What about the claim that the federal government needs the money to shore up Social Security? The Clinton-Breaux plan raises $11.3 billion over five years, according to the Congressional Budget Office. That is almost enough to buy two more years of solvency; putting off the day of reckoning from 2030 to 2032, by one estimate. Even on its own terms, this doesn't seem like a good deal. Why increase Social Security's liability by 5 million new beneficiaries for such a relatively small gain? And it is fair to ask, What do they need the money for? After all, the current budget surplus is entirely the result of a Social Security tax surplus. In the short run, the system has more money than it needs to pay current beneficiaries. But the president wants to spend the surplus--and the funds raised by taxing exempt employees--on an array of new proposals.
There are other flaws to the Clinton-Breaux plan. Some state constitutions mandate that all promised state benefit obligations be honored, regardless of the financial burden imposed upon the state; in such cases, new taxes will have to be levied to honor these obligations. The Clinton-Breaux plan is both a back-door tax increase and the kind of "unfunded mandate" the GOP once swore to oppose.
The Clinton-Breaux plan also violates the original promise of the Social Security system and does so in a way that should make us suspicious of any government claims about the system's future. When the Roosevelt administration dreamed up Social Security in 1935, the stated goal was to guarantee that industrial workers would have secure pensions. With the Great Depression threatening the life of so many enterprises, it seemed like a good idea to provide these workers with an independent, guaranteed retirement plan. Public employees were specifically excluded because Congress recognized that they were already safe from the swing of private sector fortunes.
Then President Roosevelt made a promise that revealed his administration's redistributionist aims. FDR allowed workers who retired after 1936--no matter how little they paid in--to collect full benefits immediately. That meant that the system had to expand to cover the costs of these unfunded liabilities. Small-business owners, farmers, doctors, and others who traditionally funded their own retirements were gradually forced into the system. Today, more than 148 million workers pay into a system that was just supposed to protect the working poor from poverty in old age.
After most private sector workers were absorbed, the federal government targeted other government workers--even though their retirements were secure. In 1954 Congress amended the Social Security Act to let states and municipalities voluntarily cover their public employees under Social Security. Some opted in, others stayed outside the system. This voluntary agreement was revoked in 1983, when Congress made it illegal for states and municipalities to continue to set up alternative retirement plans for their employees; only pension plans pre-dating the 1983 amendments were allowed to enroll new employees.
At the same time, all new federal employees were forced into Social Security. (Congress maintained that the 1983 amendments would ensure Social Security's solvency for at least another 75 years; a mere 16 years later, Social Security is again facing bankruptcy.) In 1990, the Social Security Act was amended again to force any public employee not already enrolled in an exempt plan into the system. Clinton proposes to close this last loophole, forcing the last handful of exempt workers into the Social Security system.
Soon there will be more people receiving Social Security checks than there are paying into the system. By the time the baby boom generation retires, the imbalance between payers and payees will probably be too great to sustain. That's why a Third Millennium poll shows that Americans aged 18 to 25 believe they are more likely to see a flying saucer than a dime from Social Security.
There is a better way: Let those whose retirements are already assured stay outside the system. Clinton and Congress should find a real fix for Social Security, one that doesn't ruin the retirements of teachers, clergy, and police officers.
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