the government could perpetrate financial fraud on its citizens. Perish the thought!
While Social Security does have a huge trust fund, it is a “bookkeeping device,” in the words of the fiscally hawkish Concord Coalition. In fact, as liberal writer William Greider explained last year in The Nation, “the government has already spent (the) money. Every year the Treasury has borrowed the surplus revenue collected by Social Security and spent the money on other purposes. . . . The Social Security surplus thus makes the federal deficits seem smaller than they are.”
Sure sounds disreputable to me. Charles Ponzi would be proud.
The only downside to calling Social Security a Ponzi scheme is that it might mislead younger workers into thinking they could end up with little or nothing at retirement, which is hardly the case. However, it is equally misleading to suggest, as many liberals do, that Social Security is a trivial long-term problem that can be responsibly “fixed” with such remedies as lifting the cap on income exposed to its tax (a policy that Andrew Romanoff, Bennet’s Democratic opponent, recently endorsed.)
To be sure, according to a report issued this month by the Senate Special Committee on Aging, lifting the cap would theoretically eliminate the system’s unfunded liability. So would boosting worker and employer contributions by 1.1 percent. Yet, as the Concord Coalition points out, “nothing would prevent the government from simply spending the new revenues.” No less disturbing, either remedy would involve yet another transfer of resources from young to old and from productive to non-productive populations (not to mention imposing higher taxes on business) at a time when economic growth is already facing headwinds. Given how incomes have stagnated in recent years, boosting contributions across the board would be especially obscene.
Any responsible Social Security fix must include, as a major component, reducing the trajectory of spending. One way to do this is by hiking the retirement age, except that the present age of 67 (for those born after 1960) is tough enough for manual laborers and those who must be on their feet all day. (Boosting the age to 68 for those born after 1977 would, however, trim one-fourth of the long-term deficit.)
A better way to curb spending: Link new generations of beneficiaries to a price index instead of the wage index (the latter tends to rise faster) so that pension checks still grow, but more slowly. Those with career earnings on the low side could continue to be linked to the wage index to protect their buying power. This “progressive price indexing” alone would wipe away two-thirds of the long-term deficit.
But will any of our candidates, Democrat or Republican, be willing to back a plan that doesn’t mostly just shovel more resources into the federal maw? If they won’t, and call themselves fiscal conservatives, then they’re frauds.
E-mail Vincent Carroll at vcarroll@denverpost.com.
