Steven Mufson, is deputy editor of the Outlook page and covered economic policy for The Washington Post from 1990 to 1993.  Last Sunday he got to the core of things in the Post’s Sunday Outlook section.  This Social Security debate is about a shared sense of community (pooling of resources and reducing risk) versus individualism (personal responsibility and the individual assuming the risk).   No more and no less.  As my conservative friend argues, any pooling of resources for the common good, especially when it is not voluntary (he never agreed) does more harm than good – as strips away any sense of personal responsibility people should have.  It is bad for the country.  He knows the program has done some good, but the cost to the nation’s character is far too high.  A thirty-five percent poverty rate for folks over sixty-five, we on the other side argue, is bad for the country, and we fixed that with this program.  And we argue the nation’s character is also shown by chipping in and making sure folks don’t starve in the streets – as that’s too high of a cost the other way.  We will never agree.

The Post item is this -

FDR's Deal, In Bush's Terms

Steven Mufson, The Washington Post, Sunday, February 20, 2005; Page B03

The key passage is this -

How we talk about policy says a lot about how we think about it. Is Social Security a planning vehicle that an individual uses for his or her own retirement, or is it a pooling of resources so that all of society can meet the needs of its older members? Is it about each person saving for himself, or is it a matter of young helping old and rich helping poor?

In couching the Social Security debate largely as a matter of personal rather than collective interest, Bush is redefining the program's very essence. The president's drive to divert a portion of payroll taxes from traditional Social Security benefits to personal accounts for every worker is a departure from the origins of the program and the way people talked about it then.

… Bush says, "I believe the so-called investor class ought to be every American, regardless of his or her background." For Roosevelt, Social Security was a matter of obligation; Bush describes his initiative as a question of "ownership." Roosevelt saw payroll taxes as a device to make people feel invested in the program. Now, many younger workers have doubts about whether they will see any return from their payroll taxes.

Bush has fueled that perception in order to pry apart the sense of common obligation that once underlay Social Security -- and in doing so, has changed the terms of the Social Security debate.

Rick, the News Guy in Atlanta responds -

You day this Social Security debate is about a shared sense of community (pooling of resources and reducing risk) versus individualism (personal responsibility and the individual assuming the risk).  No more and no less.

Well - and please pardon me for saying this, but - "more or less."

In fact, that may be the way certain conservatives frame it, especially those "either/or" folks who think of any and all "shared sense of community" as nothing short of "socialism".

But most the rest of us, and I'd put FDR in this group, are big believers in both. After all, safety-nets don't mean everyone is supposed to use them to break their fall on their way to an otherwise bone-crushing death on the ground; most people, it is supposed, will keep walking the tight-wire until they reach the end and can manage their own way down. (And if you've ever heard from someone who has had to use one of those nets, you know that climbing down on one's own is much more comfortable.)

But yes, Bush's "ownership society" language should be another obvious tip-off to understanding the snakeoil sales-pitch. And by the way, as long as we're privatizing the public sector, I myself call dibbsies on an F-14 Tomcat, and maybe a congressman or two - my point being, of course, that we need to give some serious consideration before dismantling certain jobs we had assumed the public sector should be managing.

In truth, before we go ahead with Bush's plan, we need to realize that what his somewhat riskier "personal accounts" do is take not only the "Security" out of "Social Security," but also, since we would no longer be "pooling" the risk, take the "Social" out of "Social Security" as well.

So the task remains to come up with a catchy name for what's left after Bush takes both the "Social" and the "Security" out of "Social Security". How about this: "Personal Insecurity"!

(Okay, okay, we'll keep working on it.)

PS: A question regarding this statement below:

"Bush justifies the multi-trillion-dollar cost of using Social Security funds to create personal accounts by saying that over the long-run, the government would save trillions more because it would shed some of the obligations it pays under Social Security now."

Okay, as I understand Social Security, a large amount of money now is paid into the system through payroll taxes, while a relatively small portion of that is paid out in benefits, leaving us an actual surplus that is invested in T-bonds, creating a trust fund to insure money we can use to pay out benefits in the future. If so, this would mean the program is theoretically "self-sustaining," notwithstanding future adjustments to help make sure it stays that way.

So what am I missing here? Could someone who understands this stuff better than I do please tell me what these government "obligations" are, the "shedding" of which will save us "trillions"?

Thanks in advance.

What is Rick missing?  He says "a large amount of money now is paid into the system through payroll taxes, while a relatively small portion of that is paid out in benefits, leaving us an actual surplus that is invested in T-bonds, creating a trust fund..."  

That money has been spent. 

The trust fund is plowed into general revenue to pay for the day-to-day expense of the government - that what you do with the revenue from Treasury bonds.  You could look it up.  This kept the deficit lower than it otherwise might have been.  What do he think all that talk of creating a "lock box" for Social Security was all about back in the Gore-Bush campaign?  The money is there, tons of it, yes, in that these Treasury bonds are guaranteed by the government, as all government Treasury bonds are.  But it is not an "actual surplus" - it is more a virtual surplus.  And Bush has been hinting he will instruct the government to default on those bonds.  It sure beats having to pay them back.  Maybe our friend Vince who teaches in a graduate business program can explain better.

But see this -

Saturday 12^th February 2005 (22h28):

Bush Says Social Security Trust Fund Doesn't Exist

President Bush slipped something new into his Social Security pitch on Wednesday. And it was there again twice yesterday.

He says Social Security's $1.8 trillion trust fund doesn't really exist. Even in Washington, that's a lot of money to go missing.

Here is Bush, from the transcript of his talk at the Commerce Department on Wednesday:

"Some in our country think that Social Security is a trust fund -- in other words, there's a pile of money being accumulated. That's just simply not true. The money -- payroll taxes going into the Social Security are spent. They're spent on benefits and they're spent on government programs. There is no trust. We're on the ultimate pay-as-you-go system -- what goes in comes out. And so, starting in 2018, what's going in -- what's coming out is greater than what's going in. It says we've got a problem. And we'd better start dealing with it now. The longer we wait, the harder it is to fix the problem."

Some quick background:

Social Security is indeed fundamentally a pay-as-you-go program. But ever since 1983, workers have been paying more in Social Security payroll taxes than was strictly necessary to cover benefits. The idea was to build up a reserve for when the Baby Boom retired.

By law, the proceeds -- and they have grown, with interest, to $1.76 trillion last I heard -- are invested in Treasury bonds. Just like the proceeds of other Treasury bonds, that cash is then spent by the government for its programs -- so it's not just sitting there in a pile somewhere, just like Bush says. And, in fact, just like with other Treasury bonds, the government will have to raise the revenue down the road to pay them back eventually -- which may not be easy.

... Former Bush speechwriter David Frum, appearing on MSNBC's Hardball with Chris Matthews right after the State of the Union address, hailed Bush for being bold enough to say "that the Social Security trust fund isn't there, and the problem begins in 2018, not so very far away."

In his blog, Frum later explained: "If Fred writes an IOU for $10 to Jim, Jim has an asset. But if Fred writes an IOU to Fred for $10, he has not created an asset for himself -- he's created a reminder notice.

"And that's the situation of the Trust Fund."

Our business school professor replies -

Hey -I don't think I want to go anywhere near this one!

You are absolutely right about current use of forward resources - but what's real and what's not - what's illusory even to Wall St - is an awfully tough nut - and I'm not personally inside the numbers...  (And who IS these days?  That’s a GOOD question!)

Hey - I'm just the smart marketing guy - depending on expert partners for deeper qc before I commit budgets...

.. what was the famous old line, "verifiable..." ?

And Rick in Atlanta comments -

Okay, that helps.

I never was quite sure why people kept saying there is no such thing as a "Social Security Trust Fund," but this explains it well enough that I may now say, with a certain amount of conviction, that the people who make that claim are, as they say in France, "full of shit."

Although I guess I did already know this, I think the problem comes from how one views the situation. Here, for example, is how David Frum (also known as the man who invented the "Axis of Evil") puts it:

"If Fred writes an IOU for $10 to Jim, Jim has an asset. But if Fred writes an IOU to Fred for $10, he has not created an asset for himself -- he's created a reminder notice. And that's the situation of the Trust Fund."

That would be true, except for the fact that it's not.

The Social Security Trust Fund is not a case of Fred loaning money to himself, it's a case of Fred loaning money to his deadbeat brother, Jim. Put another way, Social Security is not the government, it's an independent self-sustaining program that theoretically has nothing to do with government's taxing and spending except that it loaned some money to it.

But if he'd known from the start that brother Jim was going to be so irresponsible, spending the money with no intention of paying it back, maybe Fred should have loaned the money to someone more trustworthy. After all, a bond is not a gift, it's a loan, and loans must be paid back.

The fact that the government is spending that loan money is not really the point; that's what is supposed to happen. The problem comes when the government hints it may not pay the money back. In addition to creating a crisis for its own citizens, this trick, one would think, might also do bad things to its credit rating.

And when, after the borrower starts hinting that he might not repay the loan, but still keeps spending the money anyway, and furthermore reduces the taxes that might be used to pay that loan back, and then, having created this crisis, starts screaming "Crisis! Crisis! We need to fix this!" - one starts to think we're not so much lending the money to our own government as to some criminal enterprise! (Does anyone here think it might be possible to indict the Republicans on federal racketeering charges?)

But yes, Virginia, there actually is a "Trust Fund". The real question is, where is the trust? These untrustworthy people, especially the president, seem to be doing everything in their power to undermine it.

Ah, trust is for sissies.  And the president and his crew are just making it so everyone assumes personal responsibility of his or her life.  First order of business?  Make sure no one trust the government.  They’re working on that.  Heck, they’re pretty much there.