Social Security and Medicare: Behind the Numbers and the Spin

Here are some headlines you won't see after the government releases new figures on Social Security and Medicare later today:

"Social Security Trust Fund Even Larger Than It Was Last Year"
"Growing Wealth Inequity Will Lead to Social Security Imbalance Later This Century"
"For-Profit Healthcare Poses Threat to Medicare, Federal Deficit, and Overall Economy in Coming Decades"
"Public Consensus Grows For Taxing Wealthy to Restore Long-Term Entitlement Imbalance"

Instead here's what we've already seen:

"Aging workforce strains Social Security, Medicare"

That headline's completely wrong, and yet it's been repeated [1] in dozens of different news outlets (sometimes with minor variations) as they run an improved, but still misleading, news story on Social Security and Medicare from Stephen Ohlemacher at the Associated Press.

Perhaps Trudy Lieberman's Columbia Journalism Review analysis [2] of misleading Social Security reporting had some impact.

Whatever the reason, it's good to see that Ohlemacher's article acknowledges the role that our ongoing economic difficulties have had in slowing revenues for these programs, and that he quotes critics of the Social Security-cutting consensus (although with far less prominence than he does a little-known figure repeating right-wing talking points.)

Even the Washington Post, which is the nation's worst journalistic offender on these subjects, shifted the emphasis with their headline this time. Today they're running [3] the AP article with the header "Social Security, Medicare strained by slow economic recovery, aging workforce."

That headline is 50 percent right - which is a 50 percent improvement.

Ohlemacher's article was occasioned by the latest report from the Trustees of the fund that handles Social Security and Medicare, which will be released today. He writes that "both programs (Social Security and Medicare) are on a path to become insolvent in the coming decades, unless Congress acts, according to the trustees."

Unfortunately the piece provides no context for the use of the term "insolvent," which most people associate with bankruptcy or running out of funds. As Sarah Kliff [4] explains, nobody is suggesting that either of these programs will ever run out of funds. And when programs have ongoing sources of income, the temporary absence of a surplus isn't the same as "insolvency" as that term is commonly understood.

In fact the report will clearly state that Social Security's Trust Fund has grown to $2.7 trillion dollars, and that Social Security will be able to pay all its benefits in full for a quarter of a century. After that, if no changes are made, it will be able to pay 75 percent of scheduled benefits without changes.

Nor is the "aging workforce" the cause for any of today's concerns, despite the millions of dollars in advocacy money meant to make us believe that it is. We've known about the baby boom ever since it ended in the 1960's, and it was fully addressed in past adjustments to the program. That's why the program was considered perfectly solvent for the foreseeable future after the Greenspan Commission raised the retirement age and made its other adjustments in the 1980s.

The demographics of that "aging workforce" were well known to actuaries by then, since all of those now-aging boomers were already alive and participating in the workforce. So how could an "aging workforce" have caused unexpected shortfalls in Social Security?

The answer, which you won't find in the AP article, is this: As economists like L. Josh Bivens have shown, there's been a sharp increase in income inequity in the last couple of decades. The payroll tax which finances Social Security was reconfigured to capture 90 percent of the nation's income, but because the richest among us are capturing more of our nation's wealth that figures is now closer to 83 percent.

If that hadn't happened there would be no problem with Social Security at all. Understanding the nature of the problem helps us come up with a cure. If wealth inequity is the cause, shouldn't the solution also center on inequity?

Medicare, unlike Social Security, does have very serious long-term financial problems. Why? Because we're the only developed nation that insists in delivering its health care through a system of for-profit hospitals and other medical providers. The for-profit medical/industrial complex has exploded in size over the last few decades, and it's driving our runaway health care costs. The for-profit insurance system which serves most insured Americans under 65 has no incentive to resist for-profit medical care, and arguably even benefits from runaway costs.

The impact of for-profit care on Medicare's future can be inferred from this quote by economist David Blitzer: ""The trends in Medicare are more modest than the cost increases we have seen in the private commercial sector." That's because Medicare, as a government program, is far more cost-efficient than the private health insurance system. (That difference makes a mockery of Republican proposals to end Medicare and replace it with a system of vouchers for private insurance.)

The AP article prominently features an alarmist quote from someone named Mary Johnson, who is described as a policy analyst for the "Senior Citizens League." "I don't know how to make it clear to the public," says Ms. Johnson, "but in my mind the sirens are going off."

The Senior Citizens' League does not present Ms. Johnson's professional qualifications on its website. And who is the Senior Citizens League? The only member of the organization with a national reputation is its apparent founder, former Republican Congressman David Funderburk. I hadn't heard of it before, but some quick Googling led to complaints like this one [5] ("Notch octogenarians should beware of Social Security scam") and this one [6] ("Got a letter requesting money from them. The letter is full of propaganda about Mexican immigrants taking away all social security benefits??!")

The League also fought against health reform which claims that it would create a "massive" Federal database that would make your medical records available to "millions of people" with "a complete lack of privacy and confidentiality" and would hit doctors and hospitals with "stiff penalties." That even earned a slap from PolitiFact [7], which has been known to defend conventionally-accepted misstatements on the subject of entitlements. According to its website the League's been on the right side of at least one issue, that of cost-of-living adjustments, but it's surprising to see alarmist words from such a little-known group given such prominence in a piece of this kind.

The AP article also quotes people with more obvious credentials, including economist Blitzer and Eric Kingson, a professor of social work at Syracuse University who co-chairs the Strengthen Social Security Campaign. (Conflict alert: I'm affiliated with that organization.) But these more qualified individuals aren't given the prominent display of the less-well-known Ms. Johnson.

The simplest, and by far the most popular, solution to Social Security's future revenue gap is to lift the payroll tax cap. Such a move would end any future doubts about its ability to pay benefits, would be politically popular, and would harmonize with the wealth inequity that is the source of that future shortfall.

Yet this solution goes unmentioned until the end of the article, and then only as the position taken by "advocates": "Kingson and other advocates say Social Security could be shored up by simply increasing the amount of wages subject to Social Security taxes -- an idea that most Republicans in Congress flatly oppose."

That makes it sound as if this were a matter of opinion, rather than one of fact, but it's not. Experts ranging from Ronald Reagan's Chief Actuary to economists with expertise in this area have confirmed that this would fully solve Social Security's long-term shortfall.

By contrast, consider the article's opening sentence: "An aging population and an economy that has been slow to rebound are straining the long-term finances of Social Security and Medicare." That sentence should have read "Growing wealth inequities and an economy slow to rebound ..." Near the end another sentence could have something like "The Senior Citizens League and other advocates say an aging workforce has contributed to the problem ..."

That would have been much more accurate. Unfortunately the AP reverses opinion and fact, presenting one as the other and vice versa. That will serve to reinforce widely-held (and, for the right, politically convenient) misconceptions about the program. Nevertheless, although it repeats far too many misconceptions and fails to provide the proper context, this article is an improvement from past misreporting on Social Security and Medicare.

We have a long way to go before we can be sure that our news outle ats are giving people the facts and the context they need to understand what's happening to Medicare and a Social Security - and what it means for them.

(NOTE: The above originally said that the AP article didn't mention lifting the payroll tax cap at all. It did, but presented its effects as if they were merely a matter of opinion. We have rewritten that section of this piece accordingly.)