Why is 2045 more important than 2007?

Like Dean Baker, I am growing tired of reading editorials complaining about a failure to take “Social Security’s long-term problem” seriously.

True, projections show a deficit of something like 1.5% of US GDP in Social Security starting around 2045.    See Figure 1-3 in the CBO’s outlook.    That of course assumes the US treasury doesn’t default on its obligations to the Social Security trust fund. 

However, I don’t get why a 1.5% of GDP deficit after 2045 is a bigger problem than the  current 3.5% of GDP gap (per the CBO – see the on-budget deficit in 2006 on p. 22) between the revenues of the government (excluding social security) and its current spending (excluding social security).    The current on-budget deficit came even with more revenues from the tax on corporate profits than at any time since the 1970s.  That may not last (even if the stock markets seems to think it will).

Deficits in the non-Social Security part of the government now, usually financed by borrowing from the central banks of non-democratic countries v. smaller deficits in Social Security after 2045.  Which is the bigger problem?     

True, current levels of spending are not written into law, but it doesn’t take a rocket scientist (or an ex rocket scientists now working on the street) to figure out that they are unlikely to come down significantly.   The Bush Administration cut into the government’s (non-social security) revenues without cutting its (non-social security) expenditures.

And I haven’t even mentioned that Social Security strikes me as the best – indeed virtually the only – insurance most Americans have against the risk that unexpected volatility in their pre-retirement wages will lead to large falls in their retirement income.   Political realists who favor free trade really should support more – not less -- Social Security ….