Given some of the things I've been reading here of late, I wanted to take a few minutes to highlight an exceptional article in The New York Times Magazine yesterday. Entitled
A Question of Numbers and written by Roger Lowenstein, it examines the perspective of government actuaries who have been assessing data and projecting the future of Social Security since the program was founded.
What do they see as the looming crisis? Nothing at all. More after the jump.
I'd strongly urge you to read the article in its entirety from the link above...it's a long article, but a critical read. I'll highlight some of the most salient points.
1)
Currently, Social Security is running a hefty surplus; the payroll tax brings in more dollars than what goes out in benefits. By law, Social Security invests that surplus in Treasury securities, which it deposits into a reserve known as a trust fund, which now holds more than one and a half trillion dollars. But by 2018, as baby boomers retire en masse, the system will go into deficit. At that point, in order to pay benefits, it will begin to draw on the assets in the trust fund.
This is significant, as many of the "doomsday/worse case" calculations simply ignore the presence of this surplus. They begin calculating the SS deficit from 2020 forward, overstating the shortfall...Lowenstein even calls this out later in the article.
Another point related to the trust was made quite succinctly by Kos earlier this week...namely, that the current administration is planning on utilizing trust funds to promote the very revision of the system. One word: Wow.
2)
Paul O'Neill, the former treasury secretary, went so far as to say that Social Security has no assets. In anti-Social Security literature, the ''no assets'' contention isn't even debated; it's treated as gospel. According to Michael Tanner, head of the Cato Institute Project on Social Security Choice, the agency's pauperism has turned America's seniors into ''supplicants'': after working and paying taxes their entire lives, ''they earn the privilege of going hat in hand to the government and hoping that politicians decide to give them some money for retirement.'' The implication is that the money isn't there: graybeards will have to beg for it.
The assets that are being ignored are the aforementioned $1.5 Trillion in U.S. Treasury bonds...O'Neill doesn't believe that the Government will be able to redeem the bonds once it tries to do so. Why? Because the government has been borrowing against the SS surplus to finance the war and their tax cuts. The irony is amazing...a former Treasury secretary is more comfortable with a privatization scenario (and all the problems that it brings for current/forthcoming seniors) than the country's ability to redeem his Department's own bonds?
3) I had to include this simply for hilarity's sake:
Alfred Landon, the Republican who ran against Roosevelt in 1936, called it ''a cruel hoax'' on the American people. His platform, sounding uncannily that like that of Republicans today, stated, ''The so-called reserve fund . . . is no reserve at all, because the fund will contain nothing but the government's promise to pay.'' Arthur Altmeyer, head of the Social Security board, came under heavy fire at a Congressional hearing. Looking for a way to safeguard the reserve, he made an intriguing suggestion: why not let the government invest in sound private securities, and thus insulate the surplus from Congress's eager hands? As Altmeyer recounted in his memoir, Arthur Vandenberg, a Republican senator from Michigan, threw up his hands and snickered, ''That would be socialism!''
If nothing else, this is just another feather in the hat of those looking to sharply and clearly distinguish the current Republican leadership from its conservative roots ("Neocon" doesn't go NEARLY far enough).
4) A similar cattle call to the one we are hearing now was first sounded in the late 1970s, then addressed as Reagan took office.
Once Reagan was in the Oval Office, he allowed his budget director, David Stockman, to handle the crisis. Stockman, who was waging a war on government spending, tried to exploit the moment to curtail Social Security sharply. It was Stockman's idea to cut benefits to early retirees by one-third. Without those cuts, he warned, the U.S. could suffer ''the most devastating bankruptcy in history.''.
The problem with this approach?
Since the birthrate dropped during the Depression, the number of seniors coming of age in the 1990's would decline, providing the agency with a respite.
The birthrate is just one of a number of factors that prognosticators have to consider...and to get the kinds of estimates (those that are treated as sacrosanct in the SCLM) correct. Others include life span, immigration, and average wages.
5) Robert Ball, a former Social Security Commissioner, puts forth a two-pronged (gasp) way of addressing the problem:
(Ball) starts from two premises: it would be reckless not to make some adjustments now, but foolish to make too much of 75-year prophecies. ''In 1928, there was no way to forecast the Depression, World War II, the birth-control pill. We have to stop acting as if 75-year estimates were absolute.''
Why, precisely, do we have to address the entire future of the program in one fell swoop? One that, even to its proponents, clearly imparts hurt on what has been termed the "Greatest Generaton". Don't they deserve more?
Put it this way, if the alternator in your car fails, do you buy a new car that day simply because - inevitably - the car will have to be replaced someday? Of course not.
At the same time, a modest fix that COULD secure SS through that 75-year period would have to involve either a payroll tax increase of less than 2%, or a benefit reduction of 13%. Either, of course, is greater political suicide than taking a privatization stance...but so what? Bush loves to claim that he makes tough decisions in the name of leadership, is this not a fantastic chance? He has his "mandate" and "political capital", and no re-election to worry about...this is the most maddening part for me. Bush uses the SS surplus to cut taxes (disproportionately to the rich, of course, who will not be needing Social Security) and wage an unlawful war, thus accelerating the oncoming SS "crisis" for those that are counting on the program. He then comes up with a means to leverage these giveaways into a second for another group within his support network: Wall Street.
So, in conclusion;
The White House worries that any fix that covers 75 years of benefits could still bequeath a deficit in the 76th year. ''The nation must act to avert a long-foreseen future crisis in the financing of its old-age entitlement programs,'' the report states. Its assumptions may be true, or they may not be, but the conclusion suggests a misplaced allegiance: We have an obligation to the distant future, but don't we owe a greater debt to the current generation and to those that immediately follow?
Cicero himself could not have said it better.
Let's first make adjustments to preserve and stretch the current fund (yes, Gore's infamous "Lockbox" approach would have been a fantastic start when we had a surplus). If we ever then DO see a real crisis, we'll deal with it...but it's tough to foresee demographics serving us with a more difficult scenario than the Baby Boomers.