Saturday, February 26


The Washington Post maintains that both Republicans and Democrats are stretching the truth in their arguments about Social Security. But as so often, though their "experts" conclude that the "stretch" is much greater for Repugs than Dems, you'd never know it from the lead: "As the two political parties would have it, Social Security is either careening toward catastrophe or is on as solid financial footing as it has ever been. Both sides have marshaled -- or twisted -- facts and figures to back up those seemingly irreconcilable views."

[Ed. note: I put "experts" in quotes because the SSA is quoted repeatedly, and said SSA has recently been demonstrated to be exhibiting bias and acting as a tool for the Resident's agenda.]

Here are the most pertinent graphs of the article:

On the stump, the president says Social Security will be bankrupt -- or, in more colorful moments, "flat bust" -- by 2042. The truth depends on the definition of "bankrupt."
As long as there are workers paying taxes, there will be money flowing into the Social Security system to pay benefits. Moreover, all of those numbers are in dispute. The Congressional Budget Office, Capitol Hill's nonpartisan official scorekeeper, says the date of trust fund exhaustion is 2052, and at that point, the system still will be able to pay 80 percent of promised benefits.

So what IS the definition of "bankrupt?"

a. Having been legally declared financially insolvent.
b. Financially ruined; impoverished.

If the system continues as at present, says the more reliable CBO, benefits will still be paid. So the term "bankrupt" is patently incorrect.
If people are allowed to divert a portion of their payroll taxes from the system to their own accounts, there will be less money coming into the government to cover those current benefits, which Bush has promised to pay in full.

Bush says the accounts would cost about $754 billion over the next 10 years. This might be true, but only because it is based on the program starting in 2009 and being fully implemented in 2011. The costs skyrocket when the new accounts are open to all. Senate Minority Leader Harry M. Reid (D-Nev.) says that it will cost $4.9 trillion over a 20-year period, starting in 2009.

Vice President Cheney recently said the accounts would cost "trillions of dollars," which is probably the most honest, if vague, estimate, budget experts said.

It's unsaid who these "experts" are, but they clearly favor the Democratic estimate; "trillions" being a plural, even $2.0 trillion is far closer to the $4.9 trillion projected by Dems than the $754 billion by Bush.
"Young workers who elect personal accounts can expect to receive a far higher rate of return on their money than the current system could ever afford to pay them," Cheney told an audience at Catholic University last month.
That calculation is based, however, on the premise that taxes paid into Social Security somehow have a fixed rate of return correlated to Treasury bond interest rates.

Instead, the rate of return in the current system is the product of complex formulas based on years worked, wages earned, the rate of wage increases over a worker's lifetime and inflation rates during retirement. Social Security offers low-wage workers a higher benefit relative to their tax payments than higher-wage earners get.
For virtually everyone, those future rates of return would fall below the 4.6 percent gains the government actuary anticipates for money that would be invested in personal accounts under Social Security. But under the administration proposal, anyone investing in the accounts would lose 3 percent of their gains to help finance the new system. So beating the current system is not a sure thing.

According to the "experts'" explanation, "Young workers" could only refer to "young high-wage earners" and maintain a modicum of truth to Cheney's assertion. But note the caveat in the last graph.

It's those "young workers" Bush is trying to woo support from. For everyone old enough to have lived through various market slumps and dives, trusting their principal, or only, source of retirement income in the financial markets is a scary prospect.

I guess you could say that The Sage and I are middle-American baby boomers. Our principal savings are tied up in our 401(k)'s. We've watched them fluctuate over the past years and held our breath during some especially bad times. With five kids to support and educate, we've never been able to save much beyond that. If we couldn't depend upon Social Security, we'd never be able to retire -- our 401(k)'s will never be big enough to support us in our golden years. And as a matter of fact, we've invested more of our wages in Social Security than in our 401(k)'s. If the government hadn't forced us to do that, we probably would have spent the money one way or another, so I'm grateful that we were forced to save despite ourselves. I figure that if we live and work for another 10 years and then either of us died and the other lived for 15 years after our retirement, our S.S. benefits would amount to around $400,000. Our 401(k)'s would render us about $350,000. So "my money" has been just as well invested in S.S. as in Wall Street.

But that's only if the financial markets continue to perform well over the next 10 years. With the Bush deficits, anything can happen. I could lose all or most of my 401(k). With no Social Security, then where would I be?

That's the scenario all but the wealthier Americans should contemplate before they throw their hat into the Bush ring.


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