A Roadmap for killing Social Security

Like a zombie tromping through a Hollywood gorefest, the idea of privatizing Social Security still walks among us.

The last promoter of the idea that people should personally invest their Social Security assets in the stock market was President George W. Bush, in 2001. With the dot-com crash still ringing in people’s memories, the idea died in 2005.

The market hasn’t yet recovered from its most recent crash, but the monster unaccountably is back on its feet. This time it comes dressed up as part of the “Roadmap for America’s Future” recently unfurled by Rep. Paul D. Ryan (R-Wis.), the ranking GOP member of the House Budget Committee.

The Roadmap is a retort to the charge that the Republican Party contributes no ideas to the national debate on fiscal issues, only “no” votes in Congress. It’s a road map to the dismantling of federal social programs under the guise of making them fiscally sound, while cutting taxes for the rich. (The plan eliminates taxes on capital gains, interest and dividends.)

Social Security comes in for particular abuse. Ryan states that “Social Security’s shrinking value and fragile condition pose a serious problem. . . . To maintain the program’s significant role as a part of the retirement security safety net, Social Security’s mission must be fulfilled . . . without bankrupting future workers.”

One doesn’t want to be picky about an elected congressman’s words, but with all due respect, these words are pure bilge. They come straight from the talking points of Social Security’s historical enemies: conservatives who have never believed that the government should play such an important role in people’s retirement planning, and mutual fund and insurance companies that hanker for the business generated by millions of Americans looking for a profitable place to park their retirement assets.

Social Security’s value to the average American isn’t “shrinking” -- it’s expanding. In 1962, it accounted for 30% of the income of Americans aged 65 and older; in 2007 that figure was 36%. (These numbers come from the Social Security Administration.) Given what’s happened to most families’ financial assets since 2007, the percentage probably is even higher today.

Its “fragile condition”? Social Security runs an annual surplus and has done so since 1983; no other government program can make that claim.

By the way, even when the program starts paying out more in benefits than it collects in payroll tax, that’s not a “crisis,” as it’s often portrayed -- it’s the expected outcome of changes implemented after 1982, when the tax was raised sharply to provide a cushion against the coming wave of baby-boomer retirements. The accumulated surplus in the program’s trust fund at the end of 2008 was $2.4 trillion.

To address these nonexistent issues, Ryan would place a greater proportion of people’s retirement income at the mercy of the stock market, mocking the very idea of a “retirement security safety net.”

His privatization scheme would allow workers under 55 to place more than one-third of their current Social Security taxes into personal retirement accounts, with the ultimate goal of shifting most of that money into the stock market. The enticement is that the stock market, over time, yields more than other investment sectors, so future retirees will have a bigger nest egg than they’re promised today by Social Security.

Ryan offers two sweeteners to lure workers into the deal: Retirement income attributable to the private accounts would be tax-free, and the government would guarantee that whatever happens, benefits would be protected from inflation.

But as with every “guarantee” of financial wealth, this is a shell game. For one thing, the guarantee has to be funded from the federal budget -- presumably by borrowing. That’s because Ryan’s plan sucks revenue out of the program for years before the ostensible gains from stock market earnings take root.

When Social Security’s chief actuary examined a Ryan proposal in 2008 (it’s nearly identical to the Roadmap provisions, as far as I can tell), he concluded that annual infusions from the general fund totaling $4.3 trillion in present value would be required over a long, 30-year transition period, from 2032 through 2063.

“The individual account plans don’t hurt in the short term,” economist Peter A. Diamond of MIT, an expert on Social Security, told me this week. “But over the medium term they hurt a lot.”

Diamond observes that shifting any portion of the program’s funding to the general fund from the payroll tax, which is dedicated to Social Security and Medicare, undermines the future of Social Security.

“Politically, dedicated revenue is much more secure than revenue you have to take out of the annual budget,” Diamond says. “The fact that we’ll go through an extended period with the money coming out of the annual budget puts Social Security at risk. And the fact that to handle this we’ve got to do a whole lot more borrowing puts the finances of the entire federal government at risk.”

As the Congressional Budget Office advised Ryan last month, the guarantee would become even costlier “during periods of economic stress” like recessions -- for that’s when investment returns are most likely to fall below the inflation rate and therefore trigger greater and possibly more politically sensitive infusions from the government. One could argue that such major market reversals will occur only rarely in any average worker’s lifetime. But one could also point out that we’ve had two in the last 11 years.

What is Ryan really up to? His Roadmap would achieve a goal that conservative opponents of Social Security have cherished for decades: killing the program by undermining its broad base of popular support. It would sap Social Security’s resources, increase its complexity and hammer a wedge between the currently retired or near-retired (who would be guaranteed their current statutory benefits) and younger workers and the future workforce (who would be increasingly on their own). The term for this is “divide and conquer.”

President Obama has drawn a bold line against this sort of tampering with Social Security. His formal position on the program is that he “stands firmly opposed to privatization and rejects the notion that the future of hardworking Americans should be left to the fluctuations of financial markets.”

One would hope that’s enough to stop Ryan’s plan in its tracks. But is it? The actor Woody Harrelson delivered a star turn in a recent picture as a vigilante who decapitated the walking dead with tremendous brio. Can’t we set him loose on the Roadmap?

Michael Hiltzik’s column appears Sundays and Wednesdays. Reach him at, read past columns at, and follow @latimeshiltzik on Twitter.