Some days, I just can’t write about work frustrations. Not that I don’t want to or that I don’t think they’re interesting, just that it’s part and parcel of the whole confidentiality thing.
On days like today, it’s important to write about other frustrations (trust me on this). Today’s topic: scare tactics in government funded letters. I received my social security statement the other day and it has a lovely section on the front page entitled “About Social Security’s future…â€
Social Security is a compact between generations. For more than 60 years, America has kept the promise of security for its workers and their families. But now, the Social Security system is facing serious future financial problems, and action is needed soon to make sure that the system is sound when today’s younger workers are ready for retirement.
Today there are almost 36 million Americans age 65 or older. Their Social Security retirement benefits are funded by today’s workers and their employers who jointly pay Social Security taxes – just as the money they paid into Social Security was used to pay benefits to those who retired before them. Unless action is taken soon to strengthen Social Security, in just 11 years we will begin paying more in benefits than we collect in taxes. Without changes, by 2040 the Social Security Trust Fund will be exhausted. By then, the number of Americans 65 or older is expected to have doubled. There won’t be enough younger people working to pay all of the benefits owed to those who are retiring. At that point, there will be enough money to pay only about 75 cents for each dollar of scheduled benefits. We will need to resolve these issues soon to make sure Social Security continues to provide a foundation of protection for future generations as it has done in the past.
There are no lies as pernicious as half truthes. And the statement above is full of them. I fully predict that we’ll see a new round of Social Security privatization er, personal accounts, er reform this spring. Not that much foresight is needed since the president and the republicans have already said as much. So just as an exercise in identifying half truthes, let’s take a look at the above. Here are the things I find:
- “Unless action is taken†– actually, it was. A group led by Greenspan in the 80s under Reagan took action to create the trust fund. Essentially, we are all paying in more to Social Security right now in order to get us past the baby boomers
- “in just 11 years we will begin paying more in benefits than we collect in taxes†– possibly true. The specific year depends on the growth in the US economy, but yes, we will eventually begin spending more than we take in. This is BY DESIGN – see above
- “by 2040 the Social Security Trust Fund will be exhausted.†Keep in mind that every year, the Social Security Trustees produce a report to congress. The report presents 3 scenarios using pessimistic, reasonable and optimistic assumptions. The pessimistic scenario results in exhaustion by 2040. The reasonable and optimistic scenarios have the trust fund lasting INDEFINITELY. It takes very little economic growth (1.9% as compared to our historical 3.1+%) to make the trust fund last indefinitely.
- “only about 74 cents for each dollar†– This could be true, but keep in mind that most of the proposed solutions involve paying LESS than 74% of scheduled benefits. So even in the worst case, we still might be better off under the current system.
- finally, and not captured here, most privatization schemes require a robust stock market to pay benefits. *IF* we have a problem (i.e., less than 1.9% economic growth) then the stock market will be in the tank and won’t be able to make up the difference. You can’t get a poor economy and a strong stock market.
Do you see others?