Monday, December 20, 2004

Social Security, Cont'd.

Farther down in the utopian distance of his 12/11 column in the NY Times, David (Twit-in-Chief) Brooks warns us of the larger and more insidious agenda signified by the camel’s nose of Social Security “reform”: “But the fact is that over the next decade—whether we are talking about pensions, health care or even schools—the central argument is not going to be over whether to apply market competition to these problems. It’s going to be over how to structure [market] competition to produce the most dynamic results.”

Don’t you love how the fact that “is,” isn’t yet here? Makes you admire Bill Clinton’s parse of this pesky verb.

Has it occurred to young David, who reminds us in closing that “this is not the age of big, static state institutions,” that no one is looking for “dynamic results” if the dynamism of the market means penury for the elderly?

If the dynamism of the market means that the diseased among us will have to buy the right not to die? If the dynamism of the market means that public education is starved by tax cuts and killed by the kind of “competition” (from pseudo-private schools) which excludes teachers and their unions from the conversation about curriculum?

No doubt about it, the market is dynamic. Does it follow that the old, the sick, and the young need to be sacrificed to the business cycle? “The market” is not a remote externality, David, some absconded God to be trusted even in his absence, to be retrieved in the name of progress. It’s just a device, a cultural convention subject to social purpose and political action in the name of the common good.

Let’s take a look at Social Security in both moral and economic terms. Our texts will be the competing editorials of The Wall Street Journal and The Financial Times for Thursday, December 16, 2004. The WSJ spices its “reformist” remarks with snide references to the redistributional purposes of the original act (“FDR’s greatest contribution to the welfare state”): “The holding pen for this pay-as-you-go transfer was called, brilliantly if dishonestly, a ‘Trust Fund.’ . . .And like all income redistribution programs, Social Security presented politicians with lots of incentives for sweetening [e.g., the level of benefits and the number of people covered].”

The crisis, saith the WSJ, resides in the familiar “demographic” problem—not enough workers in relation to retirees, so the Trust Fund expires around mid-century, blah, blah. The editorial writers actually understate the forecasted shortfall of legal liabilities the Fund carries on their way to the real problem, which is (surprise!) public spending as a proportion of Gross Domestic Product. By 2030, they announce, the combination of Social Security, Medicare, and Medicaid payments will amount to 15% of GDP.

Oh, the horror, the humanity! As we speak, more than 30% of the labor force is employed either directly by government (federal, state, and local) or indirectly, as a result of government spending. Can someone explain to me why this is a moral problem, rather than a mere fact? Can someone explain to me how private investment could do better at creating jobs? There’s no evidence that it has, that it can, or that it will—on which, if you inclined to check, see my 1994 book, Part I, and the article by John Judis in The New Republic of late January 1997. So why don’t we just relax and realize that Clinton was right to ignore the distinction between private and public investment?

In moral terms, Social Security works because it makes us our brother’s and sister’s keepers. It is, in fact, a redistribution program, just like the WSJ says it is. People who are able and willing to work tithe themselves, as it were, so that their grandparents don’t end their lives in poverty. Don’t kid yourself. In the absence of Social Security benefits, more than half of the people in this country over age 65 would have incomes below the poverty level. That was true in 1994, at any rate. In view of lagging wages, low inflation rates, and declining real rates of return on government bonds, imagine the carnage if we fast forward twenty years.

Do we want to trust in the market, or do we want to trust in our capacity and our ability to provide for those whose working lives are done? This is the moral question that technical prattle about “reforming Social Security” lets us evade.

Even so, next time we lead with political economy, and our text is The Financial Times.