Dean Baker has been having an ongoing argument with libertarian columnist Megan McArdle for the last week. It’s always interesting to listen to libertarians make their arguments, because they are so certain that they are all evidence based. But in fact, libertarians are the most ideologically constrained thinkers around. I’ve written a lot around here about how libertarians start with practical arguments like, “The minimum wage kills jobs.” But when those arguments fall apart, the libertarians retreat to theoretical arguments, “People should be able to enter into any contracts they want.” That’s because all they had to start with was their ideology. And as Baker has noted again and again, McArdle makes a lot of different arguments against Social Security, but all she really means is that that she hates the program.
Baker caught her most recently using one of the classic disingenuous arguments against Social Security. You see, people arguing against the program want to have it both ways. On the one hand, they argue that the there is no way to separate taxes for Social Security and the general fund. Thus, the idea that Social Security has a huge trust fund is meaningless. Then, on the other hand, they argue that if Social Security spends more than is brought in with payroll taxes, it is bankrupt because it can’t take money from the general fund.
So Social Security is damned either way. When it is bad for the program to be just another part of the general fund, it is just part of the general fund. When it is bad for it to be a separate program, it is not part of the general fund. And these claims are not always made at different times. They are made inside the very same arguments. In McArdle’s article on Friday, she uses this trick. Basically, she argues that we can’t increase Social Security payments because we don’t have the money — as though we don’t have the trust fund. But at the same time, the money can’t be taken from the general fund.
I discussed the basic issue before, Reagan’s Legacy: Tax Cuts for Rich, Tax Hikes for the Rest. Those big tax hikes on the non-rich were intended to create a huge trust fund — to tax more for Social Security than was being spent at that time. But people like McArdle want to brush that all aside and claim that the government just spent that extra money and it is gone. This was part of Baker’s longer argument with her.
It is true that the federal government has borrowed from the Social Security trust fund. But it is never clear why people like McArdle think this is different from the federal government borrowing from bond holders. In her most recent article, she argues that this is because the bond holders exist outside the government, but the government could just end the Social Security program and pocket the cash. That strikes me as disingenuous because the government could also decide to default on its debts. Governments have done that before. Of course, the government is not going to eliminate the Social Security program, although people like McArdle want to do just that.
It would be a whole lot better Megan McArdle would just admit that she doesn’t like Social Security. It goes against her ideology. It just wastes everyone’s time to write endless articles about accounting and how it all proves that retired Americans are just living too high.