David Altig at Macroblog dissects the article in today's New York Times on Social Security, "Bush's Social Security Plan Is Said to Require Vast Borrowing." I commend the whole post to your attention, but here's the concluding paragraph, which is right on the money:
The deficit is, pure and simple, a pretty poor basis on which to evaluate the pros and cons of any fiscal policy. What matters is how much we spend and what we spend on, how we collect the revenues and who we collect them from, over the long haul. Debate about the short-run deficit is a diversion from the important business.All deficits matter, but trying to evaluate a change in an intergenerational transfer program based on the surpluses or deficits that occur during a five- or ten-year window is not particularly constructive. I posted about the inadequacies of the budget framework last week.
The NYT article contains more evidence that the issue is not being framed properly in Washington. Consider this paragraph:
The main Republican players in Congress on the issue say they expect to endorse an increase in borrowing to finance the transition to a new system. But they remain split over whether to back plans that would include larger investment accounts and few painful trade-offs like benefit cuts and tax increases - and therefore require more borrowing - or to limit borrowing and include more steps that would be politically unpopular.
This is almost entirely a false tradeoff. The system has projected obligations that exceed projected revenues by $10.4 trillion in present value. This is the amount of "politically unpopular" measures that must be taken to restore the system to solvency. This figure has nothing to do with the size of the personal accounts that may also be carved out of the system, except insofar as a greater opportunity to make private investments in personal accounts makes the whole reform package easier to pass.
I laid out my reform suggestions for Social Security here and here about a month ago (and offered plenty of criticism of the way Democrats in the Congress and on the campaign were discussing the issue). With the election behind us, my biggest fear in this process is that we will get debt-financed personal accounts without the necessary measures to restore solvency.