Third Way is No Way for Social Security

CO-AUTHORED BY NANCY J. ALTMAN and ERIC KINGSON, co-chairs of the Strengthen Social Security Campaign (www.strengthensocialsecurity.org)

In a recent Politico column, Jon Cowan and Jim Kessler, respectively the president and senior vice-president of The Third Way, criticize “progressives” for opposing deals which cut Social Security benefits. They advise the Strengthen Social Security Coalition to “wise up and buck up the president so Social Security reform gets done in the coming weeks.” But their advice belies the expressed wishes of the American people, who poll after poll reveals, overwhelmingly favor eliminating Social Security’s projected shortfall through increased revenues, not through reductions in Social Security’s already modest benefits, just $13,000 a year on average.

Cowan and Kessler state the obvious, that “math knows no ideology,” but they fail to acknowledge that they do. Undisclosed is Cowan’s long history of fanning the fans of “intergenerational warfare” and calling for the radical dismantling of Social Security. For instance, in a 1995 Los Angeles Times op-ed, he proclaimed, “The time has come to reinvent Social Security based on a “cut and privatize” approach that will be fair to all age groups.” Although no longer threatening as Newsweek quoted him as saying in 1995 that he plans “burn social-security cards in New Hampshire” to make a big splash in the presidential campaign, Cowan is hardly an objective voice when it comes to Social Security.

Here are the facts, stripped of political spin and cleaned of biased factoids used to support their radical changes and benefit cuts. Here, too, are the reasons why the coalition of 300 national and state organizations they criticize – composed of many of the nation’s major unions, women’s, aging, disability, human rights groups – strongly oppose the cuts they advocate.

First, Social Security works. Despite their claim that Social Security is “in deep financial trouble,” the data produced by the most unbiased sources lead to the opposite conclusion. According to the Chief Actuary of the Social Security Administration, Social Security can meet all its obligations for the next quarter century, after which it can pay out 77 percent of scheduled benefits. This is if Congress makes NO changes to Social Security for the next 75 years! The projected shortfall is the rough equivalent of the revenue that will be lost to the federal treasury if the Bush tax cuts are continued for the top 2% of American taxpayers.

There are numerous ways to eliminate this shortfall but it is impossible to have a serious discussion of the options until Third Way and other similar actors agree that Social Security is structurally sound, is not in crisis, and does not need fundamental change. Means testing Social Security, as Cowan and Kessler casually suggest, would fundamentally change Social Security from insurance to welfare. It would not reduce the projected shortfall in any meaningful way unless the means test were set to reduce benefits for households with as little as $50,000. This kind of major change, with complicated distributional impacts and implications for the long-range stability of the program, is not a change that should be hammered out behind closed doors under the threat of a default by the United States on obligations on which it has pledged its full faith and credit. Neither should changes be imposed to cut COLA adjustments or place young and middle-aged Americans at risk by raising their retirement age or otherwise reducing the benefits they are earning for themselves and their families.

Social Security affects virtually every American. It is the most important source of life insurance and disability insurance, as well as retirement income for the vast majority of the American people. It is neither cause nor solution to the federal deficit. Social Security has no borrowing authority. It does not and cannot contribute to the federal deficit. In the unlikely event that the program’s revenues ever fall short of what is needed to meet its obligations, then, by law, benefits would be cut. Today, the Social Security Trust Funds hold $2.7 trillion dollars in treasury notes and bonds, essentially the very same federal obligations held by Wall Street banks, China, Savings Bond holders and others. Cutting its benefits does not change the amount of federal debt subject to statutory limit by a single penny.

In Social Security’s 76 year history, it has always been dealt with independent of the general budget, through the normal legislative process. Rather than enact major changes in haste and, we believe, repent at leisure after the damage has been done, we urge policymakers to focus on Social Security after the debt limit has been raised, in its own legislative vehicle, through the normal legislative process with full hearings and open debate. Let’s go with the old-fashioned way, rather than some new, untested third way.

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