Former Senator Simpson, co-chair of President Obama's Fiscal Responsibility Commission, calls our Huffington Post blog opposing Social Security benefit cuts and raising retirement age "a remarkable spew of drivel" and "an "extraordinary screed." His letter with that attack (below) invited our comments. Here they are.
All that we hear from commission members is the supposed need to trim Social Security benefits and to raise retirement age, which also cuts benefits. That is strange because Social Security does not contribute to deficit growth. Cuts are not necessary because the Social Security trust fund, now at $2.6 trillion and projected to grow to over $4 trillion, makes the funding outlook quite solid for another quarter century. Then, if necessary, a very modest FICA rate increase, about 1% for employees and a matching amount by employers, would banish the small Social Security long-term shortfall. Meanwhile, improved earnings -- which are projected -- would make such a change completely affordable. Why don't we hear about that from commission members?
The secrecy of Commission meetings denies the public and experts any opportunity to address areas of concern. Here we do not know what the Commission asked Steve Goss which might explain why he emphasized the aged dependency ratio in the material you sent us. While demographic dynamics are important to Social Security funding, so are other factors, like the level of employment. And, as our post shows, improved productivity has offset some dramatic shrinkage in the working population. For example, in 1900, almost 40% of the work force farmed; today, fewer than 2% do. By the alarmist logic of the aged dependency ratio, the United States would be starving. Of course, we are not because the technology of food production has changed so spectacularly. This argues for greater attention to encouraging technological innovation and education and training to use it. And, of course, few advances match the enhancement of productivity achieved by computerization. As late as the 1990s, that effect was pooh-poohed by many.
Further, Social Security benefits are quickly transformed into purchases of goods and services. Reducing them would reduce business income by hundreds of billions of dollars. Social Security is performing just as it was designed to: expand benefit payout when the economy weakens and building on the biblical principle of laying up reserves during years of plenty to meet needs in leaner years.
Our article presented analyses shared by nationally respected economists. More importantly, a majority of the American people support our conclusions.
Here is the letter we received: