Senator Allard Criticized for Relying on Cato’s Social Security Research
This post might be seen as a 3-part math workout with the warmup being the news that the Club for Rich People (aka Growth) has their own Social Security webpage. Featured is a graph from Don Luskin of the first derivative of the Social Security reserves (well almost as Luskin’s graph omits the interest income of the Trust Fund). Luskin once again defines crisis is the inflection point, that is, the point in time when the second derivative of reserves becomes zero. Luskin in another post objects uses the term “class warfare” in its title. If one adds to the area under Luskin’s curve the current reserves of $1.6 trillion and the interest on reserves, one starts to get an idea of how massive the transfer of wealth from workers to Luskin’s rich friends we are talking about. More on this as we enter the main portion of our workout.
Via Joshua Marshall comes this story from the Denver Post:
Sen. Wayne Allard told a town meeting in Greeley that the Social Security system could face a $28 trillion debt…Advocates of radical reform are making up their own math in their campaign to partly privatize Social Security…A Google search found no report of the $28 trillion Social Security debt figure that Allard cited. Instead, it’s Medicare that faces a $28 trillion shortfall over several decades, says the National Center for Policy Analysis.
But check this Investors Business Daily oped dated March 5, 2004by Michael Tanner:
In fact, in less than 15 years Social Security will begin running a deficit, spending more on benefits than it takes in through taxes. Overall, Social Security is facing unfunded liabilities in excess of $26 trillion. Trying to fill a gap that size by increasing taxes would cripple the American economy and place an intolerable burden on younger workers.
OK, Allard was off a mere $2 trillion. A Google search using $26 trillion would find lots of rightwing hacks citing Tanner’s figure, but as we noted, Roger Lowenstein exposed Tanner’s math to be akin to stealing our retirement contributions to essentially fund those massive General Fund deficits. Let’s see, the difference between $26 trillion and $3.7 trillion does seem to be a reasonable estimate of the massive wealth transfer that Luskin & Company are proposing. Twice corporate equity and about half of household net worth being stolen from workerss retirement accounts to pay for a tax cut for the rich. I wonder if Luskin would concede this is a big number.
But the President’s press conference with all of its discussion of Social Security math will have to be our cool down. One new face among the reporters asked Bush if those who did not support his Soc. Sec. proposals were relying on “different, honest” numbers. Ouch! But Bush kept saying if we delay reform, the cost of reform would go up dramatically. Maybe he should check his own math. Any alleged insolvency over the very long-term is a function of the difference between pay-outs versus pay-ins. Bush has ruled out an increase in pay-ins. He has also said that anyone born in 1945 or before and hence retiring in 2010 or before will not face benefit cuts. So if whether we implement his proposal now of five years from now will have no affect on pay-outs. So how is deferring this issue a couple of years going to significantly reduce the cost of reform given how the President has constrained his proposals?