There’s a new meme that has gripped official Washington over the past few months. I’ve got a fever, and the only prescription… is more deficit reduction.
But instead of ringing a cowbell, our Very Serious Leaders are trying to lead us to slaughter, using this deficit “crisis” to justify their ultimate goal of shredding the social safety net. Naomi Klein talked about this in her seminal book, The Shock Doctrine, and it seems her theory of disaster capitalism has infected current inside-the-beltway thinking when it comes to Social Security.
We are already starting to see the signs of a trumped-up crisis, fed by lies and misinformation about Social Security’s current “insolvency.” We are told that Social Security is now running at a deficit, that it won’t be around when those currently paying in retire, and that skyrocketing life expectancy rates have put a burden on the system, among many others.
But now for something completely different: the truth.
Zombie Lie #1: Skyrocketing Life Expectancy Rates Burdening The System
For Social Security purposes, the correct question is not how many live to age 65, but rather how long those reaching age 65 live thereafter. Here the numbers are not as dramatic. In 1940, men who survived to age 65 had a remaining life expectancy of 12.7 years. Today, a 65-year-old man can expect to live not quite three years longer than he might have in 1940, or 15.3 years beyond reaching age 65. For women, the comparable numbers are 14.7 years beyond age 65 in 1940; 19.6 years in 1990.
Zombie Lie #2: Social Security Is Running At A Deficit
While the traditional media is falling all over itself to report that Social Security will run at a deficit starting this year, this stat only takes into consideration the primary deficit due to depressed payroll taxes because of almost 10-percent unemployment. It fails to include the interest payments that the Social Security Trust Fund continues to earn. Here’s a handy chart from the Center on Budget and Policy Priorities (CBPP):
Those who tout Social Security’s impending doom (any day now… really… I’m not kidding… we’re completely screwed) conveniently forget that Social Security is currently running trillions in surplus. According to the CBO, old age and disability trust funds are projected to grow from $2.5 trillion in 2009 to $3.8 trillion in 2020. Here’s another handy chart:
Zombie Lie #3: Social Security Won’t Be Around When I Retire
The Social Security Trust Fund is not estimated to run out of money until 2037, and even then tax income would allow payment of about 75% of benefits through 2083. Kathy Ruffing of CBPP has more:
- In 2009, the combined Old-Age, Survivors, and Disability Insurance Trust Funds — commonly known as Social Security — ran a surplus of $137 billion, meaning that the trust funds’ income (from taxes and interest) exceeded their spending (for benefits and administration) by that amount.
- The Congressional Budget Office (CBO) expects the surplus to slip to $91 billion in 2010 before rising again — reaching $137 billion in 2015.
- The Office of Management and Budget (OMB) echoes CBO’s projections for the next two years and expects a more robust recovery in the system’s finances thereafter.
Certainly, there are ways to ensure Social Security remains solvent well into the rest of this century, but the fixes to the system do not need to be draconian. Noted economist Monique Morrissey of the Economics Policy Institute explains (emphasis mine):
Poll after poll has shown that voters are willing to pay higher taxes to preserve and strengthen Social Security. But most of the gap can be closed without raising taxes on ordinary workers—just those with earnings above the taxable earnings cap of $106,800.
For example, gradually restoring the cap to again cover 90% of earnings for workers, and eliminating it altogether on employer side, would be enough to shrink the long-term deficit by 69%, while still preserving the link between these workers’ contributions and the benefits they receive.
Raising or eliminating the cap on taxable earnings is appropriate because almost all the earnings growth (and the growth in life expectancy) in recent years has been at the top.
So why the sudden rush to slash Social Security benefits? Our old friend, Paul Krugman, has an answer:
There has always been a sense in which [Republican] voodoo economics was a cover story for the real doctrine, which was “starve the beast”: slash revenue with tax cuts, then demand spending cuts to close the resulting budget gap. The point is that starve the beast basically amounts to deliberately creating a fiscal crisis, in the belief that the crisis can be used to push through unpopular policies, like dismantling Social Security.
So let me get this straight, Republicans ran up huge deficits by cutting taxes for the very wealthy, waging two wars in Iraq and Afghanistan, and drove the financial system to the brink of ruin through their deregulation mania. And now the middle class, the working class, and the elderly need to foot the bill? Perhaps this is what Alan Simpson was referring to when he was talking about “taking care of the lesser people.”
We have been told that Social Security is “the third rail of American politics,” but if politicians of either party use lies, misinformation, and a trumped-up crisis to justify slashing this very important and beneficial program, then perhaps they deserve to be electrocuted (politically speaking). Unfortunately, I fear that this political “electrocution” Obama and the rest of his Democratic followers face will be largely self-inflicted, once again by their zeal to prove their conservative bonafides.
UPDATE: The Trustees of the Social Security and Medicare trust funds released their annual report on August 5th. It shows that Social Security will remain solvent through 2037, at which time “…tax income would be sufficient to pay about 75 percent of scheduled benefits through 2084.”
In terms of Medicare, the report finds (emphasis mine):
The outlook for Medicare has improved substantially because of program changes made in the Patient Protection and Affordable Care Act as amended by the Health Care and Education Reconciliation Act of 2010 (the “Affordable Care Act” or ACA). Despite lower near-term revenues resulting from the economic recession, the Hospital Insurance (HI) Trust Fund is now expected to remain solvent until 2029, 12 years longer than was projected last year…
UPDATE 2: Our friends at CBPP are also reporting that Social Security keeps approximately 20 million Americans out of poverty, including 1.1 million children. But who cares? It’s much more fun to invent a crisis so that we can privatize Social Security and use the money to gamble at the casinos on Wall Street. Right?