When projections showed big surpluses, the George W. Bush administration wanted to cut taxes to give “their money” back to the people. When projections worsened, it wanted to jump start the economy by giving “their money” back to the people. Its official position was that paying for the “war on terror” by raising taxes would just increase the damage done by terrorism. It chose not to work the costs of the war in Iraq into its budget projections. In 2005, the administration pushed for Social Security “reform” that would have significantly increased deficits. Vice President Cheney famously dismissed deficit worries as politically needless.
That’s the public record; here’s the private. In 2008, I did some interviewing in OMB about the budget process during the Bush years. A senior political official discussed how the budget worked one year, in a way that was confirmed by senior career staff’s descriptions of the process. He explained that they focused on, “what is appropriate, needed and fair for nonsecurity… We ended up with some increase, just below inflation, and building from that. Then you ask what is the increase on the security side, you build in that. Then there is DOD, and you can imagine there were discussions on that. There was no magic in the top line, it’s just the sum of the parts.” As staff described the process, arguments about the proper number for the deficit per se were rarely if ever made.
Why, then, would anyone believe that politicians were less responsible about the rest of the budget because of the Social Security surplus? For most of the period of large deficits, they couldn’t do anything without finding some way to make the task look smaller, not larger. The Bush 1 and Clinton administrations experienced major political pain for what they did do. The Bush 2 administration showed no sign of having cared much about deficits anyway.
Deficit hawks don’t want to recognize that other people could legitimately object to the policy consequences of program cuts or tax hikes. They believe their policy is more important than all others, so that if others cared as much about the deficit as they do, more would be done to reduce it. The argument that Social Security surpluses cause politicians to do less than they “should” allows deficit hawks to believe the problem is a policy illusion, not actual objections to deficit reduction packages. Yet if you go through the history, there is no reason to believe making the deficit look larger ever would have caused more budgetary restraint.
Does that mean overall budget policy doesn’t matter? Of course not. In the long run, the ability to pay for Social Security depends on the federal government’s fiscal capacity. That includes the amount it can raise in taxes, and how much it is obligated to spend on other programs. Faced with a choice, politicians who do more to avoid deficits, to reduce future interest payments, are making the federal government better able to pay for Social Security.
Politicians who say taxes are not evil also are making it more likely that Social Security will be paid for. If you have two groups who push through increases in federal spending on medical care; and one group (in 2003) doesn’t offset any of the costs while the other (in 2010) is scored by CBO as providing offsets that exceed the costs, it’s pretty clear which group is making it more likely that Social Security can be financed in the future and which is more responsible about the budget.
Joseph White is Director of the Center for Policy Studies at Case Western Reserve University.