Social Security Con Artists Are Lying About One of the Strongest Arms of the Program
Continued from previous page
If we were to use a different set of assumptions in our projections, we would see a “problem” that can be addressed with any number of relatively painless fixes, none of which need to be implemented now. Americans currently pay Social Security taxes on the first $106,800 they earn. But because the distribution of income has skewed toward the wealthy for the previous three decades, the amount of income falling under the cap has shrunk—in 1983, when the payroll tax was tweaked, 90 percent of all income fell below the cutoff; by 2006, that number had fallen to 84 percent ( PDF).
Eliminating the cap entirely would instantly close the Social Security "gap” over the long run, and then some. Yet according to economist John Irons, even just rejiggering the number so it once again captured 90 percent of Americans’ wages would narrow three-quarters of the long-term “shortfall.” And in the process, only 6 percent of the population—the highest-earners—would feel any tax bite at all.
The larger point, of course, is that we have $2.5 trillion set aside to keep our older citizens from living in squalor during their Golden Years. Americans should be happy about that, and feel secure in the knowledge that Social Security will be there for them when they need it. After all, even if the trustees’ pessimistic intermediate assumptions should come to pass and the government took absolutely no action to shore up the program’s finances over that very long-term, Social Security would still be able to pay 75 percent of “scheduled benefits” for the entire 75-year projection, right through 2084. (And after 2037, those bennies would still be higher, adjusted for inflation, than what retirees get today.)
But that’s not the case; polls show that many younger workers aren’t confident that the benefits they’ve been promised will be there when they hit retirement age (one ABC News/ Washington Post poll conducted in 2004 found that only 7 percent of people in their 20s and just 15 percent of those between 30 and 40 expected to get full benefits when they retire). Call it a testament to conservative propaganda (über-wealthy activist Pete Peterson has sunk a billion dollars of his own money into the effort), specifically the false narrative that the trust fund has been looted, and is left with nothing but “worthless IOUs.” Ron Johnson, a wealthy self-financed candidate facing Wisconsin Senator Russ Feingold, recently aired an ad pushing the lie. “Politicians of both parties raided the Social Security trust fund of trillions,” Johnson solemnly tells viewers, “and left seniors an IOU. They spent the money… It’s gone.”
In the real world, the Social Security Trust Fund has trillions in interest-bearing Treasury Bills, which are essentially the same as those sold off to private investors and considered among the safest places to put one’s money. The $2.5 trillion in special issue T-bills in the fund are backed by the full faith and credit of the United States government, just the same as the other $11 trillion in public debt outstanding, almost $9 trillion of which are sitting in investors’ retirement accounts. They earned 5.1 percent interest in 2008, and 4.8 percent last year.
The kernel of truth here is that conservatives have long labored to de-link taxes and spending in the minds of the American public, promising they could deliver an endless series of tax cuts without gutting the public services that people have come to expect from the government. Economist Paul Krugman described the result of the Right’s “tax cut crusade,” as a “fundamental mismatch between the benefits Americans expect to receive from the government and the revenues government collects.”