Josh Marshall has an outraged little post this morning on something that John McCain said about Social Security the other day:
McCain told a townhall in Denver on Monday, “Americans have got to understand that. Americans have got to understand that we are paying present-day retirees with the taxes paid by young workers in America today. And that’s a disgrace. It’s an absolute disgrace and it’s got to be fixed.”
It’s really a disgrace? That’s how the system was designed to operate. And it’s served as financial bedrock of retirement security in this country for going on a century.
I would imagine that this was more a case of McCain misspeaking or misunderstanding than having a secret plan to dismantle Social Security as we know it. But still, calling Social Security a “disgrace” is just patently ridiculous. Giving retirees a claim on current workers’ earnings is actually a pretty economically sensible way to fund retirement (just ask Robert Merton!), although it shouldn’t be the only way. And while Social Security may have some long-run funding issues as the ratio of active workers to retirees shrinks, they certainly aren’t insurmountable or disgraceful.
The only disgraceful thing involving Social Security at the moment is that payroll taxes are being used to paper over deficit spending by the rest of the federal government. Or if you want to get all class-warfarey about, payroll taxes paid by working- and middle-class Americans that are intended for Social Security’s coffers are instead being diverted to fund income tax cuts for the rich. I’m sure McCain will be addressing this outrage at his next town hall meeting.
The other thing that gets me about this whole Social Security discussion is that the real retirement crisis of today is the disappearance of the corporate pension and its far-less-than-adequate replacement by the 401(k). That’s what the candidates ought to be talking about. But while both Obama and McCain are amenable to the idea of creating some sort of new system of retirement accounts to supplement 401(k)s and Social Security (Obama has been the most explicit about it), this just hasn’t become a major campaign topic. I blame the %$&#* mainstream media. Especially the newsweeklies’ economics columnists.