Social Security Con Artists Are Lying About One of the Strongest Arms of the Program
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You’ve no doubt heard about how the Social Security Trust Fund is projected to run out of cash a few decades down the line. What you may not have heard is that it might not run out at all; in fact, it may well continue to back-stop the popular program indefinitely.
If you want to know just how contrived the Social Security "crisis" really is, consider that the trust fund, created by a bipartisan act of good governance that’s almost inconceivable today, is doing exactly what it was designed to do, and more so. It is nonetheless cited by “entitlement” fearmongers as evidence that the program is unsustainable, a fiscal trainwreck just waiting to happen.
In fact, the opposite is true. In 1983, when we still had a somewhat functional Congress that was capable of tackling real problems facing the nation, Democrats and Republicans got together to address a very modest shortfall in funding for the Social Security system. But they went a step further. They thought long-term, raised payroll taxes and in doing so created the Social Security Trust Fund, a surplus that could be drawn down as the baby-boomers reached retirement age. Today, with $2.5 trillion worth of assets, the fund is so fat it’s projected to continue growing on just its own interest decades into the future.
The “reforms” were a victory for neither side -- Republicans agreed to a tax hike on businesses, and Democrats accepted a regressive tax on working people, while giving up an issue they had used to win 26 House seats in the 1982 midterms.
But it was a far-sighted act of governance. At the time, the oldest boomers were 37 years old, and the youngest were just 19. In 2037, when the fund is projected to be tapped out, the oldest baby boomers still kicking will be 91 and the youngest will be 73 years old. Not to be morbid, but given that the life expectancy of Americans is 78.1 years today, that means that the “glut” of baby-boomers receiving benefits will be receding in the nation’s rearview mirror. In other words, the trust fund will have done exactly what it was intended to do.
What the media never mention is that, according to the latest Social Security Trustees’ report ( PDF), under an alternative “low-cost” projection, the fund might just continue to grow larger throughout the period of the trustees’ 75-year projection, increasing from 3.5 times the cost of a year’s benefits today to more than 6 times the annual benefits projected for the year 2084.
The trustees caution that it’s an absolute best-case scenario, and they also offer a “high-cost” alternative that paints a far bleaker picture than the “intermediate” assumptions used in the headlines. But the context that is largely missing from the debate is that those official, intermediate assumptions that lead to so many reporters making definitive statements about the fund running out in 2037 are very, very conservative.
In his analysis of the 1998 report (the assumptions are virtually unchanged, but look a bit better today), economist Doug Henwood noted, “At every turn there’s a bearish assumption in the Trustees’ numbers.” He looked at the projections for population growth, the growth of the workforce, the age of the workforce, and concluded that some of the trustees’ projections would represent a “violation of all historical precedent.” As I write in The Fifteen Biggest Lies About the Economy, the Social Security trustees’ intermediate projection “assumes that during the next 75 years the U.S. economy will grow by half the rate of the last 75 years. That may well prove to be the case (and there are certainly good reasons for using conservative estimates), but it’s an ahistoric assumption.”