Saturday, April 28, 2012

Left Side of the Aisle #54 - Part 1

The usual phony doom and gloom about Social Security

The latest report from the Social Security trustees is out - and it was greeted with the usual doomsaying in the media. For example, AP's article on the report started this way:

Social Security is rushing even faster toward insolvency, driven by retiring baby boomers, a weak economy and politicians’ reluctance to take painful action to fix the huge retirement and disability program. The trust funds that support Social Security will run dry in 2033 - three years earlier than previously projected - the government said Monday.

After a couple more paragraphs of doom and gloom, the article declared that

[u]nless Congress acts - and forcefully - payments to millions of Americans could be cut.

Meanwhile, the Washington Post has taken to calling Social Security that all-purpose epithet "welfare" that is "slowly and inexorably crowding out the rest of government" and and called opposition to cuts in the program result of "self-centered, shortsighted intransigence" among seniors.

Well, I for one am sick and tired of baby boomers (or, if you prefer, the '60s generation) being blamed for every social and economic ill the country faces. To show how bad it's gotten, did you know, for example, that the rise of the armed right-wing militias of the sort that produced Timothy McVeigh were the fault of the '60s? It's obvious: In the '60s people said "question authority," and these people mistrust government, so, QED, right? That lame argument was actually made in the New York Times several years back.

In any event, getting back to Social Security: Bluntly, the idea that it's in some kind of desperate trouble - that it's "rushing even faster toward insolvency" - is utter crap. It's complete, total, nonsense.

I know I've addressed this before, but I'll keep doing it. Whenever the bilge gets sprayed, I'll call out the spewers for their lies and ignorance.

The fact is, for most of its history Social Security has been "pay as you go." But the baby boomers - the '60s generation, my generation - constitute a demographic bulge. It was realized decades ago that our retirement could strain system. So in 1977 payroll taxes were raised significantly for the specific purpose of creating a surplus that could be drawn on when time came. That's what's happening now: We are tapping the reserves set aside for this very purpose.

And by the way, who paid for that surplus through those increased taxes? We did - the baby boomers who are now being accused of sucking the life out of the system.

Here's another thing: When the doomsayers tell us that "the trust funds will run dry," what they actually means is that the surplus - the one created to deal with the baby boomer bulge - will be used up and Social Security will go back to the "pay as you go" system it has used for most of its existence. At that point, that is, in 2033, if do nothing at all in the interim, the system will be able to pay about 75% of scheduled benefits for as far out into future as the trustees calculate.

"Scheduled" is an important word here: The trustees make calculations of future costs and benefits based on various scenarios of how the economy might play out over the years. Initial benefits for a new retiree are calculated on a wage base. The thing is, over time, wages tend to rise a bit faster than inflation. Which means projected - that is, "scheduled" - initial benefits also rise a bit faster than inflation. The bottom line is that 75% of scheduled benefits in 2033 will provide about the same standard of living as current benefits do today.

That standard of living provided by those benefits not great; the average Social Security benefit is approximately $14,800 per year. But to say the system being able to provide the same standard of living in 2033 as it does now equals the system being "insolvent" or "busted" at that point is transparent nonsense.

If want avoid those reductions and provide full scheduled benefits - that is, to "fix" Social Security, we can. In fact, it has been tweaked any number of times over history. Indeed, in 1983, the trust fund was not 21 years away from running out of its surplus, it was a few months away from it - but some tweaking based on recommendations from the Federal Reserve fixed the problem. That was a far worse situation that anything faced now and now almost no one even remembers it. Dealt with and done.

Of course, the simplest and best way to fix the system for as far into the future as anyone cares to calculate (about 75 years) is to remove the ceiling on income subject to payroll taxes. In fact, you wouldn't even have to remove it (although I would desire that). The ceiling was traditionally set at a level to "capture" - that is, make subject to the levy - about 90% of wage income. The current level is considerably below that. Just raising the ceiling to the traditional level would solve any problem.

Oh, and there is another scare tactic being used: The ration of workers to retirees. Over the next decades, the number of workers compared to the number of retirees is predicted to shrink - that is, there will be fewer workers to support retirees. That, we're told in the darkest tones possible, will bring an intolerable burden on "ordinary wage earners" and thus the economy.

But workers don't just support retired people, they support all non-workers, including their children and their spouse or partner if they don't work. Even as the number of retirees is growing, family size is shrinking. So over those next few decades, even as the ratio of workers to retirees is expected to go down, the ratio of workers to non-workers is expected to go up. The burden on workers will be much that same, it's just that in effect, some portion of that burden will have shifted from supporting their children to supporting their parents.

Social Security is under no danger of collapse. Period. Not unless we are stampeded by ignorant, sloppy, lazy media driven by fear-mongering politicians and their 1% paymasters into undermining it. And make no mistake, that's what we're seeing: As far back as 1983, a plan was hatched at a conference at the Heritage Foundation with the avowed intention of wrecking Social Security. The right wing hates Social Security; it always has - because it works, it has worked for 77 years, and it will continue to work into the future. And the only thing the right wing hates more than taxes is government programs that work.

I have to say, though, that the fear mongering has had an impact; the steady drumbeat of impending disaster has had an effect. Gallup polls over the past six decades have consistently shown that some 70% of the public strongly supports Social Security. But increasing numbers of young folks are becoming convinced that the system will not be there for them when they retire and so - and this has been part of the plan all along - their commitment to the program is weakened, making it easier to dismantle it entirely.

So I want to say to anyone out there who has absorbed the meme that Social Security won't be there for you when you want to retire is that the people telling you that either don't know what they're talking about or they are lying through their teeth.


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