Demographics and the third rail of politics

On Monday, February 23, the Associated Press reported surprising news: Social Security’s insecurity beat joblessness as the top economic issue for the coming election.

That result may well be a historic first, one that portends the disruption of the tranquil politics of Social Security.  For the last 80 years, politicians have said just enough about the program to get elected, and then done as little as possible in order to get re-elected.  That strategy works.

Hillary Clinton is the personification of this political tactic.  She will tell you what she won’t do while telling you nothing about what she will do.  She has promised to consider asking high-wage earners to contribute more but can’t tell you what she will do when they say “no.”  She has said that Social Security is unfair but can’t tell supporters what changes she believes are necessary to make the program fair to those “unfairly treated by the system.”

The politics of blah-blah-blah thrived in the past on a dedicated supply of indifference in the voter base.  The political calculus served older voters, who expected to be dead long before the consequences of their votes arrived.  As recently as 2009, that audience included about 50 percent of voting-age Americans.  The policies also drew support from a younger audience possessed with the misguided idea that Social Security is an unquestioned expense that keeps seniors from starving in the streets.

This political ploy will face demographic challenges as current voters realize that reforming Social Security will affect them personally.  In their most recent report, the Trustees of the program’s Trust Funds reported that the system has about a coin-flip chance of paying full benefits into 2034.  That means that people turning 49 this year expect to retire the year that the Trust Fund is exhausted.  That is roughly 50 percent of voting-age Americans. 

The trend is that more people will follow the issue.  Every day, 10,000 Boomers reach normal retirement age.  About half of the people turning 68 this year reasonably expect to be alive in 2034.  They will worry less about the job that they don’t have and more about the meal ticket on which they depend.

The finances of Social Security are also unraveling much faster than the public generally understands.  Since 2009, the cost to keep Social Security “solvent” has quadrupled according to Andrew Biggs, AEI’s policy expert for Social Security.  The system now accrues unfunded liabilities faster than it collects revenue.  In other words, every penny of benefit paid in 2016 comes at the projected expense of a future retiree.

The younger audience present an even larger problem for politicians depending upon a docile electorate.  When I was a kid, children were raised by people who truly believed that Social Security was the greatest accomplishment of government.  Now kids are raised by people who call it a Ponzi scheme.  That dynamic will not improve as politicians ask these parents to work until 70 in order to preserve the system for political convenience.

Unfortunately for polite politics, Bernie Sanders is agitating his base with a plan.  It is a crazy plan, one that would divert $11 trillion from debt control to expand and extend Social Security.  His incremental spending is largely directed to wealthier seniors.  His promise to preserve Social Security for 50 years is essentially the cost to make the Boomers’ problem a larger problem for Millennials.

The GOP on the other hand is largely committed to preserving benefits for current voters, but these politicians haven’t said what taxes they will raise in order to fulfill that promise.  What little benefit reductions that they support largely do nothing.  The GOP is offering one benefit reduction in order to replace the one that will be forced into insolvency anyway.

Comically enough, some people believe that demographics will insulate Social Security from economic gravity as the finances of the program unravel.  The reality is that demographics will doom Social Security politically long before they can financially.

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