The Times editors continue to follow the Social Security debate; unfortunately, they fail to follow their own newspaper's reporting. Their latest editorial tells us that "The administration has suggested that it would be justified in borrowing some $2 trillion to establish private accounts because doing so would head off $10 trillion in future Social Security liabilities."
However, a month ago Edmund Andrews of the Times told us that "nearly every leading Republican proposal on Capitol Hill acknowledges that private accounts by themselves do little to solve system's projected shortfall of at least $3.5 trillion...".
And today, Mr. Andrews says that "White House officials privately concede that the centerpiece of Mr. Bush's approach to Social Security - letting people invest some of their payroll taxes in private accounts - would do nothing in itself to eliminate the long-term gap." Evidently, that is their story, and they are sticking to it.
The Times editorial cites the leaked Wehner memo making exactly the point that benefits must be cut as evidence that the Administration has been misleading the public. Well, someone has been misleading, all right. Unless the editors are inclined to provide a cite to back up their point, and print a correction to their reporter's two stories, we have to conclude that the misleading is coming from New York, rather than Washington.
The Times also rallies to the defense of the Social Security Trust Fund:
At a recent press conference, Mr. Bush exaggerated the timing of the system's shortfall by saying that Social Security would cross the "line into red" in 2018. According to Congress's budget agency, the system comes up short in 2052; according to the system's trustees, the date is 2042. The year 2018 is when the system's trustees expect they will have to begin dipping into the Social Security trust fund to pay full benefits. If you had a trust fund to pay your bills when your income fell short, would you consider yourself insolvent?
Well, Bush said this, and who can argue?
By the year 2018, Social Security will pay out more in benefits than the government collects in payroll taxes. And once that line into red has been crossed, the shortfalls will grow larger with each passing year. We have a problem.
The Times editors then mount an impassioned defense of the Social Security Trust Fund, relying on a seemingly indefatigable strawman:
In suggesting that 2018 is doomsyear, the president is reinforcing a false impression that the trust fund is a worthless pile of I.O.U.'s - as detractors of Social Security so often claim. The facts are different: since 1983, payroll taxes have exceeded benefits, with the excess tax revenue invested in interest-bearing Treasury securities. (An alternative would be to, say, put the money in a mattress.) That accumulating interest and the securities themselves make up the Social Security trust fund. If the trust fund's Treasury securities are worthless, someone better tell investors throughout the world, who currently hold $4.3 trillion in Treasury debt that carries the exact same government obligation to pay as the trust fund securities. The president is irresponsible to even imply that the United States might not honor its debt obligations.
Well, the President did not suggest that we would default, of course. And critics agree that the promise to make payments to beneficiaries from the Trust Fund is backed by the full faith and credit of the United States. Our point is not that such a promise is meaningless, or that the I.O.U.s are "worthless"; our points are (a) "a promise", however credible, is not a trust fund as any else understands the concept; and (b), beginning in 2018, the US will have to borrow from the public, cut other spending, or raise taxes in order to meet these payments. These are precisely the choices that will be faced with the mechanism of the "Trust Fund". The Heritage Foundation, as ardent as they are on the issue of privatization, explains this quite cogently in Myth 2 without calling the Trust Fund "worthless".
Now, rather than putting money in a mattress, if we had purchased British and German government bonds, for example, we would be relying upon British and German taxpayers to fund our benefits, rather than our own. That choice was not made. Consequently, calling this accounting mechanism a Trust Fund, however appealing that may be for political purposes, does not give it the economic significance of a conventional trust fund.
MORE: Fine, I'm glidng past the $10 billion versus $3.5 billion question. And the current Times piece presents the "Why is Social Security the crisis du jour?" question quite nicely. Don't vex me.