Paul Krugman suspects that cutting Social Security has become a badge of seriousness because
Social Security . . .is something that matters enormously to the bottom half of the income distribution, but no so much to people in the 250K-plus club. A 30 percent cut in benefits would represent disaster for tens of millions of Americans, but a barely noticeable inconvenience for [Very Serious People] and everyone they know. A rise in the retirement age would be a vast hardship for people who do manual labor, but if anything a gift to [Very Serious People], who don’t want to step aside in any case. And so on down the line.
So going after Social Security is a way to seem tough and serious — but entirely at the expense of people you don’t know.
Certainty, I doubt anyone thinks about it in such crass terms. I take Paul to mean that subconsciously Social Security seems like something of a relic to the “Investor Class” who thinks about their retirement not in terms of pensions and government payments but their 401(k).
Even now when I do fairly in depth calculations about my retirement plan I often forget that Social Security is a factor. When I first left college I didn’t even consider Social Security in relation to my savings because I simply assumed that it would exist by the time I retired. I did include what are now almost certainly gross overestimates of housing price appreciation, but that is another topic.
Even still, I would venture a perhaps more, perhaps less cynical view depending on your perspective. I think Very Serious People concentrate on Social Security because they can understand it. The program is relatively simple and the math straightforward. The ultimate driver of most projections – that there will be more retirees than workers – makes sense.
Reasoning about long term health care costs and affects, economic growth rates, global convergence, the importance or lack thereof of skill biased technological change, etc is more difficult and therefore I think people shy away from it.
When giving talks to business leaders and government officials about economics and taxation there is a sudden confidence that comes over them when the subject of Social Security comes up. They immediately feel as if they know the right questions to ask and could even potentially push back on some of the things I am saying. This confidence makes them want to steer the conversation in this direction.
I often get feedback that I am much more accessible and friendly than most economists so I don’t think I am browbeating them on the other topics. I just think they are having trouble completely wrapping their minds around them and feel less confident making assertions about them.
This is deeply unfortunate because the benefit – rather than cost – side of social security is incredibly complex and high stakes. In terms of the welfare of senior citizens cutting social security could range from massively destructive to mildly helpful.
There are the obvious issues of life cycle saving, risk and whether investment decisions are rational but it goes way beyond that. One of the largest effects of Social Security is that more seniors are able to live independently. Trying to get a handle on the surplus associated with that is a nightmare not least because when lack funds induces a change in your entire living situation, willingness-to-pay and willingness-to-accept are likely to diverge enormously.