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Senator Rubio's Fact-Phobic Social Security Speech

Senator Rubio's recent speech on Social Security was political fun and games. If we take it as serious analysis and policy prescription, millions of Americans and the economy would pay a terrible price.
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Senator Marco Rubio's recent Reagan Center speech praised President Reagan and condemned the present provisions of Social Security. He omitted to say that President Reagan's 1983 Social Security agreement with Democratic Speaker Tip O'Neill bolstered and shaped today's Social Security, the system he attacks.

Senator Rubio darts from, "I believe in America's retirement programs," to declaring Social Security not "sustainable." He argues that "When Social Security first started [he should have said 1950], 16 people were at work for each beneficiary," while "Today there are only three for every retiree and soon [he means the 2020s] there will be only two." This is a set piece for Social Security critics like Fiscal Commission co-chairs Erskine Bowles and Alan Simpson and Gang of Six leader Senator Mark Warner. The claimed conclusion -- too few people at work to support too many benefit recipients -- wilts under examination.

Since 1950 an avalanche of technological advances have enabled employees to progressively make more, sell more, bill more, ship and deliver more goods and services more quickly and in new ways. The computer revolution did not happen just once; it did so repeatedly. For example, since the early 1980s, chip capacity doubled every two years. The internet, jet planes and the interstate highway system helped make commerce faster and vaster. Computer-assisted devices unknown in 1950 revolutionized the economy. With nanotechnology in only its natal phase, the end is not in sight. Recent experience demonstrates the growth potential of a technologically advancing economy. Between 1990 and 2000, non-farm employee hourly output increased by more than 20 %, manufacturing hourly output expanded by 45 % and per hour compensation (after subtracting inflation) grew by 5%.

Senator Rubio credited President Reagan with "defining the proper role of government ... better than any American has done before." Presumably that refers to what he said ("government is not the solution, it is the problem") rather than what he did (accepted and signed the 1983 Social Security amendments). But many Americans embrace Abraham Lincoln's precept that "The legitimate role of government is to do for a community of people, whatever they need to have done but cannot do, at all, or cannot do as well for themselves." Social Security fits that bill. And it is designed to be self sustaining. As the Social Security trustees reported in 2011, Social Security is fully funded for another quarter of a century. Modest measures that enjoy wide public support would assure Social Security's funding for an additional 50 years.

Higher wages should mean higher program income. In recent times, the greater portion of improved income has unexpectedly flowed to those with earnings above the FICA cap - currently $106,800 a year. As a result, FICA (Federal Insurance Contributions Act) revenue has not grown in step with the economy. Raising the cap on earnings subject to FICA would come close to cancelling the funding shortfall that is projected to begin in about 2037. Or raising FICA rates by one and one tenth percentage point for both employers and employees also would do that job even better. Meanwhile, wages are projected to grow faster than that, boosting average pay.

The Rubio/Bowles-Simpson/Warner pitch ignores the fact that, despite the worsening worker/beneficiary ratio they cite, since 1983 Social Security resources exceeded its payout. That has built a huge trust fund invested in U.S. Treasury obligations; the trust fund already totals $2.6 trillion and is projected to grow beyond $4 trillion. Some pooh-pooh that reserve as composed of "worthless IOUs." But investors worldwide regard such U.S. Treasury IOUs as among the world's most reliable and desirable securities. That became clear yet again when, after the federal debt ceiling battle shook confidence in private company stocks, investors flocked anew to purchase just such U.S. IOUs.

Of course, they must be redeemed. If we extend the two Bush tax cuts, continue vast subsidies for corporations and the wealthy, spend more trillions on war and armaments (including those we give other nations), the U.S. may have to borrow. But that would not be to pay Social Security benefits; program participants have already done that. We would be paying for the billions borrowed by the Treasury from the trust fund to pay for non-Social Security outlays and tax cuts.

Senator Marco condemns entitlement programs that help meet the hazards to income and health we all face, claiming that "these programs weakened us as a people." We strayed, he says, from a former better time when " If someone was sick in your family [or]a neighbor met misfortune, you took care of them. You saved for your retirement ...because you had to..." But, he notes regretfully, " it [became] no longer necessary to worry about savings for security because that was government's job."

Senator Rubio, caring for a family member takes more than tender loving care. A premature infant needs more than affectionate swaddling. Cancer requires more than hot or cold compresses lovingly administered. Saving for retirement, illness or disablement takes more than a New Year's resolution. Social Security and Medicare are not "government" doing that "for" us; they are Americans using the political process as Lincoln envisaged to meet common unmet needs. Such prudent measures do not sap our character. They make the private enterprise system work better.

Senator Rubio extols "compassion" but doesn't describe how it would work or how he proposes to pay for it. His prescription is as gauzy and ill defined as that supposedly golden time when, he says, "we" took responsibility. But, Social Security and Medicare are exemplars of responsibility, requiring everyone to contribute to their funding.

After the widespread failure of private retirement plans and the shriveling of private savings plans, Social Security has become more vital than ever to American families, not just seniors.
Senator Rubio's Reagan Center speech recycles his Senate campaign themes. Partisan audiences hardly notice or care about his contradictions, fact-free fantasies, faulty logic or gauzy prescriptions. Senator Rubio's speech was political fun and games. If we take it as serious analysis and policy prescription, millions of Americans and the economy would pay a terrible price.