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Social Security Crisis?

October 30, 2010 Leave a comment Go to comments

I wrote some 20 months ago about Jeff Madrick’s book The Case for Big Government. Yesterday he had a useful post at the New York Review’s blog on social security.

We all know that the deficit is increasing, the population is aging, and we are headed for a social security crisis. Along with Obama, we await the report of his National Commission on Fiscal Responsibility and Reform, due in a month and sure to include recommendations to cut social security benefits while raising the eligibility age for receiving them. Republicans tell us we must cut spending while continuing to fight two wars, or maybe three. Oh, and spend more on protecting our borders and spying on each other. And cut taxes too.

Perhaps the only item on which Democrats and Republicans will agree, once the election is over and a new Congress is seated, is that social security must be cut. This is the context in which Madrick’s post is worth reading.

In view of all the rhetoric, voters may be surprised to find out how little Social Security will actually contribute to the future budget gap. In fact, most would probably be stunned.

The Congressional Budget Office, which produces dry, cautious budget projections, recently reminded Congress that Social Security as a percent of GDP will rise from 5 to 6 percent in 2035 and simply stay at that level for the foreseeable future. In other words, the much decried shortfall amounts to only 1 percent of GDP over three decades. And this may be exaggerated. As some observe, much will depend on the flow of young immigrant workers to America. The more workers contributing to Social Security, the smaller any future deficit will be. And the CBO projections tend to make overly conservative estimates about such immigration in the decades to come.

No matter. I have little doubt that Social Security benefits will be cut. And the wars will continue. I don’t see Obama rocking the boat and taking any stances counter to conventional wisdom until after the 2012 election, if ever. As Madrick says, “This is no way to run a government.”

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Categories: Economy, Politics
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