DN Editorial: "Entitlement reform" facts and fiction

ALL THE PHONY talk about reducing the federal deficit - and most of it is phony - means it's time for a refresher course on "entitlement reform."

The people who pretend to be serious about these things say that we need to do something drastic about "entitlements" right now. The next sentence usually includes something about cutting Social Security benefits, raising the retirement age or both.

"Entitlement reform" sounds so, well, virtuous. "Shared sacrifice" and all that. Shouldn't the next generation of senior citizens have to tighten their belts like everyone else - except, of course, the military? Besides, the argument goes, most boomers are well off enough that they don't need Social Security benefits anyway.

Now for few actual facts:

Social Security, Medicare and Medicaid are not the same program. They should not be lumped together. Medicare and Medicaid are indeed in deep financial trouble, with skyrocketing costs that will bankrupt the nation if they aren't reined in. But that will require dealing not only with the actual government programs but reforming the entire health-care system as a whole. This, as we know, will require some pretty heavy economic lifting.

Social Security is different. It isn't broke. In fact, the Social Security Trust Fund has a surplus. If no changes at all were made to the way it's operating, it would have enough money to pay out full benefits for the next 26 years.

Until 2010, Social Security collected more in payroll taxes than it paid out in benefits, lending out the rest in the form of Treasury bonds to finance other parts of the government. True, the government soon will have to start paying back the money it borrowed - and a lot has already been squandered on tax cuts for the rich, the unpaid-for Medicare drug benefit in 2003, not to mention a couple of wars. In addition, the burst of the housing bubble in 2008 destroyed more than $1 trillion in American wealth, which means a lot less revenue is being collected in taxes.

But that's not the fault of Social Security. As Jacob Lew, the director of the White House's Office of Management and Budget, pointed out in an article in Tuesday's USA Today, "Blaming Social Security for our fiscal woes is like blaming you for not saving enough in your checking account because the bank lost all the depositors' money."

(Lew's comments come as a relief since President Obama seems to have been signaling for months that he is open to cutting Social Security as part of his continuing bipartisan fantasy of fixing national problems the way Ronald Reagan and Tip O'Neill supposedly did in the 1980s. Of course, Reagan left the country mired in debt.)

Still, we can't help but notice how easily the calls for "entitlement reform" trip off the tongues of the inside-the-Beltway crowd, as if the changes being proposed are a simple matter of bookkeeping. Here are a few more facts:

Social Security keeps about 20 million Americans from falling below the poverty line ($10,890 for a single person.) Statistics collected by Susan Jacoby for the Los Angeles Times show that the changing economic times will make Social Security benefits even more critical to the quality of life of boomer retirees. Households headed by people age 55 to 65 lost half their wealth because of the real-estate collapse. People who responsibly saved for retirement saw their "nest eggs" destroyed with their 401(k)s.

We'll say it again: The most effective way to cut the federal deficit is government investment in creating jobs, which will in turn increase demand for goods and services, which will lead businesses to hire more workers.

Cutting Social Security simply doesn't cut it. Take it off the table.