Right before I went to bed last night, the last bit of news that came across the internet from CNN.com was that President Bush had reaffirmed his support for a constitutional amendment to ban gay marriage. "I can't wait for your blog tomorrow!" commented one of my regulars.
I've decided not to write about that. Despite my intense personal interest and feelings on the subject, it really wasn't the news of the evening; I might as well focus on his support for hydrogen-fueled cars. (Did the Bush family strike hydrogen in Texas?)
There were many things he addressed worthy of discussion and rebuttal, but most of what he said was "true," from a certain perspective. It might be a little premature to see a wave of democracy sweeping across the world from Morocco to Iraq, but you also can't deny there have been encouraging developments. So most responses to the speech would begin, "Yes, but..."
When it comes to Social Security, however, the President lied. I can't put it any more plainly than that. He stood in front of the nation, and said things that were utterly, demonstrably untrue. No spin, no "this is true if" statements. Complete falsehoods. Let's begin.
I have a message for every American who is 55 or older: Do not let anyone mislead you. For you, the Social Security system will not change in any way.
It's the President doing the misleading. The "crisis," such as it is, is 37 years away. By phrasing it this way, Bush clearly means to insinuate that Democrats are intimidating seniors. Democrats know full well that people 55 and older, under the current set-up, are not at risk for losing benefits.
Social Security is not a savings account; the taxes I pay aren't going in to wait for my retirement. What I pay in taxes pays for my grandparents' checks. If we switch over to the system that Bush proposes, there is a $1-2 trillion transition cost; a large part of that is because Social Security will then become a savings account for me; the question that Democrats have asked is, where then does the money to pay today's retirees come from? And that is one of the many questions the President can't or won't answer.
Thirteen years from now, in 2018, Social Security will be paying out more than it takes in. And every year afterward will bring a new shortfall, bigger than the year before.
The first half of his statement is true; but because of changes that were made to Social Security under Ronald Reagan, Social Security has a reserve fund that was created for just this event, which economists have foreseen for decades. So yes, the ratio of retirees to workers means that what the government pays in benefits exceeds what's coming in from taxes. But the money to cover the gap is already there, and has been there for twenty years.
For example, in the year 2027, the government will somehow have to come up with an extra $200 billion to keep the system afloat, and by 2033, the annual shortfall would be more than $300 billion. By the year 2042, the entire system would be exhausted and bankrupt.
No. That reserve fund lasts until 2042 and beyond; what happens in that year, according to analysts, is that the government will only have enough money to pay 70% of the current benefits. Some projections say that we may not even reach this point until 2054.
Let me say that again. It is positively, utterly and in all other ways not true that social security will be "bankrupt" in 2042. Right now, if we do absolutely nothing at all, we can afford to pay full benefits for probably 35-40 more years. At that point, social security will still have lots of money; if we do nothing, we can still pay 70% of our current obligations.
Supporters of Bush's plan like to say that the Democrats deny there is a problem. Not true. There's the problem: in 2042, or thereabouts, we'll only be able to pay 70% of what we currently provide. The question is, what do we do about it? A very modest tax hike will solve the problem: if we repealed Bush's income tax cuts for just the top 1% of the population we can fully fund Social Security for 70 years.
Conservatives then ask, but what do we do at the next crisis, raise taxes again? But they're not looking at their own projections. The baby-boomers who are retiring and will strain the system are not going to live forever; the problem is caused by a relatively small number of folks of working age. Well, guess what? Eventually those folks will retire, too, and there's many fewer of them. At that point, Social Security might well be over-funded, and we could talk tax cuts.
Here is why personal accounts are a better deal. Your money will grow, over time, at a greater rate than anything the current system can deliver, and your account will provide money for retirement over and above the check you will receive from Social Security. In addition, you'll be able to pass along the money that accumulates in your personal account, if you wish, to your children or grandchildren. And best of all, the money in the account is yours, and the government can never take it away.
In order for private accounts to make a return on investments, we would have to see a sustained rate of economic growth -- by sustained I mean forever -- that is unprecedented. I'll say that again: in order to do what Bush says they'll do, the stock market would have to grow even better than it did in the 1990s and never stop doing it. The proofs are complicated, but the bottom line is that Bush's numbers are based on wishful thinking.
People who use financial advisors are used to seeing this disclaimer: Past performance is not a guarantee of future results. Puts the "secure" in "security," doesn't it?
Under Bush's plan, it is conceivable that retirees would end up with more money than just Social Security; it's also conceivable that they could end up with less. And that's really the basic issue; Social Security, as it stands, is a guarantee. Bush's plan is not, though he claims it is: it "will" provide and you "will" receive.
He nodded at some of the concerns Democrats and other sane people have raised: he said there would be "guidelines" for the accounts; he said money would only be invested in conservative stocks and bonds; he promised potential earnings -- if any -- wouldn't be "eaten up" by Wall Street fees; he promised investments would be protected by "market swings."
But...how, Mr. President? That is what we want to know, and on that score, he had absolutely nothing to say.
Past performance is no guarantee of future results, but based on Bush's first four years, I wouldn't take his financial advice.
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10 comments:
You fuckin liberals cant get it through you're thick heads that if it wasn't for Bush Sadam Hussein and Al queda would still be in power. Why do you have to claim everythign Bush says is a lie. You think raising taxes fixes everything, if Clinton wanted to raise taxes to pay for blowjobs you would support it.
No profanity here, but you really should educate yourself about the fraud of the "reserve fund," as you call it. You're being lied to, big time.
Another NYT Social Security Lie: More Trust Fund Deception
Why not install a progressive payroll tax that would bring in more income for SS? Nah, taxing the rich is wrong.
andy, nice post. i say we should let the republican numbskulls sign up for bush's privatization scheme. the rest of us can stay in FDR's program. and other people have suggested this before, but the next time bush wants to liberate a country, we should have a referendum. those who vote yes on bush's war should be drafted. the rest of us can happily pay higher income taxes.
Kip, what you're charging doesn't make a lot of sense.
What would the Democrats stand to gain from asserting there's a massive reserve fund that doesn't exist? The conservative charge is always that Democrats give away more than people deserve. If we're so generous, why would we set our neediest constituents up for this enormous fraud? The long term political cost of lying about the fund would be astronomical. I can't think of a single reason to do it.
Conversely, with Bush's plan, the finance industry reaps billions in management fees, whether the plan works or not. Brokers don't work on contingency.
And most damningly of all, Bush's plan doesn't address the shortfall in 2042, because it operates on the assumption that every single taxpayer will opt into the personal account program. Here's one taxpayer who's not going to volunteer.
Thanks Vijay. For the record, I'd like to point out that I'm a $16/hr temp with a master's degree in voice. It doesn't take an accountant or an economist to dismantle Bush's lies...and that's why it's so scary.
There is no reserve fund. Social Security is a pay as you go system. Whatever social security taxes the Feds take in get spent. General Fund revenue as we say in government. First current obligations are paid to retirees and the remaining funds get spent on whatever Congress and the President choose.
So the future problem is that we will have too many retirees sucking up benefits and not enough s.s. taxes paid by the workers. Something like three payers/workers for every retiree on social Security. And the 3 to 1 ratio only works if you raise the amount of social security taxes.
That's not a sustainable system. This problem only gets worse the longer we ignore it. And it's not some republican/conservative scare tactic. I've heard the same line of reasoning from liberal economists.
It would be better to bite the bullet now and create two systems. One for the current retirees; pay their benefits till they die. The 2nd system - split the s.s. taxes between personal savings accounts and maintaining funding of social security.
Further, for you liberals who often self proclaim yourselves as champions of minorities(mostly just lipservice from what I see), social security rips off Black Americans. The current average life expectancy of a black male is roughly 68.6. The retirement age for social security is set by current law to gradually rise to 67. You do the math. And if you die before you retire or shortly after retirement, all the money you paid in is gone, nothing for your heirs. Savings accounts would let you have something to pass on.
Gee, Amigo, thanks so much for trotting out the "blacks are genetically inferior" argument that Bush used last week. Uch, now my blog is dirty.
There is a reserve fund. If we want to debate whether the President and/or Congress should be using the social security surplus to fund other items and leaving an IOU, in the form of a T-bill, in its place, then let's have that discussion. But that isn't where Bush isn't going with this. And if his answer is, "Sorry, the fund was spent and I, representing the government, am not obligated to make good on the IOU," that's just not good enough.
You have a fundamental misunderstanding of the program. This is not "what you put in you get out." It was never meant to be that way. Bush is not "fixing" Social Security, he's changing the core philosophy. The idea is: today's workers pay into a fund that provides today's retirees with a minimum guaranteed stipend that they can rely on every month until they die. For many seniors, it's the difference between a little dignity and abject poverty.
It's not a dollar for dollar exchange. It's a social contract: I take care of grandma today, your kid takes care of me tomorrow.
Whether you approve of this philosophy is irrelevant; I don't want my tax dollars paying for the slaughter of children in Iraq, but there you go.
You wrote, "the problem only gets worse as we ignore it." Sheesh, here we go, just like with Iraq. You people think the only choices are Bush's way or do nothing. HELLO, Democrats have proposed a solution which is guaranteed to work and is FAR less costly. As I said, if we repeal Bush's tax cuts for just the top 1% of earners, we can fully fund the program for 70 years.
Bush's program costs an *additional* $1-2 trillion over the next decade; it could cost as much as $15 trillion over 30 years according to some projections. For conservatives who worry about high taxes, I hate to break it to you, but the Democrat way is A LOT cheaper. Oh, and it works, did I mention that?
The reason that life expectancy for African-American men is lower is because blacks in America endure a much higher infant-mortality rate than whites, and additionally are much more likely to be the victims of violent crime. The REAL truth is that black people who live to the age of retirement can reasonably expect to live just long as white people.
And again, it's not about "what you put in is what you should get back." That's just not how the system works; in fact, most people get back more than they put in. You think changing that is a good idea? I mean, if I died tomorrow, would my family have a claim to all the social security taxes I've paid thus far?
By the way, I'm gay, and George Bush doesn't think it's right that I have any children to give my inheritance to, so that's not a real selling point for me, thanks.
MOREOVER -- and you're gonna love this -- because African Americans tend to occupy the bottom rungs of the economic ladder, they pay less into social security than whites. That means they actually get a bigger return on their "investment," if you want to look at it that way, which apparently you do. According to the New York Times, Latinos do even better.
Your argument is offensive not only because it's based on lies and Enron economics, but because it utterly lacks compassion. "Black people die sooner," you say. Your answer to that is to give them their money now (even though Bush's plan won't work).
Someone with an ounce of sense would: improve the national healthcare system and make it more accessible to underserved populations, which will improve pre- and post-natal care and drop the infant mortality rate; spend enough money on education so that inner cities and poor rural areas have modern facilities and competent teachers; fund other social programs which are shown to improve quality of life and reduce crime.
When ss was designed, the average life expectancy was roughly 67 years of age. Life expectancy has risen with each decade. Currently, we're hovering at 77 years of age depending on which source you use. With that being said, SS was designed for minimal usage after age 65...2 years specifically. What objections do you have if we just raise the eligibility age to 75 for all those age 40 and youger?
If you privatize SS, those who are not investors will lose out. I'm hard pressed a large percentage of our population invest wisely.
Well, there are many things about Social Security that can be put on the table. In order to offset tax increases, we can look at the benefits and see if there are any that could go. (Personally, I don't see Social Security as a windfall bonanza. No one is living in luxury off of Social Security.)
Yes, people are living longer, and people are working longer. So moving back the age at which you can begin to collect social security is one of the things that should be discussed. Also I think we should revisit the wisdom of allowing the Treasury to borrow from the SS reserves.
I think we could also offer a program to voluntarily donate your social security back into the fund when you retire; you could say, "I don't really need it right now" and decline your monthly checks. If your financial situation changed, then you could start collecting. It might not be wildly popular, but I bet some people would do it.
I'm not sure I understand your last comment because the sentence seems to be missing a crucial word, but I'll try to respond: Bush's plan depends on an unprecedented permanent period of economic growth in order to succeed. It all hangs on the vagaries of the economy and the market in particular. It is entirely possible that people who invest in private accounts will NOT do better than people who stay in the traditional system. If you retire during a recession or, God forbid, another depression, your investment account might be worth zippo. And, yes, one of the great questions that Bush has yet to answer is, who is going to advise people on how to invest their money?
Take a look back at Enron. Enron was politically very well-connected, and up until the day of their collapse, they were widely regarded as an extremely strong and secure investment. Uh oh, but their books were cooked. But what would have stopped them from bending the President's ear -- any President -- and saying, "Hey, you should steer social security investors toward our stocks, they are really quite strong." Everyone believed that they were. But the figures were inflated, and Enron went bust. It seemed like a very wise, very safe investment, but it was a scam.
There is NOTHING to prevent that from happening again.
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