I've been thinking about a fact that is thrown around a lot in the Social Security debate but that really doesn't mean very much in and of itself. The gist of the fact is:
In 2042 (or 2052 depending on the source) the Social SecurityTrust Fund will be exhausted and retirees will only get 70+ percent of scheduled benefits.
That is the fact, but what does 70+ percent of scheduled benefits really mean? How much is that in real dollars?
As it turns out, if ABSOLUTLEY NOTHING IS DONE with respect to SS, "While trust fund insolvency would lead to large percentage reductions in scheduled benefits, real benefit levels for average retirees would remain as high as or higher than benefits paid to average retirees today."
Did you get that? "[R]eal benefit levels for average retirees would remain as high or higher than benefits paid to average retirees."
This is further supported by the
CBO:
"At the same time, because Social Security benefits are based on career earnings and earnings in the economy rise over time--at a rate generally in excess of inflation--the first-year benefits for successive groups of new recipients are projected to rise in terms of the goods and services that they will buy. For average earners retiring at age 65 in 2035, the purchasing power of their first-year benefits is projected to be $17,000 (in 2003 dollars)--25 percent greater than that for a comparable retiree today.
Thus, by one measure, future Social Security benefits would be smaller than they are today, and by another measure, they would be larger."
Now ask yourself, which measure is more important to you? The abstract number, a reduction in benefits by 20+ percent, or the real dollar number, greater purchasing power than today's Social Security recipients receive.
Why isn't anyone screaming this from the rooftops?
The Washington Post weighed in:
It won't be until 2042, according to the Social Security trustees, or 2052, in the analysis of the Congressional Budget Office, that retirees' demands will be so great that the trust fund is depleted. At that point, enough new money will be coming in to pay 73 percent of promised benefits, according to the trustees (80 percent, according to the CBO). Even with such a reduction, future beneficiaries would receive more, in inflation-adjusted dollars, than they do today because of the way benefits are adjusted for wage growth. When Mr. Bush says that the system then "will be flat bust, bankrupt," he is flat wrong.
However, coverage since that point has been spotty at best.
I realize the "crisis" rhetoric has been toned down and the Administration is backing off a bit, but throwing around abstract numbers like "only 73% of schedule benefits" obscure more than they illuminate. If the majority of the American people want private accounts and want to run the risk in the market, although it seems they don't, that's fine by me. Let's just make sure they know exactly what they are giving up in guaranteed benefits.