The 3rd Rail Of Politics Is.... Derailing

The media largely missed an AP poll in which Social Security beat joblessness as the top economic issue for the coming election. For the 3rd Rail of Politics to work, the voter base has to have a large segment of people who aren't affected by the impact of their vote.  This is what the poll means, and why now. 

This piece originally appeared on American Thinker.

For the last 80 years, politicians have said just enough about the program to get elected, and then done as little as possible to get re-elected. That strategy works.

Hillary Clinton is the personification of this political tactic.  She will tell you what she won’t do, while telling you nothing about what she will do.  She has promised to consider asking high-wage earners to contribute more, but can’t tell you what she will do when they say “no”.  She has said that Social Security is unfair, but can’t tell supporters what changes she believes are necessary to make the program fair to those ‘unfairly treated by the system’.

Voters Will Be Affected This Time

The politics of blah-blah-blah thrived in the past on a dedicated supply of indifference in the voter base. The political calculus served older voters who expected to be dead long before the consequences of their votes arrived. As recently as 2009, that audience included about 50 percent of voting aged Americans. The policies also drew support from a younger audience possessed with the misguided idea that Social Security is an unquestioned expense which keeps seniors from starving in the streets.

This political ploy will face demographic challenges as current voters realize that reforming Social Security will affect them personally. In their most recent report, the Trustees of the program’s Trust Funds reported that the system has about a coin flip chance for paying full benefits into 2034.  That means that people turning 49 this year expect to retire the year that the Trust Fund is exhausted.  That is roughly 50 percent of voting aged Americans. 

The trend is that more people will follow the issue. Every day, 10,000 Boomers reach normal retirement age.  About half of the people turning 68 this year reasonably expect to be alive in 2034. They will worry less about the job that they don’t have, and more about the meal ticket on which they depend.

The Demographics of younger workers
The finances of Social Security are also unravelling much faster than the public generally understands.  Since 2009, the cost to keep Social Security ‘solvent’ has quadrupled according to Andrew Biggs, AEI’s policy expert for Social Security.  The system now accrues unfunded liabilities faster than it collects revenue.  In other words, every penny of benefit paid in 2016 comes at the projected expense of a future retiree.

The younger audience present an even larger problem for politicians depending upon a docile electorate. When I was a kid, children were raised by people who truly believed that Social Security was the greatest accomplishment of government. Now kids are raised by people who call it a Ponzi scheme. That dynamic will not improve as politicians ask these parents to work until 70 in order to preserve the system for political convenience.

Political Uncertainty none of these people have a plan

Unfortunately for polite politics, Bernie Sanders is agitating his base with a plan. It is a crazy plan, one which would divert $11 trillion from debt control to expand and extend Social Security. His incremental spending is largely directed to wealthier seniors. His promise to preserve Social Security for 50 years is the essentially cost to make the Boomers problem a larger problem for Millennials.

The GOP on the other hand is largely committed to preserving benefits for current voters, but these politicians haven’t said what taxes it will raise in order to fulfill its promise. What little benefit reductions that they support, largely do nothing.  The GOP is offering one benefit reduction in order to replace the one that will be forced by insolvency anyway.

Comically enough, some people believe that demographics will insulate Social Security from economic gravity as the finances of the program unravel.  The reality is that demographics will doom Social Security politically long before they can financially.

No Matter Who Wins In Iowa, Social Security Loses

No matter who wins in Iowa, Social Security loses.

AARP says that 8 out of 10 voters in Iowa want a plan for Social Security.  No one has a plan, including Bernie Sanders.

The leaders of the GOP field do not have a plan - if they do Google cannot find it. The GOP’s solution to the financial problems in the system is to convince younger workers to accept them.

Democrats are willing to tax high-wage earners. That means that they are willing to throw money at the problem. This approach is OK with supporters because it is largely someone else’s money. The problem is, of course, that much of the incremental revenue is going to current beneficiaries rather than to shoring-up the system’s long-term financial picture.

For nearly eight of ten Iowa caucus voters, this election will be a disappointment. For ten out of ten Americans, it will be a bust. (read : See more at: http://www.fedsmith.com/2016/02/02/presidential-candidates-social-security-proposals-throw-future-seniors-under-the-bus/#sthash.XGuqtqMF.dpuf)