Why The Powers That Be Hate Social Security

Moneybox
A blog about business and economics.
Dec. 19 2012 12:31 PM

Why The Powers That Be Hate Social Security

Something that I think often confuses people but that it's important to understand if you want to understand the budget debate is that Important People absolutely despise Social Security. It's basically their least-favorite thing in the world. And it's not because they're insane or something. There's a deep logic to their hatred, and you have to appreciate not just the existence of the hatred but its source to understand the game.

And to be clear, this goes way deeper than the fact that lots of people don't like taxes and thus don't like spending that leads to taxes. Social Security is special and especially despised because lots of important people care a lot about The Economy.

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The Economy consists of adding up all the economically valuable stuff that happens. All the goods and services and labor that are bought and sold. And with most government spending, you can make some kind of case that the spending boosts The Economy. It boosts The Economy because we need infrastructure or educated workers or healthy ones. Even something like Medicare does something for The Economy because it subsidizes medical training and research. The Economy wants you to spend money on things that can be plausibly described as "investments" that drive future prosperity. And mailing a check to your grandma doesn't fit the bill.

You've got this big scheme to levy taxes on working people who are participating in The Economy and transfer money to people who've dropped out of The Economy. They take that money and use it to pay the electricity bill and buy a cookie for their grandkids. If they didn't get that money, they'd probably have to work longer and spend more years being part of The Economy. And they'd have to spend their working years being thriftier, and amassing more savings that (via the magic of the financial system) finance private sector investments in The Economy. So not only would lower taxes on The Economy spur more growth, but the mere fact of not sending your grandma those checks is good for The Economy. The Economy thrives on incentives (if you work, we'll give you money) and desperation (if you want money, you have to work) and Social Security is a double-wammy, reducing the incentives of workers and reducing the desperation of the elderly.

The important thing to note about this hatred is that it's not unjustified. The haters aren't wrong. I loved both of my grandmothers, but they spent a lot of years just sitting around consuming goods and services while producing nothing of economic value. Retired people don't boost The Economy. Trimming their cost of living adjustments does. The more you trim, the more boost you get. Doing the reverse of Social Security and saying that everyone over the age of 65 has to write a check to the government or be turned into Soylent Green would boost The Economy even more.

Which isn't to say we should do any of that. But it is to say that there's an essential tension here. Most of us like the idea of spending funds on bolstering the living standards of elderly people. But the Job Creators who want public policy to serve the needs of The Economy are always going to dislike that idea. There's no magic formula of "tweaks" that will end the dynamic. Taxing working people to hand out free money so people don't need to work is antithetical to the spirit of capitalism, and so the leaders of the business community and their friends in government will always want to curb it.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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