Earl Blumenauer, the Portland-area Democrat who raised eyebrows with his story in the New York Times suggesting potential benefit changes to Social Security, again reiterated to Tim Fernholz that he never intended to call the Social Security Trust Fund a “Ponzi scheme,” as Bai interpreted. He also talked about his ideas for the budget in general and Social Security in particular.

Blumenauer is correct that Democrats have generally been far more responsible with the federal budget, though this responsibility has gotten them nowhere in opinion polls. And he’s right that Republicans increasingly favor “no government” whatsoever rather than limited government, which has narrowed the debate considerably. Then the conversation moves to Blumenauer’s budget solutions:

We as Democrats have not spent as much time comprehensively dealing with the big picture, and that was most of what Matt and I were talking about. We are going to have to look at how we spend money differently, in defense and agriculture and infrastructure. I support putting more money in the highway trust fund for roads and transit. I really do think that we can do things to get a lot more value out of federal spending. We ought to avoid lots of little piecemeal decisions on the tax side of the equation. I’m a voice that hopes that as we move forward, we can take a deep breath and look at the range of federal policies that deal with taxation and not have a lot of little rifle shots.

I don’t have much to argue with that in theory, though coming at a time of mass demonization of federal spending, it may be too subtle an argument. But I have no problem with efficient, responsible government that doesn’t hand money to bankers or defense contractors or Ag subsidies or fossil fuel prodicers or any of the other mindless giveaways that are a feature of our budgets (I will hold out there the fact that efficiency is less a priority at a time of insufficient demand than spending to increase that demand).

It’s when Blumenauer gets into Social Security that he ends up on shakier ground.

Establishing a long-term adjustment to protect and strengthen Social Security is one of the easier parts of the equation. There will be a concern of people who do more demanding jobs [if raising the retirement age is on the table]. They’re not going to work till they’re 70, and we can [work that into the system]. There’s recognition that particularly wealthier people should pay more. Why should I pay the same Social Security tax as A-Rod or Warren Buffet? You put those things together and let reasonable people talk about them, and I think you will come up with two or three approaches that not only would be accepted by Congress, they’d be accepted by the American public. And you would make sure that Social Security is there; particularly for most Americans it is the only guaranteed inflation-proof part of their retirement. We can drive a stake through the heart of the notion of privatization; we were right to fight it. 


You’re more confident than most! 


I’d be surprised if this is something that isn’t produced by the administration and Congress. What will kill it is that everyone is circling, and they want to hyper-politicize it, and they want to take the worst-case scenario they would imagine, and then they run with it to the extreme. Somehow you can’t look at reduction in benefits for wealthy people 30 years from now without threatening retirement security for middle-income people in the next decade. Well, that’s nonsense. But if everybody is going to have their worst case — “if you raise the tax, it’s going to be raised to some unacceptable level and shut down commerce and industry” — everything’s off the table and we lose a chance to move forward. Political opportunism and gridlock can win.

The first problem I have here is the notion that Social Security only needs protecting. Actually, it needs strengthening because all of the other areas of retirement income have cratered. We’re down to a one-legged stool for retirement security, and a creaky one at that. So focusing on protecting the status quo narrows the debate and assumes a crisis that only actually exists in the overall retirement security of older Americans.

My other problem is here: “Somehow you can’t look at reduction in benefits for wealthy people 30 years from now without threatening retirement security for middle-income people in the next decade. Well, that’s nonsense.” Actually, it’s math. Progressive-price indexing, which is what Blumenauer is talking about here, doesn’t work unless the indexing dips all the way down into the middle class. The type of policy Blumenauer describes – “reduction in benefits for wealthy people 30 years from now” – does nothing for long-term actuarial health. You would have to basically eliminate benefits at the high-end to provide the actual revenue savings necessary. Setting aside the dangerous ground of turning a universal benefit into a means-tested program for the poor, the only real savings can derive from making this a broad cut.

If Blumenauer wants to come up with a credible progressive-price indexing scheme that doesn’t dip into the middle class, he can show it. But until then, he’s just advocating for benefit cuts now to save us from benefit cuts later. There’s nothing wrong with having the debate, except it’s coming in an environment when the knives are out for Social Security, and Blumenauer won’t be writing the policy. Alan Simpson and Erskine Bowles will. And that’s dangerous.