Nearly everyone following the Social Security debate is familiar with former Wyoming Sen. Alan Simpson, the co-chairman of President Obama’s deficit commission. Simpson, the son of a senator, thrust himself into the national spotlight with an infamous, late-night email. In addition to displaying an ignorance of bovine anatomy, this email displayed open contempt for Social Security and the tens of millions of retirees and disabled people who depend on it.
While Simpson has seized the spotlight, it may prove to be the case that Erskine Bowles, his co-chairman, poses the greater threat to Social Security. The reason is simple: Bowles is the living embodiment of the rewards available to politicians who would support substantial cutbacks or privatization of the program.
On either policy or political grounds, Social Security should be very safe right now. In policy terms, it would be difficult to envision a more successful government program. Social Security does exactly what it was intended to do. It provides a modest retirement income to the vast majority of the country’s workers and their families, keeping them out of poverty in their old age. Almost two-thirds of retirees rely on Social Security for more than half of their income.
The collapse of the housing bubble has destroyed much of the home equity of near retirees. The plunge in the stock market that followed in its wake severely deflated the retirement accounts of middle-class workers. As a result, near retirees are likely to be even more dependent on Social Security than those already retired.
Social Security also provides workers with insurance against disability in their working years. Nearly 20 percent of beneficiaries are receiving disability payments. Many workers are not even aware of the disability insurance aspect of the program, but if they find themselves unable to work due to disability, they will be glad to learn that they had insurance through Social Security.
And, contrary to the Washington fear mongers, Social Security is in solid financial shape by any reasonable definition. The Congressional Budget Office projects that it can pay all scheduled benefits for the next 29 years with no changes whatsoever. Even after it first is projected to face a shortfall in 2039, the program could still pay nearly 80 percent of benefits into the next century without any changes at all.
Modest changes, such as raising the cap on taxable income (currently $106,000) would eliminate much of the projected long-term shortfall. Changes of the size implemented by the Greenspan commission in 1983 would make the program fully solvent long into the 22nd century. Remarkably, virtually no policy wonk seriously disputes these numbers in spite of the near universal hysteria among the chattering class over Social Security.
On policy grounds, Social Security is a smashing success. It scores even better politically. Poll after poll finds that everyone from Tea Partiers to actual socialists strongly supports the program. Yet, many members of Congress stand prepared to vote for substantial cuts to Social Security or even a partial privatization of the program.
Why would members of Congress be prepared to take a vote that is both bad on policy grounds and also could hurt their own political survival? Erskine Bowles is a large part of the answer. Bowles is an unsuccessful politician, having twice lost in runs for the Senate in North Carolina.
Yet, he is very successful financially. He pockets $335,000 a year as a director of Morgan Stanley, one of the huge Wall Street banks that was rescued by taxpayer dollars in the fall of 2008. He likely pockets a similar sum from sitting as a director of GM, another company rescued by the government.
This means that Bowles pockets close to $700,000 annually (@600 monthly Social Security checks) from attending eight to twelve meetings a year. This must look like a pretty attractive deal to current members of Congress. In other words, the message Bowles is sending members of Congress is that if you betray your constituents and vote to undermine Social Security, you will be amply rewarded even if the voters give you the boot.
For this reason, Bowles should be a very scary figure to supporters of Social Security. By example, he is telling our elected representatives of Congress that they need not worry about either good policy or their voters’ wishes. Unfortunately, many members of Congress may find Bowles career to be an attractive route to follow.