Is James Lockart Implying President Reagan Lied in 1983?
Max Sawicky has been documenting how some employees of the Social Security Administration are assisting George W. Bush in his attempt to destroy the program. Max links to the presentation from James B. Lockart III.
Let’s take a look at this chart starting with its “earth is flat” slide #7, which is preceded by its earth is round slide #6. #7 is the usual Bush spin that the system will go bust very soon with pressure on the Fund starting in 2008 and expenditures (E) exceeding taxes (T) as soon as 2018. The 2008 crisis date is sort of like Don Luskin’s inflection point, that is when the first derivative of the time path for reserves (R) (the surplus) starts to decline. Why the second derivative of R turning negative is a crisis point is not explained.
But even with E exceeding T, reserves will continue to grow as a careful reader of slide #6 would see. Slide #6 is not only entitled “Trust Fund Continues to Grow” but also provides the correct accounting for the annual rate of increase in reserves equals (T minus E) PLUS the interest on accumulated reserves. By even the pessimistic forecasts of SSA, reserves will be near $7 trillion by 2018 so interest income will be around $350 billion – which means the Trust Fund will continue to grow until around 2022.
Beyond contradicting himself, Lockart provides more gems. Slide #10 shows that there will be no cuts in benefits for folks like myself (mid-40’s) and even for the Little Nells still in their diapers, their benefits will be around 70% of what the projections say. Yet, the Bush plan to switch to price-indexation would have me losing around 10% of my scheduled benefits and Nell losing about half of hers. So all workers would be worse off under Bush’s plan v. the status quo.
But how could that be? Take a gander at slide 12, which is a pay-as-you-go (aka the 2018 just IOUs yahoos) interpretation of Social Security. Lockart wants you to look past 2018 but why not look at his chart before 2018 – in fact, take the historical data back to 1983 when President Reagan and Congress decided to raise that payroll tax rate to 12.4%. Lockart’s blue line is well below his 12.4% red line, which means that the payroll tax was well above what was needed under this pay-as-you-go interpretation.
Now let’s go back and recall why President Reagan and Congress decided on this tax rate. Was it to subsidize the massive General Fund deficits so as to use employment tax increases to fund reductions in tax rates on capital income as suggested by the George W. Bush minions? Not according to President Reagan who told us it was to prefund the Soc. Sec. benefits of the baby boomers. But now certain Republicans wish to say that was never true. Odd that is we liberals who claim it was for prefunding, which means we are implicitly saying President Reagan was being honest in 1983.