Not for the first time, the sharks are in the water about the supposed crisis facing Social Security, part of a larger push for "entitlement reform." Nearly as a bloc, the Republican party would like to scale back, with a view to eventually privatizing, the program. And in a highly unfortunate turn, President Obama has anointed a "deficit commission" stacked with people sympathetic to cutting Social Security benefits, including the staggeringly dishonest Paul Ryan, as well as Democrats like commission chair Erskine Bowles, who have a history of working toward an unwarranted trimming of the program.
(For an especially scathing attack on the commission, here's the testimony to that commission by the eminent economist James K. Galbraith, son of the legendary John Kenneth Galbraith.)
In any event, in hopes of providing some ammunition in the coming battle against the doomsayers, here are five (far from exhaustive) points to keep in mind about Social Security:
1) The program is fully funded decades into the future
According to the most recent report of the Social Security Trustees, the program will be able to pay all projected benefits through the year 2037, nearly thirty years from now. The Congressional Budget Office projects the full payment date to be 2039. It should be noted that these projections have been depressed significantly by the economic slowdown that began in late 2007. It's very likely that, once the economy starts to improve, those projections will change accordingly (and if they don't, we've got much bigger problems than a projected shortfall for Social Security decades in the future).
That trustees' projection is their so-called intermediate projection. It assumes a substantially slower rate of growth over the next seventy five years than the United States has experienced over the past fifty years.
Perhaps that projection is correct. But under the trustees' "low-cost" projection, which assumes a rate of growth going forward much closer to what we've experienced over the previous half century (a period that also included several recessions), there is no shortfall whatsoever over the next seventy five years. (And there are other arguably flawed assumptions that make the program's future look less healthy than it really is.)
2) Even when the trust fund runs out, Social Security will still be in pretty good shape
When reporting on the expected date that the trust fund will run out of money, media and Social Security doomsayers commonly and mistakenly use words like "broke," "insolvent" and other adjectives to describe Social Security. This is false in any common understanding of those terms.
The trust fund was established in 1983 (under a reform commission headed by Alan Greenspan). Its specific purpose was to ensure that Social Security could meet its obligations when the baby boomers began to retire in about 2013. As the projections suggest, by the time the trust fund is exhausted (in the late 2030s), it will have substantially done its job -- having provided the extra money to cover the costs associated with the retirement of the baby boomers. That the trust fund will eventually exhaust its reserves is by design, not an unforeseen disaster. In fact, Social Security will always be able to provide benefit levels for all retirees at a higher level than retirees receive today, adjusted for inflation, with no changes whatsoever in the funding of the program. This is because Social Security is funded by payroll taxes, and as long as those are being collected, retirees will continue to receive their checks. Nothing will change this fact unless Congress decides that Social Security taxes should no longer be collected, or retirees should no longer receive benefits. In other words, unless Congress decides to abolish the program or deliberately reduce its scope, none of the doomsday scenarios will come to pass.
3) Repeat after me -- Social Security is not Medicare (or Medicaid), Social Security is not Medicare (or Medicaid)
One of the common errors in reporting on Social Security's (non-existent) problems is to lump it in with the (real) problems facing Medicare and Medicaid. But those programs are separately funded from Social Security. And their problems are traceable to a simple source -- the runaway costs of our bloated, bureaucratic and highly inefficient health care system. And it's the inefficiency of the private sector of the health care industry that is largely responsible for the explosion in costs. This has nothing to do with Social Security. Whether intentional or not, lumping Social Security in with Medicare and Medicaid amounts to simple fear-mongering about Social Security's future viability. (As a side note, as has been widely reported, the recently passed health insurance reform bill may gone a long way toward improving the long-term financing of Medicare). In any event, it's either out of willful dishonesty or a fundamental misunderstanding of the nature of our "entitlements" that these programs are frequently lumped together in discussions of our long-term deficits.
4) To the extent that there is a long-term hole, it's easily fixable
The Trustees calculate a 75-year projection for the program. So does the CBO. When one projects the potential shortfall over 75 years, one gets some pretty large numbers. As of the year 2084, there will be a roughly $4.5 trillion hole in the program. That sounds like a lot. But as a point of comparison, that is the equivalent of, in current spending, roughly six or seven years of Pentagon expenditures. As another point of comparison, making permanent the Bush tax cuts of 2001 and 2003 for the richest two percent of Americans would result in the same long-term shortfall. As Kathy Ruffing and Paul Van De Water write: "Members of Congress cannot simultaneously claim that the tax cuts for people at the top are affordable while the Social Security shortfall constitutes a dire fiscal threat."
Furthermore, closing the 75-year long hole would require a quite modest increase in payroll taxes equivalent to a roughly one percent increase in workers' deductions (or less). In other words, though the size of the very long-term social security deficit looks scary, it's not. Therefore, it's easily correctable. And to reiterate point three above -- even without any fix at all, Social Security will always be able to produce higher benefits, inflation-adjusted, than it does today.
5) As Paul Krugman observed today, the doomsayers make no sense, essentially arguing that in "order to avoid the possibility of future benefit cuts, we must cut future benefits." Some of them also claim that the trust fund itself is a fiction because it has been raided to cover general budgetary expenses. But if that's true, as Krugman notes, it cannot simultaneously be true that the program should be evaluated as a standalone program going forward. It either is or isn't part of the general budget. If it isn't, its health is exactly as I've described. If it is, then "relative size of retirement benefits and payroll tax receipts has no special significance -- benefits are just one federal expenditure, payroll taxes just one source of federal revenue." And as I've noted above, in this context, Social Security is certainly not of broader concern than the Bush tax cuts for the wealthy, or our insanely expensive commitment to the Pentagon.
Any sane cost-benefit analysis shows that Social Security has been a remarkable success, making retirement security a reality for the great majority of seniors, among whom poverty was once endemic. On the program's merits, including its long-term fiscal health, there is no reason to doubt that it can continue to perform that function decades into the future.
Follow Jonathan Weiler on Twitter: www.twitter.com/jonweiler
We need to start checking what the professors are teaching at our colleges if people like allenwsmith and others don't comprehend what the truth is. I suppose it is a matter of seeing what you want to see.
*All of the $2.54 trillion in surplus Social Security revenue has already been spent on other things.
*None of the Social Security surplus money was invested in real bonds or anything else.
*The so-called "trust-fund bonds" are not marketable, and they have no monetary value.
*After 2016, full Social Security benefits cannot be paid without a tax increase, borrowing, or cutting other programs, because the payroll tax revenue will be insufficient and there is no trust fund to draw down.
Allen W. Smith, Phd.
I agree with you totally, yet I don't think that you are going to convince most people.
These are the same people who were convinced by the economists and financial writers/planners that the housing prices would keep rising and the stock market was solid.
Remember when in 2006/2007 Peter Schiff on Fox News accurately forecast that the U.S. housing market was a bubble that would soon burst and in a Bloomberg interview further added that he felt that the crisis would extend to the credit card lending industry.
Most economists, financial advisors, and the general public laughed at Peter Shiff because they were in denial that they could suffer a tremendous loss of their net worth.
These same people are in denial that they are going to have to take a big reduction in Social Security payments. They are going to be wrong big time, just like before.
Here is what Peter Schiff says:
"The [Social Security] system isn't solvent, it's bankrupt, it's being run on a ponzi principle, which is the same principle that Bernie Madoff used to run his investment funds. There is no difference between what Madoff was doing and what the Social Security Administration is doing. The only difference is Madoff can't force people to participate, whereas the government can. But in the end it still collapses because ponzi schemes don't work . . . so the whole thing is an unraveling."
I kept posting that the houses couldn't go that high and would go down if people didn't buy them.
We bought our home 20 years ago and it probably is worth less now than it was 6 years ago, but I didn't plan on using it for credit anyway.
Some want to weaken Social Security and not pay the money back so they will have more workers at the mercy of the rich and the gambling casino on Wall Street.
You might be thinking Social Security doesn’t affect me at all, since it will be several years before I get my first paycheck; that would be wrong. Social Security gets a little more than 12 cents for every dollar my Mom & Dad make, and their take home pay does affect the amount of things they can afford. Like saving for me and my brother's college education, taking family vacations together, and , and yes my weekly allowance. Now what really has me worried is how Social Security will affect my future paychecks. Grandpa has told me about the Social security IOU debt, and how the piece of Mom & Dad's paychecks that was supposed to be put away for their future Social Security checks, was instead spent. Now my generation is on the hook to pay again what our parents have already paid once. ; I don't think that's right. Remember, one day you'll probably need a piece of my paycheck to help pay for your social security check; so I remind you, what's fair is fair. I'm asking you to please help my Grandpa do something about the IOUs, and you can do that at www.socialsecuritysolution.org . "Amber's Alert"
Actually Social Security gets 6.2% of each paycheck. It is also matched by our employer by 6.2%.
We raised three daughters while we paid Social Security. My husband had paid into Social Security for 45 years.
You need to study how treasury bonds work. People buy them by paying money they want to save for later. The government uses the money until time to pay you back, then pays you back with interest.
It is a good deal for Social Security and it saves us having to borrow from China.
It took a lot of money for grandpa to put up that website. You don't happen to know Pete Peterson do you?
20 cents of every Fed dollar is spent on Social Security.
19 cents of every Fed dollar is spent on Medicare and Medicaid.
there is trouble on the Horizon folks, make no mistake about it.
If we die while we have young children, Social Security pays our survivors a monthly benefit. If we die old then our spouse draws our Social Security benefit if it is higher.
Social Security is a dignified program. Only those who work can draw benefits.
Many consider Social Security contributions as paying for a bare bones retirement. I always thought of Social Security as our bonds while investing our extra money in the stock market. So far I have had better luck with Social Security considering the market crashes and so forth.
Of course their wedge issue smokescreens make no sense.
Although I have been trying to get this quote widely circulated since it came out 15 months ago, it was only on Tuesday of last week, when Allan Sloan quoted me and referred to my book, "THE BIG LIE: How Our Government Hoodwinked the Public, Emptied the S.S. Trust Fund, and caused The Great Economic Collapse," in his Washington Post column that it got widespread circulation.
It was true last year and is still true today, so why was it deleted from the 2010 Report?
Allen W. Smith, Ph.D.
Soc. Security government bonds are as secure as any other government issued security.
Soc. Security benifits are secure at present distribution rates till 2035.
The fix for Soc. Security is simply removing the cap of $104,600.00 for all earnings above this amount.
Eliminating the cap would allow grandma a raise.
We need to tax the rich more to get new money to pay down the deficit by paying Social Security.
What if you lose all your money in the stock market? Who would have to take care of you?
Have you ever heard of 'from rags to riches?'
What if you decided to make a killing in Vegas, but lost your money and your shirt. Who would take care of you?
What if you never got around to saving for retirement? Who would take care of you?
Young people are not very good savers. If you wait until you are older you won't save enough.
Sometimes the grownups have to take control until junior grows up.
--David Walker, Comptroller General of the U.S. Government Accountability Office (GAO), January 21, 2005.
When the GAO made this announcement more than five years ago, I thought it was the beginning of the end for the great Social Security scam that I had already been trying to expose for five years, even in 2005. Surely the American people would wake up to the fact that the were being robbed by their own government. But the statement was not widely reported by the news media. When the GAO says there are no bonds in the trust fund, we can be absolute sure there are no bonds.
David Walker and Pete Peterson are sorry people who only want to gain from us, not help us.
The money workers and their employers paid in over the years -- since the 1930's -- was "borrowed" from the fund by unscrupulous politicians, over the years. They did not honor their fiduciary responsibility to hold our hard-earned money in trust. They operated and continue to operate the social security system as a pay-as-you-go account. The money collected from workers at the beginning of the week goes out to retirees at the end of the week.
Many years ago, when there were 8 or even 10 workers to support each retiree, it was a bonanza for the politicians -- it was their own personal piggy bank; they had lots of leftover money to take each week! But now, when there are only 2 workers to support every 1 retiree, the pay-as-you-go system is unsustainable, especially when more people are retiring than there are people joining the work force.
Just recently (I think it was about two weeks ago), the social security administration announced that, for the first time in the history of the program, social security had paid out more money than it took in.
So to say there's enough money to last for decades is a gross mischaracterization of the real truth.
The Social Security System is broke!
In February 2005 President George W. Bush attempted to explain Social Security to Americans:
"Some in our country think Social Security is a trust fund-in other words, there's a pile of money being accumulated. That's simply not true. The money - payroll taxes going into Social Security are spent. They're spent on benefits and they're spent on government programs. There is no trust We're on the ultimate pay-as-you-go system - what goes in comes out. And so, starting in 2018, what's going in - what's coming out is greater than what's going in."
What a brilliant idea, having a big-time bankrupt government borrow money from itself and issue IOUs to itself, promising to pay it back sometime in the future as retirement income to its citizens!
People relying on Social Securit for retirement is tantamount to my saying. "I don't have any money in the bank for my retirement. But I will be okay because a few years ago I lent my brother $350,000. He hasn't paid me back yet because he just went bankrupt. But I have an I.O.U. for $350,000 from my bankrupt brother so that means my retirement account is worth $350,000."
Fact is, sooner or later there is going to be a massive restructuring of the system and Americans are going to find out that they have no Social Security, or at least a lot less, to rely on for a retirement income than they had anticipated.
Notice they never mention cutting the lush and early retirements of the elected government.
It is the fact that the SOLVENCY of the Social Security Trust Fund is projected for thirty-seven years at least.
SOLVENT: The ability to pay all legal debts.
Can you imagine the delirious joy you would feel, if you could truthfully say you could pay all your debts for the next thirty-seven years?
Can you imagine the extraordinary financial strength of any corporation, even a Fortune 100 corporation, even Exxon or Microsoft, if it could project it's own SOLVENCY and safely say in the present, that it could pay all it's legal debts thirty-seven years into the future?
Such a financial strength as that, such SOLVENCY, is unheard of among private individuals and corporations both (Bill Gates and Microsoft included), and yet that is the true and undisputed projection of SOLVENCY (the ability to pay all debts and obligations) for the Social Security Trust Fund.
Again, it's any person's or any corporation's 'wet dream' to be able to say they can pay all their debts for the next thirty-seven years at least, which is what we can truthfully say about the Social Security Trust Fund.
SOBs are special obligation bonds created when excess Social Security retirement dollars are transferred to the general revenue fund and spent.
There are some who justify this process by saying the United States government has never defaulted on one financial obligation, therefore the SOBs are backed by the full faith and credit of the U.S. government, and are as good as gold. Numerous politicians, AARP, and their senior membership have peddled this fallacy for years.
So here’s a challenge to AARP, any elected representative, or individual/s who claim the SOBs are as good as gold. Put your money where your mouth is, and agree to take SOBs in lieu of your government issued paychecks or monthly Social Security checks. Take your SOB down to the supermarket and offer to pay for a bag of groceries using your SOB; oh that didn’t work. Now try your financial institution, maybe they’ll credit your checking account when you deposit your SOB; oh they don’t want your SOB either. Well try one last thing, invite the grandkids over for dinner, and after a nice meal ask them for a loan offering your SOBs as collateral; oh, oh, they don’t belong to AARP. Hmm, well guess you’ve exhausted your options, and you’ll just have to get used to those SOBs showing up in your mailbox every month; after all they’re good as gold!!
A real “generations working together” solution; www.socialsecuritysolution.org ;
According to the most recent report of the Social Security Trustees, the program will be able to pay all projected benefits through the year 2037, nearly thirty years from now."
This point has been hammered into the minds of the public for so long that most people seem to believe it. It has been repeated in the media so often that most journalists seem to believe it. BUT IT IS NOT TRUE! All of the $2.54 trillion in surplus Social Security revenue that is supposed to be in the trust fund has been "borrowed" or "stolen" by the government and used to finance tax cuts, wars, and other government programs. THE TRUST FUND IS EMPTY. IT HOLDS NO REAL ASSETS THAT CAN BE USED TO FUND FUTURE BENEFITS.
Allen W. Smith, Ph.D.,Prof.of Economics, Emeritus, Eastern Illinois University.
I see you flaunt that you are a professor. Don't tell me, let me guess. You are a republican and have lots of money.
My mother always told me that common sense was more important than book learning. You are listening to what you want to hear whether it is true or not, Mr. Smith.