217.1 - Refuting the lies about Social Security

Refuting the lies about Social Security

Well, a couple of weeks ago I had some anniversaries to note: The 50th birthdays of Medicare, Medicaid, and the Voting Rights Act, and the 70th anniversary of the bombings of Hiroshima and Nagasaki.

And now I have another birthday to mark. On August 14, Social Security turned 80. And in what should have come as a surprise to no one, the date was met with a spate of widely-distributed articles claiming that the system either is or soon will be on its death bed.

Make no mistake: The claims you no doubt have seen that Social Security is "running out of money" or needs an "overhaul" which invariably involves cutting benefits or "will go belly up" in less than 20 years or, this one addressed to younger workers, "won't be there" when you get to retirement age, are all lies. Flat out lies.

I refuse even to call them misunderstandings or inaccuracies. They are lies, lies intended to undermine support for a program that the right wing has tried to bring down from the get-go, a program which they hated at first because it was government support for those in need and have come to hate even more because it has worked so damn well.

Oh, and I do mean from the get-go.

When Social Security originally was being considered in Congress, opponents claimed it would bring an end to American freedom. Seriously. For example, one member of Congress warned that the people would feel "the lash of the dictator" while another said Social Security "opens the door to a power so vast, so powerful as to threaten to pull the pillars of the temple down upon the heads of our descendants" and a third insisted it would "end the progress of a great country."

They haven't stopped trying to undermine it, they've just changed tactics to regular waves of fear-mongering about how "unaffordable" and "unsustainable" the system is.

And, again, it's all lies.

One widely-circulated article was from Stephen Ohlemacher of Associated Press, headlined with some version or another of "Social Security at 80: Is it time for an overhaul?" Because it was from Associated Press, it appeared in newspapers major and minor all across the country.

It is hard to imagine that this article would have been more biased against Social Security if it had been written by some far right-wing think tank. But for that same reason, plus its wide publication, it provides a template to rebut the lies.

It starts with the boiler-plate fear mongering:

Social Security’s disability fund is projected to run dry next year. The retirement fund has enough money to pay full benefits until 2035. But once the fund is depleted, the shortfalls are projected to be enormous.

Okay, let's deal with the disability issue first because it's a bit subtle. Social Security actually has two funds: the Old-Age and Survivors Insurance Trust Fund, which is what we usually think of when we think of Social Security, and Social Security Disability Insurance. The money that comes in from payroll taxes is distributed between those two funds, with most going to the former.

Eleven times over the years, the trustees of the funds have adjusted what percentage of the monies coming in goes to each fund, depending on which one needed an extra little boost at the moment. Such shifts have been routine and uncontroversial. The last time one of these re-allocations of tax income was done was in 1994 and it was predicted at that time that the Disability Insurance fund would need to be replenished - guess when - in 2016. The need for replenishment is exactly what has been expected for the past 20-plus years.

The reason, the only reason, this presents the possibility of a crisis is that on the first day of the new Congress in January, the GOPper leaders of the House of Representatives adopted a rule which said that it would be out of order for Congress to reduce the actuarial balance of the Social Security retirement account. But obviously there is no way to reallocate any money to the Disability Insurance fund without affecting the balance of the retirement account. The effect would be small, but it would not be zero. Put bluntly, the "crisis" in the Disability Insurance fund was deliberately created by the right-wing in the House.

But the article mentions this rule only in passing, never explains its effect, but does describe it falsely as related to "improv[ing] the overall financial health" of the system, and allows the disability program to be called "plagued by waste and abuse" without challenge or evidence.

Next up, saying "the fund will be depleted" in 2035 is total and complete garbage. Starting back in 1977, payroll taxes were increased to build up a surplus to deal with the baby-boomer demographic bulge in retirees everyone knew would be hitting around 2010. The trustees' latest report says that the Social Security Trust fund now has $2.8 trillion in assets and that amount is expected to grow until 2019.

At that point, payments will exceed income and the system will have to dip into that surplus to pay full benefits. That is what will be "depleted" in, its now predicted, 20 years from now: the surplus. The surplus that was deliberately created to deal with the increasing demands on the system. The surplus that was deliberately created so it could be drawn upon. At that point, the system would be back on the pay-as-you-go basis on which it has existed for almost it's entire life.

More scare tactics:

In 1960, there were more than five workers for every person receiving Social Security. Today there are fewer than three. In 20 years, there will be about two workers for every person getting benefits.

Omigosh, how will we ever afford it?

Except that "workers versus retirees" is a useless and deceptive statistic. 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: more workers per non-worker. 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.

But wait! Come 2035, when we're back to pay-as-you-go, Social Security would collect enough in taxes to pay only 79 percent of scheduled benefits. A 21% benefit cut! Horrors! We have to cut benefits now to avoid that big hit later!

Well, yes, the 79% figure is true - if you also assume that nothing is done in those 20 years. The system has been tweaked and adjusted numerous times over its life and it will probably have to be tweaked again, but presenting it as a choice between "cut benefits now" and "cut benefits more later" is a false choice.

And here's an interesting thing I bet no one has told you: Note the reference to "scheduled" benefits. 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 79% of scheduled benefits in 2035 will provide about the same standard of living as current benefits do today.

Oh, and one other little tidbit to add in here: Three years ago, instead of predicting being able to pay 79% of scheduled benefits in 2035, the prediction was being able to pay 75% of scheduled benefits in 2033. Which means, of course, that projections are somewhat better than three years ago.

Finally, there is of course the "scare with big numbers" gambit.

Over the next 75 years, Social Security is projected to pay out $159 trillion more in benefits than it will collect in taxes. That is not a typo.

Wow. Scary. Except: The US GDP is now $17.5 trillion a year, so even if you assume no expansion of the economy at all, over the same 75 years the economy will generate over $1.3 quadrillion in goods and services.

You want really big numbers? We'll give you big numbers. Between 1933 and early 2015, the mean annual real (i.e., non-inflated) growth in the US GDP has been 4.4%.

If that average was maintained, in that 75th year, when the accumulated payments beyond income of Social Security would be $159 trillion, the US GDP, in that single year, would be over $440 trillion. The magic of compound interest.

And if it seems silly to try to calculate out how big the US economy will be in 75 years, it should seem even sillier to talk about cutting benefits to present and future retirees based on projections every bit as tenuous.

Finally, what would I do about Social Security? I would remove the cap on wages subject to Social Security taxes, which is now $118,500 a year. Don't give me any bull about that's going after "the middle class." $120,000 a year is more than about 92-93% of US income-earners. That is not middle class.

Sources cited in links:
http://www.dailykos.com/story/2015/08/14/1412097/-Social-Security-at-80-It-s-Time-to-Expand-Benefits
http://www.pbs.org/newshour/rundown/things-know-social-security-80-overhaul-time/
http://whoviating.blogspot.com/2015/02/1916-outrage-of-week-changing-rules-to.html
http://www.ncpssm.org/PressRoom/NewsReleases/Release/ArticleID/1432/Analysis-of-the-2015-Social-Security-Trustees-Report
http://whoviating.blogspot.com/2012/04/left-side-of-aisle-54-part-1.html
https://en.wikipedia.org/wiki/History_of_Social_Security_in_the_United_States
http://www.multpl.com/us-real-gdp-growth-rate