We’ll be talking shortly about some very disappointing events today on Meet the Press. But for now, a reading suggestion.
If you’re following or care about the Social Security debate, you really must read the article by Roger Lowenstein in today’s New York Times Magazine. It is probably the best single piece of journalism I’ve read on the subject — mixing clarifying statistical and historical information with elegant description and context.
Along the way the author touches on a number of points that are commonly either ignored or distorted. For instance, you’ll remember that Tim Russert today noted that in 1997 the Social Security actuaries predicated that the Trust Fund would run out in 2029.
Now they say it will run out in 2042, thirteen years later. As we’ve noted again and again, the forecasting assumptions upon which the predictions are based are fairly pessimistic. So it’s not surprising that each time the SSA actuaries revisit their estimates they’ve pushed them further out into the future since each time there’s a little more data that has come in that isn’t as feeble as they’d predicated.
Another point. You know how back when Social Security was created most people didn’t live much longer than 65 years, so the program just isn’t designed for the world we’re now living in?
Well, this just turns out to be a canard. As Lowenstein relates, when the actuaries sat down to design Social Security only 5.4% of Americans were over 65. But contrary to the understanding of Tim Russert and other Beltway mandarins, the founders weren’t fools. They knew lifespans would increase.
When they designed the program they estimated that by 1990 — more than fifty years later — the number would increase to 12.65%. In fact, when 1990 rolled around, the percentage was 12.45. In other words, they knew almost exactly what the demographic profile of the retired population would be. And they designed the system accordingly.
One thing they couldn’t know about quite so accurately were the effects of the baby-boom and the subsequent decline in birth-rates. But those are the factors that were taken into account by 1983 Social Security Commission that raised payrool taxes and began raising the retirement age.
So for instance you have Sen. Bill Frist today, with about as much knowledge as taste, saying that in 2008 Social Security will be hit by a “huge demographic tidal wave.”
But Frist must be in a time warp. Because in 1983 we knew all about the baby-boom generation and that is precisely why they decided to build up a surplus in the Social Security Trust Fund and raise the retirement age in phased stages. We’ve already done the reform for that.
And what happens when Social Security starts drawing on the Trust Fund? Will the world stop turning on its axis? “Since 1970 there have been 11 years in which Social Security has operated at a deficit; each time, it redeemed bonds from the trust fund without a fuss.” So, I guess the answer is, no.
Then there’s one other point the author brings up toward the end of the piece — and it’s a point we should all be focusing on, with regards to the seemingly arcane and abstract distinction between wage and inflation indexing of benefits.
“If the index was changed,” he writes, benefits “would be pegged to a fixed portion of a previous generation’s income. If this standard had been in force since the beginning, retirees today would be living like those in the 1940’s … which would mean $300 a month in today’s dollars, as opposed to roughly $1,200 a month.”
That puts it in perspective. The benefit cuts President Bush is talking about would slowly grind Social Security away into nothing, not a foundation for retirement security but an all-but-meaningless subsidy that wouldn’t keep many retirees off the streets.
President Bush figures that as long as current retirees are assured that their checks will keep coming in for the next decade or two, that they really don’t care what sort of America their young grandchildren will be living in half a century or more from now. In other words, he looks at them and sees himself. But I think America is better than that. And if the facts can speak with as big a megaphone as the president’s lies, then I think we’ll see that.
But don’t stop with my summary, read the Times Magazine piece itself.
