A democratic republic ceases to exist once its electorate recognizes the ability to enrich itself through the ballot box.
Powerful words. Attributed to Hamilton. Franklin. Perhaps de Tocqueville. Truth? No one knows the source. Nor does it matter.
You need only look around today's political landscape to see the fruition of such wisdom. Special interests. Lobbyists. Various voter blocks attempting to affect policy by manipulating those in office.
Conversely, that politicians will say anything to win office remains a non-partisan truism.
Today, one of the things being said to win the White House pertains to the granddaddy of all federal benefits: Social Security income (SSI). Among the most contentious, long-running balls to be swatted to and fro during presidential election cycles for 81 years.
Born of the Great Depression, the Social Security Act was created by President Franklin Roosevelt. And provides income to retirees and disabled workers. Initially, the Social Security Administration was charged with providing benefits only to retirees and some of the nation's unemployed. And benefits for retirees were not supposed to be permanent. But to provide a temporary "relief" program that would eventually disappear as more people were able to obtain retirement income.
Of course, a benefit given becomes an entitlement that cannot be taken back.
Regardless, Social Security will often leap from the lips of both party's torch carriers this fall. Fitting prominently into yet another cycle of presidential debates.
What truly raises my ire, however, will be the SSI fallacies perpetuated, yet again, by the Democratic candidate. Primary among them being that the Social Security Income benefit need be increased. As it allegedly falls short of meeting the needs of most retirees.
Sadly, there are those in the White House and Congress who have exploited the financial crisis to advance a big government tax, spend and borrow agenda. This being such an example. Because the fly in the ointment lies not with the inadequacy of the benefits received. But with the very concept and management of the Social Security Administration.
Before we delve in, however, consider the opinions held by the major political parties.
Democrats pledge to increase Social Security benefits. Because, they explain, American's retirement savings are inadequate, rendering unaffordable the cost of retirement. This can be resolved by raising taxes. So enabling the SSA to pay a bigger benefit to the nation's retirees.
Republicans, on the other hand, claim that benefit levels are fine. It is the administration's management that needs fixing. Which they pledge to do, and make Social Security solvent again. This might be achieved by reducing the benefits of high earning households. Or raising the retirement age. And possibly increasing the retirement savings options for Main Street Americans.
It goes without saying that ever American, considering these opposing vantage points from a non-ideological framework, would prefer the option proffered by Democrats. Who wouldn't want a bigger income benefit throughout retirement?
Unfortunately, the laws of economics prohibit the U.S. from offering bigger SSI benefits. That is, unless we want to usher in an inexorable economic catastrophe. Which is exactly where the non-partisan Congressional Budget Office (CBO) believes the nation will find itself if it pursues such utopian policies.
In a frightening report released last spring, the CBO revealed in-depth analysis on the U.S. budget deficit. Analysis that went largely uncovered by the media.
"Rising federal debt threatens to choke economic growth within a decade, beginning a death spiral that will sap revenue from government programs even as demands grow, forcing the government to borrow even more."
In fact, the report -- the first major issuance under new CBO Director Keith Hall -- took aim at other traditionally progressive arguments. Finding that government investments yield only half the return of investments made within the private sector. Noting that money transfers to the poor act as "implicit taxes," keeping them out of the labor force and depressing the economy even further.
"The long-term outlook for the federal budget has worsened dramatically over the past several years," the CBO said, blaming large deficits that piled up under President Obama's stimulus, as well as other fundamental changes to the economy that have caused Americans to leave the workforce in favor of government support.
Nor will these debt trends be rectified by an aging population saddled with rising healthcare costs. Nor by a less-motivated workforce and ever more generous promises of government assistance. Serving only to increase annual deficits and worsen the nation's debt burden. Eventually imposing a permanent drag on the nation's economic productivity. An economy that hasn't reached three percent growth for a decade.
After the report's release, the House Budget Committee Chairman recognized the report for what it was: stunning. He called for immediate action on the big entitlement programs currently draining the Treasury. Both parties agreed. Until Democrats blushed at the necessary spending constraints. Then attacked Republican proposals for such restraints. Lobbing populist appeals via the media to voter blocks across the country. Meant to elevate levels of fear and anxiety over the dastardly Republican intentions. Followed by demands for even more spending on education, infrastructure and research.
I'm no economist. But I'm pretty sure you can't solve an existential budget crisis by raising spending and increasing the budget. Though I've been wrong before.
Of course, Rep. Chris Van Hollen, the ranking Democrat on the Budget Committee, disagreed. Stating that expanding government investments will quickly boost Americans' take-home pay by pumping more money into the economy.
"Responsible deficit reduction does not mean billions of dollars in unpaid-for tax breaks," he said. "It doesn't mean recklessly cutting spending - despite the fact that the cuts will slow economic growth - or arbitrarily demanding a balanced budget. It does not mean disinvesting in America's future and turning our back on the promises we've made to America's seniors."
[Translation: regardless of how accurate your scary economic analysis may be, we will not reduce government spending. Nor will we stop using your common sense proposals to scare the hell out of senior citizens!]
Of course, Mr. Hollen forgets that the report was not produced by the GOP. But by the CBO. A non-partisan spending and budget watchdog assigned to keep Congressional spending levels in check.
So revealing that when the watchdog barks at trouble, just shoot the watchdog.
The CBO explains that federal debt will soon hit record levels (measured against the size of the economy). Matching the amount accrued at the end of World War II. At that time, however, the government quickly paid off its debt. Ushering in decades of prosperity. Unfortunately, the current trends portend unsustainable debt levels for the foreseeable future.
Sustaining the current debt level -- at about 75 percent of the economy -- would require middle-class families to pay $750 a year more in taxes.
Returning to the debt levels of most of the past five decades translates to a $1,700 annual tax increase per middle-class household. Or, the implementation of across-the-board spending cuts would mean cutting the average retiree's first-year Social Security payments by $2,400.
"To put the federal budget on a sustainable path for the long term," explains the CBO, "Lawmakers would have to make major changes to tax policies, spending policies or both."
Sounds reasonable. Or, we can forge ahead into the aforementioned economic death spiral. Which brings us back to Social Security.
Progressive dogma contends that Americans face a retirement crisis because of inadequate retirement benefits.
But dogma is often untrue.
Most financial advisors believe that 70-80 percent equates to a good retirement income replacement rate. And while financial advisors compare income replacement rates to a single year's earnings -- often an average of the years preceding retirement -- the Social Security Administration (SSA) takes a wholly different approach. Using career average earnings indexed for the growth of wages across the economy.
Which is a problem. Because, according to The Wall Street Journal, the SSA's wage indexing overestimates the purchasing power of lifetime earnings by 20 percent. So making the SSA's retirement replacement rates -- which the SSA says averages only 40 percent -- appear low.
So who can you believe?
The natural progression of government is always bigger. So any government agency -- the SSA included -- will forever seek access to bigger budgets and deeper purses.
On this topic, however, the non-partisan CBO and the bipartisan Social Security Advisory Board lent some objective analysis. The results were striking.
The panel compared SSI benefits to an inflation-indexed average of the final five years of a worker's earnings. These were defined as annual earnings equal to at least half the individual's career-long average. As opposed to some myopic nationwide index. Further, these calculations were restricted to individuals earning at least 10 percent of the national average wage over a 20-year-or-more career.
In other words, the study looked at the benefits provided those actually contributing to the Social Security Trust over time. Who, for the record, should not be the only one's receiving a benefit. But should be the only one's determining the scope of such benefits.
A typical middle-class worker born in the 1960s and retiring in the 2020s will be eligible for a SS benefit equal to 56 percent of late-career earnings. More compelling, lower earners in the bottom 20 percent of lifetime earnings will receive benefits equal to 95 percent of their late-career earnings.
Strikingly, the CBO results excluded spousal or widow benefits that more than one-third of female retires receive in addition to their own. Meaning that the actual replacement rates for many retired women were significantly higher than the CBO figures.
Further accounting for 401(k) plans and other retirement savings vehicles, and a 70-80 percent replacement rate is not be beyond the realm of possibility. And with the Federal Reserve stating that nation's retirement savings have hit record levels relative to personal incomes, there's little reason to doubt such possibilities.
Of course, these objective non-partisan findings will not prevent politicians nor partisan ideologues from doing what they do. Promising the world. With little thought as to the logistics or mechanics of such hyperbole. Then seeking ever-bigger budgets and resources once in office.
Point is, the CBO data skewers the oft-voiced fallacy that the nation faces a "retirement crisis." As well as the supposition that the crisis can only be fixed by expanding social security benefits. Inevitably equating to expanded taxes, budgets and government.
Revealingly, the CBO report provided did show that the Social Security Administration is not without issues. For the report provided a sobering assessment of the administration's handling of the SSI program. A program that is underfunded by 24 percent for the next 75 years. The solution for which is an additional 4.37 percent payroll tax increase atop the existing 12.4 percent tax.
So, the CBO study shows that current SS Income replacement rates appear much more adequate than the oft-touted figures used to presage a retirement crisis. Yet it also reveals a program that remains incapable of being able to pay what it has promised. Highlighting the tomfoolery of expanding benefits before Social Security's administration and finances have been remedied.
What Social Security needs is not expanded benefits but more effective administration. But that denies the government what it wants. And demands what it cannot provide
All of which shows that the cost of big government is always more. As mismanagement and inefficiency rarely result in lower taxes and smaller budgets.
Proponents of bigger benefits have their own solution. Remove the ceiling on earnings subject to the SS payroll tax, currently at $118,500, and tax every dollar earned by every worker. Even then, those suggesting this preposterous solution don't intend to fix the administration's management. But to raise the SSI benefit.
Perpetually leading us back to bigger, bolder and more impossibly unfeasible promises. Of course, politics has never been played within the realm of the possible.
Nor would such an expansion of the SSI payroll tax even work. As taxing all earnings would only meet 41 percent of Social Security's long-term deficit. In order to fix the rest, the SSA will have to cut benefits or raise taxes on lower-earnings households. Which the Democratic front-runner has pledged not to do.
Occasionally, reality thwarts even the most fantastical political ambitions.