It’s a pay-as-you-go system

Some areas of public policy can be difficult to understand, and can even rattle media professionals who get lost in the details and struggle to ask politicians the right questions.

But when it comes to Social Security, the issue really isn’t that complicated. Matt Yglesias had a good item this morning that political reporters covering the 2012 Republican presidential candidates should keep in mind.

[R]oughly speaking we have two kinds of people in America. We have people who are paying Social Security taxes and we have people who are receiving Social Security benefits. For the past several decades, the quantity of tax revenue coming in has exceeded the quantity of benefits being paid out. That is projected to flip around, creating the need to either redirect some additional financial stream into the Social Security system in order to repay the rest of the government’s debt to Social Security or else to reduce Social Security benefits or else to increase Social Security taxes. The choice among these options is what the Social Security debate is about, if the Social Security debate is about funding Social Security.

Oftentimes, however, I see people on your television programs or your televised debates making reference to the idea that “younger workers” should divert some of our payroll tax money into some kind of private retirement accounts. At this point you, the national political reporter, absolutely must ask them how we’re going to pay current benefits of this happens.

It’s pretty straightforward, isn’t it? I pay Social Security taxes, but it’s not as if that money goes into a Social Security bank account with my name on it, to be paid back to me when I retire. Instead, that money goes to pay for current retirees’ benefits. When I retire, those in the workforce then will pay taxes that help finance my benefits. And so on. It’s called a pay-as-you-go system for a reason.

Republicans want younger people in the workforce to, instead of investing in Social Security, put that money into private accounts. That creates enormous risk — if you want to retire when Wall Street is tanking, you’re screwed — but the problem is more fundamental than that. As Al Gore tried to explain to voters 11 years ago, the GOP can’t count the same money twice. Either workers put the funds into a private account or they put it into the Social Security system to pay current retirees benefits. It can’t be both.

If Republicans assure seniors their benefits are secure and tell younger workers they shouldn’t have to pay into the Social Security system, the math simply isn’t there. The government would have no choice — officials would either have to spend significantly more money to maintain current benefits, replacing the funds that are going into private accounts, or they’d have to drastically cut benefits.

Conservatives may find this unpleasant, but the math is inflexible.