Yes and no. Paul Krugman is mostly convincing.
But Social Security isn’t a big problem that demands a solution; it’s a small problem, way down the list of major issues facing America, that has nonetheless become an obsession of Beltway insiders.
Krugman is also right on the most pressing issue.
As Peter Orszag, the director of the Congressional Budget Office, put it in a recent article co-authored with senior analyst Philip Ellis: “The long-term fiscal condition of the United States has been largely misdiagnosed. Despite all the attention paid to demographic challenges, such as the coming retirement of the baby-boom generation, our country’s financial health will in fact be determined primarily by the growth rate of per capita health care costs.”
So why “yes and no”? It’s important to keep in mind that virtually no social policy is neutral across different family structures and work-life strategies. While Social Security is in decent fiscal shape, as Krugman suggests, that doesn’t change the fact that the program is at odds with many things we care about, or ought to care about. Here we enter controversial territory.
Social Security is framed as “social insurance,” as a hedge against inadequate retirement savings. But of course aging is not an unanticipated outcome: we fully expect to grow old. And so inadequate retirement savings aren’t really the same as, say, catastrophic health expenditures or a car accident, etc. For many Americans, the fact that Social Security will provide a basic minimum might even discourage retirement savings, particularly since the payroll tax is very steep. Social Security also offers an alternative to the extended family. While it ‘s true that Social Security benefits retirees, it also benefits workers with retired parents: it reduces the pressure on them to provide financial and even moral support.
Of course, this moral support is exactly what older Americans need to survive, social isolation being one of the key killers in affluent societies. It is absurd to blame social atomization on Social Security. But Social Security did represent a strike against the multigenerational family, which as we’ve seen has broad environmental benefits as well as social benefits.
Most obviously, consider how Social Security treats second earners, who tend to be women. The program
treats married couples with the same total earnings differently by granting smaller benefits to those whose earnings are more equally split between spouses
This hasn’t become a frontline issue, in large part because one side of the debate was cast as fundamentally unsympathetic towards a profoundly popular and valuable program. But it does have an uneven and frankly unfair impact.
Some kind of Social Security reform that combines notional accounts, early retirement accounts, and abolition of the formal retirement age would go a long way towards solving these minor problems. The larger problem, how the welfare state interacts with family structure, requires a more comprehensive approach.
My ur-theme of the moment is the metropolitanization of politics, which I hope to describe at greater length soon.