See Update at end.
Should we cut Social Security to “save” it from cuts?
Just two days after the President pledged during the State of the Union address to improve Social Security “without putting at risk current retirees” and “without slashing benefits for future generations” the program is again being subjected to widespread, misleading attacks in the media.
With the headline Social Security fund will be drained by 2037, AP ran a (since-changed, original is still available here. It is worth comparing the original with the revised.)
op-ed story that began,
Sick and getting sicker, Social Security will run at a deficit this year and keep on running in the red until its trust funds are drained by about 2037, congressional budget experts said Wednesday in bleaker-than-previous estimates.
The CBO story about Social Security is part of a larger overall budget deficit projection, the result of the recent vote to give more tax cuts to the wealthy. The AP story, widely echoed in the media, is instead focusing only on Social Security. But it is not “news” that the trust fund will be exhausted in 2037 (assuming continuing poor economic and wage growth — read this and everything Bruce Webb writes about Social Security at Angry Bear), it is the projection that had been understood for years. However, using better economic assumptions that could result from policies that increase the wages of working people and reduce the concentration of wealth the trust fund does not run out at all.
Even so, in 2037, under these bad-case scenarios, Social Security will still be able to pay 78% of projected benefits, which are higher than today’s benefits. So in this poor-case scenario, if nothing is done, recipients will face a cut of 22%.
Saying that we need to cut Social Security now because it might — might — have to be cut 22% in 2037 is saying we need to cut it to “save” it from cuts.
Deficit Commission Recommendations?
The AP story wrongly stated that the “Deficit Commission” had made recommendations to increase the retirement age and cut the program through reduced cost-of-living increases. In fact the commission was unable to agree on any recommendations.
A debt commission appointed by President Barack Obama has recommended a series of changes to improve Social Security’s finances, including a gradual increase in the full retirement age, lower cost-of-living increases and a gradual increase in the threshold on the amount of income subject to the Social Security payroll tax.
Obama, however, has not embraced any of the panel’s recommendations. Instead, in his State of the Union speech this week, he called for unspecified bipartisan solutions to strengthen the program while protecting current retirees, future retirees and people with disabilities.
To assist with its anti-Social Security formulation the AP story claimed “experts” (plural) are calling for “reform” by quoting one “expert” (singular) from the conservative think tank American Enterprise Institute.
Running A Deficit?
Conservative outlets are expanding on the CBO report, claiming that Social Security is running deficits – as long as you don’t cont the interest that the program’s bonds earn. For example, note the use of the word “effectively” in CNS’ CBO: Social Security to Run $45 Billion Deficit in 2011
The Congressional Budget Office (CBO) reports that Social Security will effectively run a $45-billion deficit in 2011 and continue to run deficits totaling $547 billion over the coming decade.
National Review, uses the word “broke” in CBO: Social Security Now Officially Broke, and claims the interest is only “camouflage,”
Today’s CBO report has some bad news about the deficit. But CBO has some really, really bad news about Social Security: It’s officially broke.
… But there’s a bit of camouflage attached: If you include the “interest” that the federal government “owes” the fictitious Social Security “trust fund,” then the program is in the black.
And so on…
Cut The Program To Save It From Cuts?
So does it make sense to cut the program to save it from cuts? The real agenda behind calls for cuts is so that the money does not have to be found elsewhere to repay the trust fund. The trust fund masked the harm done by tax cuts, and undoing tax cuts is what will be needed to pay back the money that working people have set aside for retirement,
Claiming that Social Security needs to be cut, or the retirement age raised, so that Social Security needs less funding is like your bank telling you that you need to cut back on food so they won’t have to pay you back the money you put into a savings account.
Update – As this was posted AP released an astonishing new attack, Social Security posting $600B deficit over 10 years. Ignoring the program’s huge trust fund and that there is no deficit at all when interest paid to that trust fund is counted, AP writes,
Social Security will post nearly $600 billion in deficits over the next decade as the economy struggles to recover and millions of baby boomers stand at the brink of retirement, according to new congressional projections.
This year alone, Social Security is projected to collect $45 billion less in payroll taxes than it pays out in retirement, disability and survivor benefits, the nonpartisan Congressional Budget Office said Wednesday. That figure swells to $130 billion when a new one-year cut in payroll taxes is included, though Congress has promised to repay any lost revenue from the tax cut.
. . . But the new projections show nothing but red ink until the Social Security trust funds are exhausted in 2037.