The favorite defense of Social Security by progressives harkens back to Franklin Roosevelt who famously said:
”I guess you’re right on the economics. They are politics all the way through. We put those pay roll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program. Those taxes aren’t a matter of economics, they’re straight politics.”
So, today progressives echo this even though the SS Tax is a regressive tax, and anything but progressive in its impact on the economy. With the development of the MMT approach to economics, and its emphasis on the government’s ability to spend without a solvency constraint on the Federal Budget, it’s now clear that SS doesn’t need to be funded by a regressive payroll tax; but can be funded out of general revenues and also guaranteed by a provision in law providing for automatic annual funding. Some government “trust funds” are funded this way, including parts of Social Security and Medicare, so there’s no economic reason why the primary funding for both programs couldn’t be provided for these programs.
But a friend, in an echo of FDR’s view, recently said to me in correspondence:
“It seems to me that it is a lot easier to make the case that people are entitled to a government benefit if they have been paying a dedicated tax for 45 years that is described as funding that benefit.”
And I replied in the following way.
It is easier; but it’s still not easy as we now see; and, on the downside, to defend it that way we have to:
1) support the view that people are entitled to government payments only when they pay for them;
2) then defend against the attack that the entitlement payout greatly exceeds the amount paid in, and has no relationship to what is paid in;
3) accept the idea that SS and Medicare must be self-funding like any business, while also ensuring that they are “solvent” as much as 50 years out unlike any business (that is people are upset now because questionable long term fiscal projections show that full coverage of SS spending can only be projected out for 21 years to 2033, so they are calling for fixes to extend that projected “full solvency” period out to 2075 or 2080);
4) always have a very hard time justifying any increases to entitlements for current recipients, because those oppose entitlements always cry out that the Government is running out of money, and would have to raise SS taxes to pay for it;
5) never bring into the argument the fact that things are very different now than they were when SS was first passed, because we now have a fiat money system which makes many things possible now that weren’t possible back then, because THERE IS NO SOLVENCY PROBLEM; and
6) ignore the great argument that our entitlements are the embodiment of an economic bill of rights that ought to apply to all Americans which, of course was outlined by the same FDR in 1944.
In my view, the protestant ethic defense that we’re entitled to SS, because we worked for it isn’t worth the candle. It makes things easier in the short-run, but it reinforces a skin-flintism which is wholly inappropriate to our modern economy, with its monetarily sovereign fiat currency system, and is largely responsible for the rapidly increasing inequality we’ve been experiencing over the years, which has now reached a ridiculous and anti-democratic pass.
We can’t look at SS and our other entitlements in isolation. We have to fight and win the battle for FDR’s economic bill of rights, and for an expansion of all the entitlements in the American social safety net; now the stingiest, most inadequate safety net among modern industrial nations!
FDR’s strategy for justifying SS was great for the 1930s, when we were still on the gold standard. But nearly 80 years later it’s time to move on to his economic bill of rights as our justification for entitlements, and stop reinforcing the idea that it’s only an entitlement if one pays for it. It’s time to stand on the over-riding moral argument! It’s time to say that when a nation like the United States can afford to implement these rights, as the United States has been able to do at least since 1971, they then are human rights that must be implemented as part of the public purpose. Let us have a Green New Deal with a much stronger social safety net including greatly increased payments for SS and Medicare for All, and a Federal Job Guarantee emphasizing Green Jobs!
Let’s fight for that and implement it economically using Modern Money Theory (MMT)-based fiscal policies!