THE BLOG

The Math Attack on Social Security

12/06/2010 12:59 pm ET | Updated May 25, 2011
  • Amitai Etzioni Professor of international relations, George Washington University

One of the oldest rhetorical tricks is to present what is actually a political and ideological attack as if it were a mathematical inevitability, a purely scientific conclusion. Indeed, at first it is impossible to see the flaw in the argument that, because much of the federal budget is spent on Social Security and Medicare, that to reduce the deficit one "must" cut these entitlements. As the refrain goes: "This is where the big bucks are." Speaking on NPR, Senator Michael Bennet (D-CO) pointed out that 65 percent of the federal budget is "Medicare, Medicaid, Social Security, and interest on the debt," and argued that hence, "we can't solve our budget crisis without dealing with our entitlements." Mackenzie Eaglen of the Heritage Foundation writes that "entitlements now account for around 65 percent of all federal spending and a record 18 percent of GDP." Referring to Social Security, Medicare, and Medicaid, she predicts, "If future taxes are held at the historical average, these three entitlements will consume all tax revenues by 2052." And, as every high school kid knows, there is no more than 100%.

The trick lies in assuming that the pie cannot be increased. The "inevitable" need to cut into entitlements is inevitable only if one refuses to collect additional revenues. A carbon emissions tax of $10 per ton of carbon content could generate $50 billion a year. Alternatively, a cap-and-trade system could generate as much as $1.9 trillion in revenue between 2012 and 2019. If the U.S. applied a broad-based Value Added Tax, which Europeans have, at a rate of 5%, it could generate as much as $260 billion in 2012. And let's throw in the $700 billion that could be collected if the super-rich among us had their income over $250,000 taxed at a slightly higher rate. Restoring the estate tax on estates worth over $1 million would yield about $1 trillion in revenue between 2012 and 2021. Another pot of money lies waiting if we would tax income from investment at the same rate as we tax income from labor. One need not agree to any of these revenue-generating moves to still admit that cutting entitlements is a matter of choice, not a mathematical necessity.

Raising revenue in these ways -- rather than cutting the benefits of elderly, ill, infirm, and handicapped Americans -- has many beneficial side effects. A carbon tax would help save us from frying, contribute to protecting the environment, and reduce our dependence on foreign oil. A VAT would encourage saving. Taxing investment fairly would lead businesses to use less capital (of which we are short) and more labor (of which we have plenty).

Ah, you say, but the Republicans would never agree to these measures. Now we are getting closer to the truth. We find that the crux of the issue is political, not mathematical. And speaking politically, whatever the Democrats do about cutting the deficit, the Republicans will claim it is too little. And even if the deficit is somehow eviscerated, at best the Democrats will gain the dubious stature of a "me too" party. Those who let their deficit concerns govern their votes are still going to prefer the GOP, which has long held the lead role (at least rhetorically) in attacking the deficit.

About the strongest suit the Democrats have, on the domestic front, is that they are known as the champions of Social Security and Medicare, two very popular programs. For the Democrats to participate in cutting these entitlements -- and thus giving cover for the GOP attack on social safety nets -- is not only far from the only way or best way to cut deficits, but also politically stupid. Other than that, Mrs. Lincoln, how did you like the play?

Amitai Etzioni is a University Professor at The George Washington University and the author of The Moral Dimension: Toward a New Economics.

YOU MAY LIKE