Krugman finally called Bush a liar in print over the claim that each year of delay in "fixing" Social Security costs another $600 billion.
Now is a good time to get the real numbers into circulation.
Kamin and Kogin at CBPP came out with a detailed rebuttal of Bush's bogus claim back on February 2.
They showed that each year we wait will require an increase in future annual outlays of about $2 billion for each year, simply because we'll be paying in the extra amount for a shorter time.
Please help spread this around to counter the BS.
From their article:
Waiting to act on Social Security does have a cost, but the Administration is misidentifying its source and substantially exaggerating its size. Waiting to act a year means that the same shortfall must be paid down over a slightly shorter period of time. For instance, as of 2003, savings to close the Social Security shortfall could be achieved in all years from 2003 on. But if action did not occur in 2003, the same shortfall would have to be closed over a period that is one year shorter, since 2003 would have passed. To make up for the fact that no savings were achieved in 2003, the annual adjustment necessary to restore solvency to the Social Security system must be slightly larger over the remaining years. This is the true cost of waiting.
- From 2003 to 2004, the size of the policy changes needed to restore full solvency into eternity increased by 0.02 percent of the Gross Domestic Product (the basic measure of the size of the economy) due to the delay of one year. In other words, the cost of closing the shortfall increased by an amount equal to two one-hundredths of one percent of the economy, measured over the period from 2004 into eternity.
- This increase of 0.02 percent of GDP is equivalent to an additional $2 billion per year, relative to today's economy. In other words, the cost of restoring full solvency to Social Security into eternity is about $2 billion higher for each year that we postpone such legislation. But the size of the tax cuts enacted in 2001 and 2003 just for the top 1 percent of households equals about $45 billion in 2005, or more than 20 times the cost of a one-year delay in implementing a Social Security fix.
- Over the "infinite horizon," 0.02 percent of GDP is equivalent to a total of $150 billion. (This is the $2 billion per year cost of waiting added up over time and expressed in present-value terms.) Put differently, under the measure of the cost of restoring Social Security solvency into eternity (a measure that the American Academy of Actuaries has strongly criticized as a misleading measure that should not be used in policy debates), an additional $150 billion in total savings would need to be achieved over the period from 2004 on because no action had been taken in 2003. In comparison, the total size of the 2001 and 2003 tax cuts over the infinite horizon is $16.4 trillion, or almost 110 times as much.
- Over the more established and widely accepted way of measuring Social Security's solvency -- over the coming 75-year period -- the cost of deferring action a year is smaller. From 2003 to 2004, the size of the policy changes needed to restore solvency over the 75-year period rose by one one-hundredth of one percent of GDP, or close to $80 billion in present value.
P.S. The same authors give a fuller explanation for the origin of the $600 billion figure than Krugman has space for. Basically, the bogus "infinite horizon" liability, as expressed in present value, discounts future dollar amounts relative to present-day dollars. Switching from a 2003 to a 2004 starting date means the valuation is in terms of 2004 dollars, that have a value about 6% less than 2003 dollars (the values for successive years are discounted at the expected compounded interest rate). Because the same buck in 2083 is worth 6% more relative to a 2004 buck than to a 2003 buck, the total projected liability, in the 2004 present value, is roughly 6% higher than it is in the 2003 present value. But, it's still the same buck in 2083!
The Trustees intermediate case infinite horizon liability has a present value of $10.4 trillion, so if the underlying assumptions were kept exactly the same, the present value of the infinite horizon liability would automatically increase by about 6% per year, currently around $600 billion, even though there is no real change in the projections.
It's a fake number, used in a fake argument.