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Social Contracts, American-Style III


Right-wing attacks on the Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds (a.k.a. Social Security) I can live with. They fool nobody. Nobody who’s honest, anyway. (Not a trivial qualification.) Ultimately, they are nothing but attempts to sell a political choice according to cooked numbers. As if it were etched in stone (or in “actuarial assumptions,” as the Trustees’ last Report puts it in various places) that the cost of the two funds will exceed their revenue at some future date (typically in the 2040s), with the aging of the damned baby-boomers, increases in life expectancy, and the relative decline in the fertility rate of the U.S. population all conspiring to bring this pyramid scheme of New Deal socialism crashing down under its own dead weight, decades later than its Leninist-inspired counterparts on the other side of the globe.


What the right-wing’s scare tactics about Social Security’s “insolvency” (defined as the inability to pay scheduled benefits in a full on a timely basis) betray is its fundamental desire to detach the American state from any and all responsibility for the social good. Except in two cases. Where the notion of the “social good” can be promoted to mean individual acquisition and consumption. (For example, publicly-funded airports are good, because even rich people can’t afford to build and operate their own. But publicly-funded health care is bad, because in this case rich people can afford to purchase their own.) And where the notion of the social good can be channeled into the kind of monopoly on violence that the state enjoys—warmaking, the funding of nukes and missile-defense boondoggles, the power to incarcerate, and the like. Thus, there is an abundance of public dollars to fund the military-industrial complex. Just as there is for the prison-industrial complex. But the medical-industrial complex remains (largely) a private affair.

I’m oversimplifying somewhat, no doubt. But not that much, either. And far less than you may think. As Paul Krugman, one of the best mainstream critics of this right-wing agenda, reminded us recently, the “push for Social Security privatization is only part of the right’s strategy for dismantling the New Deal and the Great Society. The other big piece of that strategy is the use of tax cuts to ‘starve the beast’….[C]onservative intellectuals [have adopted] a bait-and-switch strategy: First, advocate tax cuts, using whatever tactics you think may work – supply-side economics, inflated budget projections, whatever. Then use the resulting deficits to argue for slashing government spending.” And so on. And so on. And so on. In a viciously-circular dynamic of slashing and burning and slashing some more. But all of it political choices, through and through. Nothing immutable. Much less metaphysically pre-determined. Nothing actuarially one way rather than another.

Suppose one day soon, during the Bunko Artist-in-Chief’s “Strengthening Social Security for the 21st Century” tour, one of his speechwriters were to slip up, and load the wrong text into his teleprompter:

The Department of Defense is on the road to bankruptcy. Why? Because the Department was created as a pay-as-you-go system, current wars are supported by the taxes paid by current workers. Unfortunately, the ratio of workers-paying-taxes to wars-being-waged is falling steadily. By the year 2018, it is projected that the Department’s future expenditures will begin to exceed its revenues. What this means is that by 2018, the Department will go into the red—spending more on waging wars than it receives in taxes. After that, the shortfalls will grow larger until 2042, when the whole Department of Defense will go bankrupt. By the time today’s workers in their mid-20s begin to retire, we expect to be fighting wars on as many as six different continents. If we do not fix the Department’s funding mechanism, it will not be able to pay for the wars we promise to wage on behalf of our children and our grandchildren.

Now. What would be wrong with this particular text that isn’t equally wrong when the President delivers essentially the same speech but with respect to Social Security, rather than the Department of Defense? No one who drafts budgets and allocates the funds to cover them would ever speak this way about the Pentagon. But why not? (Aside from prevailing militaristic commitments on the part of the American state and society, that is.) Because whatever the Pentagon’s future expenditures turn out to be, they will be covered by revenue raised by taxes or borrowing. (Or theft on the model that the Americans once had hoped to implement after they invaded Iraq. And may still—if they can hold onto Iraqi territory long enough.)

Well. There is absolutely no difference where expenditures required by the Social Security Administration are concerned. And calling it a “Trust Fund,” pretending that this Trust Fund is filled with the special IOUs of the Treasury Department, that these IOUs are “unfunded liabilities,” rather than good as gold, and that there will be no money to be found anywhere to actually pay for them, changes absolutely nothing. We are simply walking through a field of lies when we brush up against rhetoric like this.

With one crucial exception: Whereas the U.S. Government’s expenditures on military account are discretionary, the Government is obligated by Federal law to cover 100 percent of Social Security’s liabilities (i.e., they are mandatory). (About which, check out “Trust Funds,” Section 401, Subchapter II, Chapter 7, Title 42, of the United States Code. Also compare the Department of Defense (p. 102) to the Social Security Administration (p. 346) sections in the draft Budget of the United States Government: Fiscal Year 2005.)

None of Social Security’s assailants and provocateurs would ever dream of projecting a shortfall for the Department of Defense budget. If the Department of Defense spent $388 billion in Fiscal Year 2003 (plus all of the so-called Supplemental appropriations), the Department of Defense had $388 billion to spend. Period. Not some fraction of it. But the whole sum. And not a bunch of special IOUs that aren’t worth the paper they’re printed on.

Similarly, if by 2018 or 2042, the Government starts spending $1 trillion or $10 trillion per year on military account, it will simply raise the revenue to cover it. And will raise this revenue the only way it knows how: By taxes or borrowing. (Or by the theft of foreign assets.)

The liabilities of the Social Security system work exactly the same way. There is no such real thing as bankruptcy for Social Security. No such real thing as a projected shortfall. No such real thing as insolvency. Except the kind that exists between two arbitrary numbers: Between that which the Government chooses to spend on Social Security, and that which the Government could have chosen to spend on it.

Dire warnings about Social Security’s future shortfalls, potential bankruptcy, insolvency, and so on, are lies. Nothing more. As long as it remains within the Government’s power to raise revenues (legitimately, that is, not via the theft of foreign assets, but via taxes and borrowing), everything comes down to how the Government uses this power.

True, insofar as the reins of Government wind up in the hands of people who want to eradicate social programs that do not serve the interests of the rich, then making damaging changes to such programs certainly remains within their power.

Still. This represents a political choice from among alternatives options. Not an actuarial inevitability.

And this, also, is where you and I come in.

United States Code
Title 42—The Public Health and Welfare
Chapter 7. Social Security
Subchapter II: Federal Old-Age, Survivors, and Disability Insurance Benefits
Section 401. Trust Funds

2004 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds, March, 2004

Old-Age and Survivors Insurance and Disability Insurance Trust Funds: 2003 Trustees’ Projections, Laurel Beedon and Mitja Ng-Baumhackl, American Association of Retired People, March, 2003

Strengthening Social Security (Homepage), White House Office of the Press Secretary

Social Security: The Phony Crisis, Dean Baker and Mark Weisbrot, University of Chicago Press, 1999
Bush Commission: No Social Security Crisis,” Dean Baker and Mark Weisbrot, December 11, 2001
Selling Social Security,” Dean Baker, December 13, 2004
Social Security: It’s Not Broken, So Don’t Fix It,” Mark Weisbrot, ZNet, December 18, 2004
Anti-Social Security,” Dean Baker, The Nation, December 27, 2004
What Crisis? It Ain’t Broke, So No Need To Fix It,” Mark Weisbrot and Dean Baker, Washington Post, January 23, 2005
Deficits and Deceit,” Paul Krugman, New York Times, March 4, 2005 (as posted to Truthout)

Health Economics 101,” Paul Krugman, New York Times, November 14, 2005 (as posted to Truthout)
Bad for the Country,” Paul Krugman, New York Times, November 25, 2005 (as posted to Truthout)

Social Contracts, American-Style I
Social Contracts, American-Style II

Postscript (November 18): Here are three that go together exceptionally well: Two analyses of the right-wing’s multifaceted efforts to render the Federal Government unsuited for any purpose other than serving the interests of elites (in the contexts of its various Social Security and Medicare – prescription drugs scams), followed by a report on today’s Federal tax-cuts that were pushed through the House of Representaties on the backs of the non-elite population of the United States.

Social Security Is Not in ‘Crisis’,” Richard B. Du Boff, National Jobs For All Coalition, November, 2005
A Private Obsession,” Paul Krugman, New York Times, November 18, 2005
U.S. House Passes $49.9 Billion in Spending Cuts,” Richard Cowan, Reuters, November 18, 2005

Three beautiful examples of how the social contract is upheld in actual practice, American-style.

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