The Folly of the 75-Year Time Horizon

Kevin Drum is excited about Dick Durbin’s idea for a new Social Security Commission, charged with establishing the program’s solvency (by trust-fund accounting rules) over a 75-year period.

If people want to waste their time on this, I don’t have a huge objection to the idea of somewhat higher taxes and somewhat skimpier benefits, but I think it’s pretty silly. Recall that 75 years ago was 1937. Any minute spent in 1937 worrying about actuarial projections about 2012 as opposed to, say, Adolf Hitler or the Great Depression would have been a minute wasted. Among other things, a long-term plan needs to be politically realistic. And in 1937, a politically realistic social insurance scheme had to engage in massive racial discrimination thanks to the overwhelming congressional power of avowed white supremacists. This was a really important part of the thinking in congress and the White House at the time. But it became totally obsolete long before the 75-year time horizon expired.

The deal worth trying to make on Social Security would be a deal that found a way to take the program outside the somewhat fantastical realm of trust fund accounting. Assessing the “affordability” of a social insurance scheme in terms of the state of its associated accounting instruments rather than the capacity of the economy to carry the load is very misleading. The actually policy question at any given time is what share of national resources should go to raising the living standards of the elderly.