Tuesday, October 30, 2007

Yes, there is a crisis

Atrios claims that not only is there no Social Security crisis (something I'm inclined to agree with, if only on linguistic grounds), but that:

"[H]aving [Obama] suggest that Social Security is a problem which needs to be dealt with by any serious candidate is like the bat signal for people like me. There is no problem with Social Security. None at all. Whatever broader fiscal time bombs exist have absolutely nothing to do with Social Security."

This "ostrich-neck syndrome" when it comes to New Deal and Great Society programs on the left is the equivalent of the Right's "ostrich-neck syndrome" when it comes to the War on Drugs. It shows a fundamentally gawdawful understanding of simple economics. The argument that Social Security faces no fundamental problems amounts to an argument that you can take a system designed for people living for x years after they retire (and which is theoretically funded by the salaries those people made), and maintain it when those people are, on average, living x+y years after they retire. Simple common sense, logic, etc., will tell you that this is impossible.

Moreover, we already have a pretty good example of a similar system collapsing under its own weight. At this point, it's pretty well understood that one of the biggest reasons Detroit is becoming increasingly less competitive in the global auto industry is its pension plan system, which creates an additional $1500 (I've actually seen this number a bit higher from other sources) in overhead for every car produced. I've seen the Left complain increasingly about "disappearing pensions" in the private sector more generally; unfortunately, the belief is usually that these plans are disappearing because of theft and greed. Unfortunately, it's emotionally easier to blame theft and greed rather than deal with the simpler, Ocham's razor explanation: just as you can't consume more than you produce, you can't take out more than you put in.

Of course, the retort is simply going to be "well, raise taxes to pay for the increased costs," as if you can raise taxes ad infinitum without ever having a negative effect on the economy as a whole. We can disagree about the point at which that negative effect will begin, but the fact is that simply raising taxes does nothing to solve the underlying problem, which means that you will have to continue to raise taxes every so often as people continue to live longer and longer. Eventually- whether 10, 25, 50, 100, or 200 years from now- you will get to a point where you can't increase taxes any more.