Using long-term budgeting sensibly

Whatever one thinks of Kevin Drum’s Social Security reform proposal (use an inflation measure that slightly lowers benefits, and collect a bit more in taxes by raising the income cap), I really like his attitude towards long-term budgeting:

That takes us out to about 2060 or so, and that’s plenty. In 2032 we can all get back together, see how things are going, and decide if we need to do anything further…

 

We don’t need to “fix” Social Security forever. After all, no one ever suggests that, say, a new quadrennial plan from the Pentagon will “fix” our defense strategy forever. We should think about Social Security the same way: something to be revisited every couple of decades, the same way the Pentagon takes a fresh look at global challenges every few years. That’s the way policymaking works.

Right. There are basically two attitudes toward long-term budgeting, both a consequence of the convention that budgets include very long-term estimates, including a 75-year horizon for Social Security. One is to panic if there’s an imbalance anywhere within the horizon. That’s silly. The second way of looking at the plan shows that it’s silly by analyzing past 75-year spans and pointing out that, for example, long-term estimates would have missed World War II, or postwar growth, or the Cold War, or the end of the Cold War, or technological change. 

President Franklin Roosevelt signs the Social Security bill in 1935. (Associated Press)

Which is true. Yes, it’s silly to care whether Social security projections work out perfectly balanced over a 75-year time frame, and it’s even sillier to worry if the federal budget projects out as balanced over even a 30-, 40- or 50-year time frame (Social Security, at least, is pretty simple to project going forward, even if there are still huge margins of error). 

I like, therefore, Drum’s attitude on it. We shouldn’t be held captive to 75-year estimates; anything that looks as if it will work for an extended period is probably good enough. And we should expect further imbalances in the future, and future fixes. There’s nothing wrong with that. Now, I have no problem with doing the long-term projections and peeking at them for at least a hint of what’s out there; a plan that projects near balance for 30 years but a collapse after that might not be ideal. Having a bit of a guideline toward the long-term isn’t so terrible. But the real issues, the ones really worth fighting over, are those where the projections figure to be at least mostly realistic. That’s nowhere near 75 years for Social Security, and it’s really not much longer than a decade for the budget as a whole. 

Also on PostPartisan

'Too big to fail' becomes 'too big to indict'