Rethinking Social Security Reform

If ever there were an opportunity for progressives to seize control of the policy agenda, if ever Beltway rhetoric seemed ready-made for co-optation by the liberal left, the Social Security crisis is it. Social Security is an immensely popular program, the aged an exceptionally popular cause, and the government is awash in Social Security revenues. Using these surpluses to fund public investments that would benefit wage-earners, their parents, and their children would seem a sure-fire agenda that could inspire wide public support. Yet progressives, thus far, have let the opportunity pass them by.

For the past two years, many progressive organizations—alarmed by the privatization lobby—have been strongly defending the public pension system. But in focusing on defense, they have overlooked a serious and immediate danger to liberal-left politics in the U.S.: the over-funding of Social Security. In the name of “long-term balance,” the Social Security system is collecting billions in excess revenues, derived from a tax that hits low- and middle-income wage-earners especially hard.

Liberals and progressives secretly hope these excess funds will be spent on public investment or on cuts in regressive taxes. Most want the surpluses used, as Clinton put it in his mid-session review, “to meet the great challenges facing our country—caring for our parents, caring for our children.” But Clinton proposed no actual programs to address these challenges. And those to Clinton’s left have offered no suggestions as to what might be done with Social Security’s embarrassment of riches. Unless concrete proposals are placed on the table, the surpluses will fuel proposals from the right that, if enacted, would sharply exacerbate the regressiveness of the federal budget.

If progressives are choosing to ignore Social Security’s over-funding in the hope that the money will be spent on progressive causes, isn’t it time to say so? If they are hoping for a more liberal Congress in 2000 to use the surpluses wisely, shouldn’t they begin making the case now, before the elections take place?

Why Reform is Urgent

The left’s failure to take the initiative on Social Security stems in large part, of course, from the lack of strong organizations to push progressive causes. But like the public at large, many left-of-center writers and analysts seem immobilized by the myths and fears the right has promoted. In jumping to the system’s defense, they have been ensnared by their own defensiveness. This is both mistaken and dangerous, because the arguments contrived to defend Social Security threaten the very idea of progressive government finance.

(1) The real funding crisis. Left analysts have so frequently repeated the mantra “there is no Social Security funding crisis,” that the hundreds of billions pouring into the trust funds have gone unnoticed. Social Security is not under-funded; it is vastly over-fun...