(This article first appeared in the American Spectator)
Seemingly out of nowhere, “reforming” Social Security has become a point of emphasis for some Washington Republicans. It began to bubble up with Sen. Rick Scott’s policy manifesto and now may take center stage in the fight over the debt ceiling. But Republicans risk political disaster in addressing a problem that might not be what people think it is.
Social Security has long been considered the “third rail” in American politics. Yet Republicans have made occasional forays into “reforming” the system, and “reform” always means cutting benefits or raising taxes. But going solo on Social Security has never worked. For decades, Democrats have successfully demagogued the issue and cost Republicans votes and elections.
The only substantive past Social Security reform was the effort undergone by President Ronald Reagan. After a modest attempt to reduce benefits given to those who retire before 65, Reagan shrewdly proposed a bipartisan commission requiring support from the Democratic speaker of the House. In short, Democrats had to take a big dose of the tax-hike medicine.
Today’s Republicans have done nothing to gather Democrats under their reform tent or to raise public support for their position. How can anyone expect to tackle a major government program like Social Security as if it were one of several bullet items on a list of demands?
No matter how loudly Republicans proclaim that they won’t touch benefits for current seniors, they will lose the argument.
The Democrats are not sitting back. They have staked out their position clearly — no cuts and no tax hikes whatsoever — and seized the high ground. Democrats cite a recent Economist/YouGov benchmark that shows 70 percent of Americans somewhat or strongly opposed to changes in Social Security. Senior voters are strongly opposed at 81 percent. Even Republicans (64 percent) and conservatives (66 percent) somewhat or strongly oppose Social Security revisions.
Digging deeper into public polling reveals the potential to cause a great deal of damage. The best age group for the GOP is senior voters — exactly the people who care about Social Security the most. In their Dec. 9–12 benchmark survey, Morning Consult and Politico reported that Social Security, plus Medicare, was the top issue for seniors (30 percent), beating out the economy, national security, and health care. And this result is not unusual. The duo’s election-eve survey, conducted Oct. 21–23, ranked it second (26 percent), only behind the economy (which included inflation). Reaching back to their June 2019 poll, Social Security was far out front — 38 percent named it their top issue, a full 11 points in the lead.
Republicans have nowhere to turn to make up those votes. Former President Donald Trump (who smartly opposes any changes) achieved a breakthrough in 2016 for Republicans by appealing to working-class voters and began to make inroads among Hispanic voters in 2020. Yet, neither group supports changes. According to the Economist/YouGov poll, only 12 percent of under-$50,000 income earners strongly or somewhat support reform; 19 percent of those earning $50,000 to $100,000; and just 16 percent of Hispanics. With households earning under $100,000 representing 63 percent of voters, Republicans would be foolish to alienate that demographic.
No matter how loudly Republicans proclaim that they won’t touch benefits for current seniors, they will lose the argument. Savings at time of retirement average $255,000, and that’s for those with accounts. About one-quarter of Americans have no retirement accounts. Households without accounts and under the savings average are highly likely to be in that low-income range — and thus much more dependent on Social Security for subsistence in retirement.
For Republicans to propose restructuring such a pervasive and massive government program without engaging in any public preparation and persuasion is extraordinary political malpractice. To charge forward and risk losing lower-income and over-65 voters is political suicide.
Social Security is NOT Going Bankrupt
Beyond politics, there is another reason not to rush into wholesale cuts and tax hikes: Social Security may not be in the dire circumstance so claimed. Yes, by any standard for private or state/local government pensions, Social Security is headed for collapse. But the fact is that the rules are different for the United States government, like it or not.
While it is true that the profligacy of the federal government should have been reined in years ago, that bridge has long since been crossed and blown up. Fortunately (at least for Americans), the United States is and will continue to be in the unique global position of engaging in this self-finance. And it’s not due so much to brilliant American monetary and fiscal policy as to poor policy and challenges faced by other countries.
Addressing the fiscal status of Social Security has no public support and is not a “now” problem.
No other country has the dollar and its reserve currency status, and there are no serious competitors on the horizon. The yuan won’t be one. China, a nation built on dodgy statistics, is an anti-capitalist, authoritarian police state facing demographic collapse and in possession of an economy that could be much smaller than it reports. The euro doesn’t measure up either. The European Union has its own demographic issues, lacks economic dynamism, and is politically fractured. The euro itself has been a disaster for Italy and Greece. There are no other serious contenders.
The dollar may see its dominance reduced, but there is no realistic prospect of its displacement, and, without that displacement, the United States will continue to be able to borrow in its own currency and print money with far fewer consequences than other nations.
Hyperinflation? Maybe Not
There does exist the specter of Social Security money printing bringing with it all the insidious, wealth-destroying, and societal-destabilizing effects of high inflation. But fast-aging demographics in America and the developed world might cancel out those effects.
Aging demography may be deflationary — perhaps even very powerfully. No consensus has been reached, and the research is speculative, as the coming rapid aging of the developed world is an entirely new experience. But Japan’s situation is instructive. Deflation has matched Japan’s demographic decline almost exactly. Despite of years of zero interest rates and significant fiscal deficits, prices barely moved for 20 years. Not only that, but Japan’s significantly internally financed national debt is at 264 percent of GDP, compared to the United States at 129 percent.
Meanwhile, the United States has seen trillions expended in COVID stimulus, massive spending bills signed by the Biden administration, nearly three years of supply-chain disruptions, Russian hydrocarbons offline, and a bird flu pandemic. What is incredible is how low inflation has been.
Fast-aging demography has hit Japan and Europe (another region “struggling” with low inflation) and is now aimed at China, South Korea, and many developing countries. Next, it is headed for the United States. The deflationary effects could be very powerful and, like in Japan, may obviate what historically would have been considered ruinous debt levels.
The bottom line is that addressing the fiscal status of Social Security has no public support and, most importantly, is not a “now” problem. What needs to be put under control is discretionary spending and suffocating regulations — in other words, the Washington favor factory and all its distortions enacted on the economy. Not only would a pro-growth agenda work politically, but it would go much further in “rescuing” Social Security than the current windmill-tilting being done by some Republicans.
Keith Naughton is the author of Washington Gold Rush: The Competition for Congressional Earmarks and a regular contributor at the Hill.