Top 5 Social Security Myths

[LiberalFighter]

Myth: Social Security is going broke.

Reality: There is no Social Security crisis. By 2023, Social Security will have a $4.3 trillion surplus (yes, trillion with a 'T'). It can pay out all scheduled benefits for the next quarter-century with no changes whatsoever.1 After 2037, it'll still be able to pay out 75% of scheduled benefits--and again, that's without any changes. The program started preparing for the Baby Boomers retirement decades ago.2 Anyone who insists Social Security is broke probably wants to break it themselves.

Myth: We have to raise the retirement age because people are living longer.

Reality: This is red-herring to trick you into agreeing to benefit cuts. Retirees are living about the same amount of time as they were in the 1930s. The reason average life expectancy is higher is mostly because many fewer people die as children than did 70 years ago.3 What's more, what gains there have been are distributed very unevenly--since 1972, life expectancy increased by 6.5 years for workers in the top half of the income brackets, but by less than 2 years for those in the bottom half.4 But those intent on cutting Social Security love this argument because raising the retirement age is the same as an across-the-board benefit cut.

Myth: Benefit cuts are the only way to fix Social Security.

Reality: Social Security doesn't need to be fixed. But if we want to strengthen it, here's a better way: Make the rich pay their fair share. If the very rich paid taxes on all of their income, Social Security would be sustainable for decades to come.5 Right now, high earners only pay Social Security taxes on the first $106,000 of their income.6 But conservatives insist benefit cuts are the only way because they want to protect the super-rich from paying their fair share.

Myth: The Social Security Trust Fund has been raided and is full of IOUs

Reality: Not even close to true. The Social Security Trust Fund isn't full of IOUs, it's full of U.S. Treasury Bonds. And those bonds are backed by the full faith and credit of the United States.7 The reason Social Security holds only treasury bonds is the same reason many Americans do: The federal government has never missed a single interest payment on its debts. President Bush wanted to put Social Security funds in the stock market--which would have been disastrous--but luckily, he failed. So the trillions of dollars in the Social Security Trust Fund, which are separate from the regular budget, are as safe as can be.

Myth: Social Security adds to the deficit

Reality: It's not just wrong -- it's impossible! By law, Social Security funds are separate from the budget, and it must pay its own way. That means that Social Security can't add one penny to the deficit.

Source: MoveOn.org

[boppers]

1. It's not part of the deficit, it's part of the debt.

http://en.wikipedia.org/wiki/Social_Security_Trust_Fund
"Because under current federal law these securities represent future obligations that must be repaid, the federal government includes these securities within the overall national debt."

[Sherman A1]

2. Thank for posting!

I am bookmarking this one! I needed a good list and this one appears to be it.

[IndianaGreen]

3. K&R against Obama's Cat Food Commission!

:kick:

[Exilednight]

4. This is why Obama needs to do away with this blue ribbon crap. If it's not broke, don't fix it.

[Igel]

5. Corrections.

In (1) I think you meant "2073." Unstated is that while the assets are there, they're not in cash. That money will come from the general fund.

In (2), life expectancy at age 65 for all people in the US has increased from 13.9 to 18.7 from 1950 to 2005. That's a 34.5% increase. It's increased slightly since 2005. I'll overlook that the workforce has gone from mostly male to about half male/half female, and that alters the number--the 1950 numbers should be lower to account for the percentage of men, so the increase is actually larger. The increase in life expectancy at birth is, as you point out, irrelevant. But describing the increase as "slight" only holds if you consider the life expectancy at birth as the standard against which to measure the 4-5 year increase. It's not. What's relevant is the number of years you're retired, and that's increased more than "slightly."

In (3), benefits are capped in a funny way to keep it from being considered an entitlement. Uncap the earning subject to the tax and it alters its perception to some extent. Moreover, saying that this would solve the problem assumes that the problem is only what's stated in (1). I'll overlook that you say that SS doesn't need to be fixed, but if you do what's recommended then it becomes "sustainable." The inference is that unless it's "strengthened" it's not sustainable.--and if it's not sustainable, doesn't that mean it needs to be fixed? :think:

In (4), you conflate US Treasury bonds and the special-purpose bonds held only by the SS trust fund. They're distinct. Both are backed by the full faith and credit of the US government, but if the faith and credit were voided for the special-issue bonds it would likely have no influence on the larger US Treasury bond market--of course, there are other ways of dealing with them. Then again, it's a funny kind of semantic game to say that US Treasury bonds aren't IOUs. They're precisely interest-paying IOUs. That's what a bond is: "You give me money, I give you a piece of paper saying I'll pay you interest and after X number of years I promise return your money." An IOU is a piece of paper saying that I promise to return your money, possibly after a set period of time. Dwelling on the differences verges far into pedantry.

In (5), it's important to note that repaying the trust fund IOUs/bonds will increase the deficit. As SS spending takes up another 5-6% of GDP, either the deficit will increase from its historical 3-3.5% of GDP or taxes will rise from approx. 20-22% of GDP to 25-27% of GDP. This also ignores that Medicaid/Medicare are scheduled to increase rather dramatically, as well, so while that increase in taxes might sound not so bad that increase is coupled with others.

In (5) you also confuse "by law" with "impossible." Congress made the law. Congress sequestered the SS funds. If Congress wants to undo it, they can.

Most important is unstated the "myth" that the number of workers supporting each SS beneficiary is on course to plummet. Instead of something like 9 workers for each SS recipient it'll be closer to 4 workers for each SS recipient. Moreover, the estimates are all wrong in your post--they change constantly, as history says that the assumptions and model underlying the predictions change.

[boppers]

8. Interesting.

Thanks for these things to think about.

[golfguru]

9. Thanks for posting a knowledgeable summary anaysis n/t

[Sebastian Doyle]

6. K&R for the truth.

And FUCK the DLC attempt to privatize everything. :kick:

[pnorman]

7. K & R! For later careful study of all the discussion on this thread.

I plan on passing that site on, but only after careful study.