This is cross posted from Angry Bear where it is no. XXVIII of my ongoing Social Security series, itself indexed at my site Social Security Posts on Angry Bear If some of the terminology is confusing you can check there or some of my earlier diaries here.

Even before the latest flooding, a group representing engineers said the United States needed to spend about $1 trillion more than it does now to bring infrastructure up to par with modern needs and standards.

Wow. A trillion dollars is a lot of money. But as it happens we have in fact an identified revenue stream that is more or less coincidentally projected to run just about that amount in cash surpluses over the next decade, and more than double that if you include interest accrued on the existing fund balances. That is if we take a little look at the dollar figures in the following table: Table IV.A3.--Operations of the Combined OASI and DI Trust Funds, Calendar Years 2003-17 1 [Amounts in billions]

So here is the deal. First I propose that we take all cash surpluses from FICA and invest them in interest earning state and local construction bonds. That alone gets you about $600-700 billion over the next decade (and all before Social Security is projected to run into a shortfall where cash income from tax falls behind cost). Assuming Intermediate Cost projections. Under Low Cost cash surpluses extend to 2023, and of course under outcomes better than IC but trailing LC you get dates in between. In any event we have a minimum ten year window to invest these already existing funds in infrastructure, and by reinvesting earnings on the muni bonds get pretty close to backfilling the whole gap. Because it gets better. Highway, bridge and school construction are all labor intensive undertakings, even more so when you take into account the wages of the people supplying the concrete and steel, to say nothing about the wages of the people who sell groceries and beer to the guys that spend their days working at the cement plant. Which is to say Social Security not only earns whatever return it gets directly on the bond, it also captures 12.4% of every contract dollar that ultimately goes to wages. Cha-ching!! I don't know how you would calculate the Return On Investment on that combination. But I suspect you are creeping real close to double digit returns.

There is a risk that the budgeteers, being deprived of this source of cheap borrowing, would simply respond by cutting transportation spending from the General Fund. But not only is this response not likely, it wouldn't really matter if it did happen. Why? Well follow me below the fold.

Lifting the cap on Social Security is widely seen among progressives as a "no brainer. Well sorry that view is simply wrong. At least once you examine the actual numbers in play and think through the financing. Detailed arguments after the jump, the abbreviated version here:

On Policy. Raising the cap actually opens the door for privatization. Obama's  economic advisor Jeffrey Liebman is pushing the Liebman-MacGuineas-Samwick Non-Partisan Social Security Reform Plan which uses a cap increase to help fund PRAs-Personal Retirement Accounts. This Plan is very worker unfriendly and predictably this is more true as you work down the income scale.

On Politics. Raising the cap simply serves to alienate potential progressives who happen to be successful. Do we really need to alienate every tenured professor, every labor lawyer, every head of a social service non-profit in the country while giving capital a pass? Raising the cap while providing no other benefit is designed as a wedge issue.

On Economics. Raising the cap actually works to weaken Social Security going forward. Taken to extremes it amounts to abrogating the Trust Fund and so stealing all of the surpluses accumulated to date. Moreover the current system is not regressive, thinking that it is is just to fall into a frame established by privatizers.

Social Security is not broke: by the Numbers That was the title to my Introduction when I put up by first series of posts on Social Security in November 2004. It holds up very well today. But for a new Introduction you might start with Guide to the BruceWeb

Social Security is not broke, even if taken on its own terms. It is fully funded until 2041, and even then if nothing was done the benefit cut would still leave a check 120% better than retirees get today. Everything else you hear about "looming Boomer retirement" "phony IOUs" "looted Trust Fund" is just part of a contrived narrative set forth in the Fall 1983 Cato Journal whose title is Social Security: Continuing Crisis or real reform

more below

Once more into the breach.

I am going to suggest a simply yet powerful theme for the mid-terms: "Social Security is not broke. Not now, not in 2017, not in 2041. Any Republican who tells you it is is a liar or ignorant"

Strong? Yes. Wrong? No neither on substance or tactics. There will be time for numbers latter, first the political background.

In Fall 1983 the Cato Institute declared the War on Social Security. They did not hide this declaration, instead the devoted their entire Fall issue of Cato Journal to it Social Security: Continuing Crisis or Real Reform? Read on to see their published war plan.

People who follow the Social Security debate closely understand that the Trustees produce not just one projection but instead produce three: Low Cost, Intermediate Cost, and High Cost. These are called the The Three Alternatives Each is a set of economic and demographic assumptions that purport to show "a range of possible outcomes" with the Intermediate set "designated as alternative II, reflects the Trustees' best estimate of the trust funds' future financial outlook." quoted sections from the 2004 Report p.1.

For a variety of reasons it no longer makes sense to look at them as a range, instead it makes more sense to look at them as answers to questions. What are those questions? Social Security Jeopardy now playing in Extended Entry

(cross posted at dKos and my blog with minor variations)

Time for Politics.

Social Security offers the opportunity to reverse a whole generation of political defensivism on the part of Democrats. We have the unique chance of changing the entire narrative. And in so doing may have just been handed a political weapon with immense power.

I have been taking up too much space at Economist's View (but Mark Thoma should be a daily stop for anyone discussing Social Security.) So I want to return to the topic of my previous diaries: Life After Solvency.

Social Security Solvency with no changes in benefits, retirement age or payroll tax is not an impossible dream. Each year the Trustees lay out a set of economic numbers that would would produce that result. This dataset, called Low Cost never gets a bit of attention. But that doesn't make it go away. You can get a little (okay a lot) of background at my website starting with What does Low Cost mean? More below the fold.

Most discussion of Social Security Solvency has been in the context of Privatization and more narrowly on whether private accounts help or not. A certain consensus has shaken out: to the extent that "Crisis" exists it doesn't manifest itself until the 2040's and private accounts in and of themselves wouldn't help anyway. So there is a tendency to agree with the following memorable phrase: "Social Security Privatization is as dead as Bob Dole's dick, let's move on".

But it is not just about private accounts. Sure killing the 70 year dream of the Republican Party of killing Social Security by privatizing it is important for all kinds of reasons, notably 2006 midterms. But there are important macoeconomic implications to Solvency. Assessments of the impacts of Current Account deficits and the impact of Bush Tax Cuts both depend critically on the Trust Fund balance in the year 2025, Solvency will rock our world.  More below the fold, warning: bring numbers.