Social Security in 1998: For The Record

When I’m arguing about Social Security, there comes a point when I just know that someone is going to bring up the fact that even Bill Clinton said there was a Social Security crisis back in the late 1990s. Every so often, it crossed my mind that I might write something about why he said this, but somehow I never did. Now I don’t have to, since Mark Schmitt has written a much better version of that post than anything I would have managed. He’s responding to an annoying article by Nicholas Kristof, in which Kristof makes the Clinton move:

“As Bill Clinton declared in 1998 about Social Security reform: “We all know a demographic crisis is looming. … If we act now it will be easier and less painful than if we wait until later.” Mr. Clinton then made Social Security reform a central theme of his 1999 State of the Union address, saying, “Above all, we must save Social Security for the 21st century.” “

Schmitt makes two points in response to this. The first:

“It is true that five years ago, the idea that the long-term financing problems of Social Security were a relatively minor concern was a distinctly out-of-the-mainstream view. (…) Going back to that period, around 2000, what were those Democrats thinking? And what’s changed? Obviously, as others have made clear, the problem did seem worse at the time, and the Trustees’ report has added, on average, two years to the projected day of reckoning when the Trust Fund would be exhausted, every year since 1997. And the problem was then much worse relative to other problems. The Medicare funding problem was not as clear at the time and had not been made worse by the prescription drug benefit. The general fund deficit crisis was unimaginable.”

This is an obvious point, but one that’s too often neglected. In 1998, the Social Security Administration (pdf) estimated that the Social Security Trust Fund would be entirely depleted in 2032. According to its more pessimistic estimate, it would be depleted in 2022 — in 1998, just 24 years away. The projected depletion date is now farther away than it was in 1998, despite the passage of time. To point out that Clinton said that Social Security was in trouble in 1998 as though that validates what Bush says now, without taking into account the fact that we now know that the information on which Clinton based his statements was wrong, is disingenuous.

Schmitt’s second point is, I think, more important. He writes:

“But there was another reason why advisors to Democrats … wanted to call attention to the potential Social Security shortfall: They worried that the hard-won budget surplus would be quickly squandered on new promises. They knew that the budget surplus was a tentative, doubtful thing. They knew that demographics would catch up with it, and they knew that both the Congressional Budget Office and OMB projections were based, as they are today on unrealistic assumptions, such as that Congress would restrain discretionary spending or that the Alternative Minimum Tax would continue to bring in ever-growing revenues, even as it cut into the middle class. And they knew that there were at least potential problems on the horizon, including Medicare and Social Security, as well as the “unknown unknowns” such as war or other crisis.

These are the cautions that reached Clinton’s ears, and they were somewhat simplified into a warning of the need to protect Social Security. What it really meant was, please please please don’t treat the whole surplus like free money.

An important point about these warnings: They were absolutely equal opportunity, non-partisan warnings. They were targeted at Bush’s assumption that the surplus could be given away in tax cuts, but they were equally directed at Democrats such as Bill Bradley, in his presidential campaign that year, who were stretching to be able to pay for an ambitous health care plan. It was a bizarre moment, a blessed interregnum in 25 years of deficit thinking, when anything you could think of — tax cuts, health care, “baby bonds,” or a little bit of everything — could be paid for from a hypothesized surplus, until we had all in theory spent the surplus several times over. But the most responsible outside analysts, as well as those inside the Clinton administration like Gene Sperling and Bob Rubin, understood the risk, and Social Security happened to be the best way to articulate the risk in one sentence. (…)

Is any of this relevant today? Hardly. Clinton, Reischauer, etc. were warning us then to be careful about a surplus that long, long ago has been squandered on tax cuts. To put it in personal terms: it’s as if you warned a friend who won the lottery to save some of the money because he might need it for an emergency; instead he spent all the money and went into debt. Now he’s asking to borrow money to buy a Porsche and also to save some for an emergency. Imagine if he says, “but you warned me to be prepared for an emergency — why aren’t you concerned about that anymore?”

Exactly. In 1998, Social Security seemed to be in worse shape then than it does now. The problems it seemed to have had not yet been dwarfed by the deficit and the real crisis in Medicare. But most of all, Clinton and his advisors were trying to warn people off spending a surplus that they had only just managed to bring into existence, and that they knew might evaporate. They were right to warn us. But the last thing that follows from anything they said is that we need to add trillions of dollars of new borrowing to finance “reforms” that even the administration now admits “would do nothing to solve the system’s long-term financial problems.”