Today is the big Day for Social Security bashers. The trustees of the nation’s retirement system will be releasing their annual financial report, and you can bet that no matter what it says, politicians from left to right will use it as the pretext for a smackdown, reluctantly and oh so sorrowfully concluding that Roosevelt’s New Deal project is about to cause the nation to go broke. The only thing to do, they will lament, is to cut Social Security as a small step in curtailing entitlements and thereby eventually balancing the budget.
The biggest suckers in the Social Security takedown are not the politicians or policy wonks, but the journalists–and in particular, the gaggle of screaming pundits on cable TV–who lap up their spoon-fed pablum without casting anything remotely resembling a critical eye. They apparently consider the idea of reporters doing their homework as a quaint habit of bygone days. Otherwise, they would know that–as two longtime experts on Social Security write–our leading old-age social program, which is celebrating its 75th year, is actually “an essential program in admirable fiscal health.”
In preparation for the coming attack, the Nieman Foundation at Harvard has asked Nancy Altman and Eric Kingson–both former staff of the Greenspan Commission that studied Social Security back in the 1980s, who have been tracking the program ever since–to write a primer to help the general public make sense of charge and counter charge. Altman and Kingson, who currently co-chair the Strengthen Social Security Campaign, call their report “Newsflash! Journalists prepared to once again utterly misread annual Social Security Trustees report.” I am reprinting salient points from the piece here.
Thursday’s report will once again describe an essential program in admirable fiscal health. But every year, journalists twist the facts to fit a narrative favored by the political elite: that the program is in crisis. Rather than manufacturing a false drama that shakes people’s confidence about their future benefits, two Social Security experts write, reporters should stick to the facts.
….. Social Security is the most fiscally responsible part of the budget, projecting income and outgo three-quarters of a century into the future — longer than private pensions or even the social security programs of most other countries. When projecting out over such a long time period, it will sometimes project deficits, providing considerable lead time for Congress to make adjustments that are needed from time to time. This careful monitoring and close examination of Social Security should provide the American people with confidence that the program will always pay benefits on time and in full, as it always has. Instead, the non-news in the report is spun every year to make the program appear headed toward bankruptcy — an impossibility, given how the program is financed. The natural result of that story angle is to shake the confidence of hardworking Americans who have contributed and earned benefits and to frighten those who currently receive benefits.
Here are some questions reporters should ask about Social Security in order to accurately report the news.
Q. What does the report say about the current and near-future state of Social Security? Doesn’t it reveal, just as last year’s did, that Social Security is currently in surplus? Doesn’t it say that Social Security has an accumulated surplus of over $2.6 trillion, which will grow to over $4 trillion by the 2020s, and can pay all benefits in full and on time for a quarter of a century? How much, or little, is today’s situation like that of 30 years ago, the last time Congress acted to eliminate a projected deficit?
This year’s Trustees Report will make 100 percent clear that Social Security is in strong financial shape, notwithstanding the projection of a moderate shortfall still decades away. It will show that we are not in any way facing the type of financing crisis experienced by Social Security in the mid-1970s and early 1980s. Back then, Social Security faced large, immediate shortfalls. If Congress had not passed and if President Reagan had not signed legislation early in 1983, then some time later that year, Social Security would not have been able to pay all benefits as promised. Nothing like this is remotely possible today. In fact, the Social Security actuaries’ low-cost optimistic assumptions will project, as last year’s did, that Social Security faces no shortfall at all. These projections are simply not consistent with the claim that Social Security is in crisis.
Q. If most of Social Security’s revenue in the future will come from future contributions of workers and their employers, and if the Trustees Report indicates that, even with no change whatsoever, three-fourths of all benefits can be paid on time for the next 75 years and beyond, why do so many young people think they will never get a penny from the program? Why aren’t politicians correcting this mistaken view?
The undermining of confidence in Social Security’s future is central to the attack on the program, as it softens resistance to radical changes that would greatly reduce benefits, especially for middle aged and young Americans. After all, if these citizens can be convinced that Social Security is unsustainable, that it will not be there for them, then they will be more likely to embrace reforms, even if these reforms drastically reduce the benefits they are earning.
Q. If there is no immediate problem, why has President Obama empowered a deficit commission — which lacks a single commissioner or even staff member whose primary expertise is Social Security — to propose changes to Social Security? And why has the Congressional leadership agreed to an up-or-down vote in a “lame duck” session, should the commission reach consensus? (See our earlier article for NiemanWatchdog.org, “Has Obama created a Social Security ‘death panel’?)
Frankly, we do not know, though it seems that some political elites want to do something deeply unpopular, yet avoid political accountability. Poll after poll on the subject reveals that overwhelming percentages of Democrats, Independents, Republicans, the young, the old, Tea Partiers, union households and everyone else do not want benefits cut or the full retirement age increased. To close the projected shortfall, they want new revenue, preferably from progressive sources such as increasing or eliminating the maximum amount on which contributions are assessed (and benefits calculated). Seemingly, some among the elites think they know best, but can’t explain it and don’t want to take the heat from simply going against the will of the people. (In the past, Social Security legislation has always gone through regular congressional processes with review, amendment and debate by members of Congress, especially those serving on committees that have jurisdiction over the program.)
Some politicians — the so-called “deficit hawks” — view the confluence of Social Security’s projected shortfall with the serious long-term fiscal imbalance in federal spending as providing an opportunity to position themselves as being “tough” on the deficit. Most concerning, the same forces that brought us unsustainable long-term federal deficits — the ones that passed tax cuts for the rich, that brought us into two unfunded wars, that deregulated the banks and mortgage systems, nearly collapsing the economy and then had the temerity to give themselves huge bonuses beyond what ordinary Americans can imagine making in a lifetime — these same forces are now trying to pin this deficit on the most cautiously financed program the nation has.
To put things into perspective: Social Security’s entire projected shortfall is just 0.7 percent of Gross Domestic Product — about the same amount it would cost to extend the top Bush tax cuts for the top one percent of the nation’s wealthiest persons.
Q. Is it accurate to say that Social Security is, for the first time, taking in less in payroll tax contributions than it is paying out in benefits?
It is the first time since 1983 that it is paying out more, but 1983 marked the beginning of a period during which Social Security started building large surpluses in anticipation of the retirement of the baby boom. There is nothing new or surprising about Social Security’s benefits exceeding the so-called payroll taxes. Benefits exceeded payroll tax contributions in 1958, 1959, 1961, 1962, 1965, 1975, 1976, 1977, 1978, 1979, 1980, 1981, 1982 and 1983. The sky did not fall. Indeed, the trust funds acted as intended, providing a margin of safety so that benefits could be fully paid, even in very difficult economic times. (see Table 4.A3–Combined OASI and DI, 1957-2008 in the Social Security Administration’s Annual Statistical Supplement, 2009).
Most important, though not well understood, payroll taxes are only one of Social Security’s three revenue sources. Payroll taxes are the mandatory contributions, deducted from the wages of workers, and matched by employers. But Social Security also collects interest on the surpluses it has invested in certificates of obligation and bonds issued by the U.S. Treasury. And the program also collects income taxes on the Social Security benefits of those with higher incomes. These three sources of revenue, taken together, exceed the cost of all benefits and associated administrative costs in 2010 by a projected $138.4 billion, according to the 2009 Trustees Report.
Q. And finally, why is all the attention focused on sustainability, instead of celebrating on this 75th Anniversary how this program has, through good and bad times, protected working Americans and their families and given expression to widely held values — rewarding hard work, caring for parents, neighbors and ourselves?
Today Social Security is America’s most important source of retirement income protection. It is also the country’s most important disability protection and life insurance protection, especially for all our children. Given the unpredictability of disability and premature death, and the insecurity of employer-sponsored retirement arrangements, stocks, home equity, and other savings, Social Security will be an even more important source of income for tomorrow’s workers. Adequate financing is obviously very important, but it is not an end in itself.