Don't Fear the Boomers. Despite the scaremongers' attempts to incite generational war, people born between 1946 and 1964 are not going to destroy Social Security. The Baby Boom cohort isn't going to be a crippling financial burden for Generation X, Generation Y, Generation XYY, or any other generation. It may be true that their descendants will be forced to listen to their greatest hits until the sun goes supernova (more cowbell, please!), but economically there's nothing to worry about.
Since I'm one of the dreaded boomers myself I guess I can't be considered objective, so don't take my word for it. Ask an actuary.
Harry C. Ballantyne's biography demonstrates that he's the nation's leading expert in forecasting Social Security trends. His career includes eighteen years as the Chief Actuary for the Social Security Administration (under Reagan, Bush I, and Clinton) and a degree in Physics - but no time whatsoever as the bass player for Jethro Tull. Actuarial certification is extremely hard to receive, and those guys know their stuff. (I know because when I was a young Boomer and numbers guy, my boss offered to finance my actuarial training. But I had small children at home, you gotta take a lot of really hard exams, yada yada yada ... you know how flightly these boomers are.)
What does Harry C. Ballantyne says about all the generational fear being whipped up today? A new report released yesterday by the Economic Policy Institute (EPI), co-authored by Ballantyne with EPI President Lawrence Mishel and economist Monique Morrissey, explains: "Social Security is running a surplus of $77 billion this year and amassing a trust fund large enough to last through the peak retirement years of the Baby Boomers."
Hey, kids! Leave them boomers alone!
"Though modest changes will be needed to put Social Security in Balance over the 75-year planning period," the report adds, "the projected shortfall is less than 1% of Gross Domestic Product." Got that? Military expenditure is 4.7% of GDP. The Bush tax cuts can be reasonably be estimated (based on these figures) to have been at least 2% of GDP. Senescent boomers playing In-a-Gadda-Da-Vida on old Stratocasters? Less than 1% ... and, as the report observes, only "modest changes will be needed to put Social Security in balance."
No less a personage than Alan Greenspan (who probably refers to Boomers as "those young whippersnappers") led the Commission that pretty much fixed the generational problem during the Reagan years, when Ballantyne first became Chief Actuary. That's why we only need minor tweaks today.
Sure, Social Security spending will increase from 4.8% or GDP to 6.1% in 2035. But since Social Security is forbidden from taking money from taxpayer revenues, all the Deficit Commission and AmericaSpeaks propaganda about those figures is only meant to confuse and manipulate. Here's the bottom line: Those numbers don't contribute to the Federal deficit. That's the main point of the EPI paper, which is entitled "Social Security and the Federal Deficit: Not Cause and Effect."
As for the canard that Social Security is "going broke" -- it's not. If changes aren't made, it will run out of assets (trust funds, etc.) in approximately 2037 and would have to cut benefits by 22%. We need to prevent that, but let's put the "going broke" rhetoric in perspective: A lot of jobless Americans today would be thrilled to receive 78% of the income they had before the Great Recession. Anyone who can say that Social Security is "going broke" is lying, or else they ain't never been "really broke." (Or both; the two aren't mutually exclusive.)
So what went wrong? The EPI report explains the real reason for the shortfall (as detailed by Ballantyne and his actuaries back in the 1990's): It's "mostly the result of higher disability take-up, slower wage growth, a growing share of earnings above the taxable earnings cap, and a growing share of compensation going toward health insurance and other untaxed benefits."
Got that? That almost sounds like a four-point plan for fixing Social Security: Improve overall health and occupational safety. Boost wages and employment. Raise the earnings cap (which isn't adjusted for wage inflation). And do more to control runaway health care costs. What isn't necessary is to ship all the boomers off to Antarctica on wooden ships, as desirable some might find that option.
(Speaking of which: These findings won't reduce inter-generational snark like this from blogger Duncan Black, aka Atrios, who remarked upon seeing people older than himself at a gig featuring contemporary bands Arcade Fire and Spoon: "(G)ood for old people who don't live in an endless nostalgia loop. Life goes on after The Eagles reunions end." Whose reunions does he go to -- Flock of Seagulls?)
The worker-to-retiree ratio isn't worse than projected, despite increases in life expectancy, thanks to a growing workforce. That growth is driven largely by increasing numbers of working women and (sorry, Tom Tancredo) immigrants. As for revenue, the EPI paper explains that this "modest shortfall" can be addressed by either raising tax rates or raising the cap on earnings. The latter is preferable because, as the paper says, "the lion's share of increases in both earnings and life expectancy (emphasis mine) has gone to those at the top of the income distribution."
There's more in the paper, including a firm rebuttal to some of the misstatements emerging from the Deficit Commission. But the key takeaways are this: Social Security does not contribute to the deficit (which is why the entire AmericaSpeaks exercise was deceptive), and Boomers are not the problem they're made out to be. That's really all there is to say on the subject, except to Duncan Black, to whom I would add:
"On a dark desert highway, cool wind in your hair ..."
Richard (RJ) Eskow, a consultant and writer (and former insurance/finance executive), is a Senior Fellow with the Campaign for America's Future. This post was produced as part of the Strengthen Social Security campaign. Richard also blogs at A Night Light.
He can be reached at "firstname.lastname@example.org."
Website: Eskow and Associates
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