The Social Security Conversation We Should Be Having

Matthew Yglesias makes an excellent point about an essential tension between Social Security and the demands of “The Market,” in a post called “Why the Powers that Be Hate Social Security”:

You’ve got this big scheme to levy taxes on working people who are participating in The Economy and transfer money to people who’ve dropped out of The Economy. They take that money and use it to pay the electricity bill and buy a cookie for their grandkids. If they didn’t get that money, they’d probably have to work longer and spend more years being part of The Economy. And they’d have to spend their working years being thriftier, and amassing more savings that (via the magic of the financial system) finance private sector investments in The Economy. So not only would lower taxes on The Economy spur more growth, but the mere fact of not sending your grandma those checks is good for The Economy.

The Economy thrives on incentives (if you work, we’ll give you money) and desperation (if you want money, you have to work) and Social Security is a double-wammy, reducing the incentives of workers and reducing the desperation of the elderly. […]

There’s no magic formula of “tweaks” that will end the dynamic. Taxing working people to hand out free money so people don’t need to work is antithetical to the spirit of capitalism, and so the leaders of the business community and their friends in government will always want to curb it.

Which gets to one of my frustrations with the conversation over the chained CPI proposal for recalculating Social Security benefits and, as a result, lowering them for most seniors. What you’ll hear, from most outlets, is that this is nothing other than an attempt to use a more “accurate” measure for measuring consumption patterns and inflation. Ignoring, for a moment, that this is debatable—a CPI based on the overall living costs of the elderly, and not just their consumption, might result in higher benefit payments—it also is a dodge for the main issue at hand: Do we, as a country, want to finance retirement for millions of people? And if so, what costs are we willing to incur?

Insofar that we’re even having a conversation over Social Security, it should be focused on those questions. In particular, it should be a discussion of whether we want to transform Social Security into a genuine retirement program, or leave it as a mere supplement to other income. I say the former; the decline of defined benefit pensions, combined with negative economic shocks, the volatility of 401(k)s, and the human propensity to consume rather than save has yielded a world where large numbers will lack the resources for a decent retirement.

Instead of working to answer those questions, we’re focused on ways to cut the program, which is to say, we’ve ceded the debate to the business leaders and their allies in government who see the program as an affront to the “proper” functioning of our economy. And let’s be clear, their vision of extremely bare bones income support is necessarily a vision for tremendous hardship—for the sake of more capital, they’re willing to turn the United States into a place where, if you’re poor or working class, you’ll almost certainly work until the day you die.

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