Social Security: Cato’s “Quick Facts”
The Cato Institute has provided us with more propaganda entitled the “Quick Facts Archive”:
1. Social Security will begin running a deficit by 2017.
2. A medium income worker born after 1965 can expect a rate-of-return of less than 2% on his or her Social Security taxes.
3. The Social Security payroll tax rate has grown from just 2 percent in 1949 to 12.4 percent today.
4. Social Security faces an unfunded liability of more than $12.8 trillion.
5. “Saving” Social Security without individual accounts could require a 50% increase in Social Security taxes or a 27% cut in benefits.
6. The Supreme Court ruled in Flemming v. Nestor that there is no legal right to Social Security benefits.
7. Social Security taxes have been raised more than 40 times since the program began.
8. The maximum original Social Security tax was just $60. Today it is $11,000.
9. In 1950, there were 16 workers paying Social Security taxes for every retired person receiving benefits. Today there are 3.3. By 2030, there will be only 2.
10. 48 million Americans receive Social Security benefits, including 33 million retirees, 7 million survivors, and 8 million disabled workers.
11. Social Security pays more than $450 billion in benefits each year. If nothing is done, by 2060, the combination of Social Security and Medicare will account for more than 71 percent of the federal budget.
12. Nearly two-thirds of those under 30 years old don’t think Social Security will be able to pay them any benefit when they stop working. Fifty-seven percent of people 30 to 49 years old agree.
13. According to Gallup, reforming Social Security is a top priority for 33% of investors.
14. Nearly 80% of Americans pay more in Social Security taxes than they do in federal income tax.
15. Every two-year election cycle that we wait to reform Social Security costs an additional $320 billion.
16. The full retirement age today is 65 years and four months. It rises by two months every year, gradually increasing to age 67 for people born after 1959.
17. By 2030, there will be 70 million Americans of retirement age – twice as many as today.
18. The average monthly retirement benefit from April 2004–April 2005 was $895. That amounts to an annual benefit of $10,740.
#9, #10, and #17 only document that the U.S. has a lot of people and that we have a demographic phenomena known as the retiring of the baby boomers. Is the Cato Institute advocating we get rid of some of the elderly as their Social Security solution? #12 and #13 only show there are some foolish enough to believe the lies from the Cato crowd. #6 is just a pathetic misrepresentation of what this Court decision involved.
Cato loves to talk about increases in taxes paid but #8 is simply money illusion (nominal v. real) in part and the fact that as real income rises, real benefits rise as well. Note also that #16 and #18 represent more benefits per person now than years ago so it is not surprising that contributions have also increased (#3 and #7).
My second favorite fraud in this list is #11 as Cato had to include Medicare (see Bush’s bloated prescription drug benefit) to get to this 71% of the Federal budget claim in the first place. In the second place, most of Federal spending is already some form of transfer payment.
#1 is a very old scam and in a simple accounting sense – a lie. The cash flow surplus for the Trust Fund includes as inflows both payroll taxes and the interest income of the Trust Fund assets, which of course Cato never gets right. And while it is true that my generation can expect an average real return equal to 2%, that’s also the real return on the government bonds in my portfolio.
#5 tells us the obvious: reducing some alleged long-term shortfall requires either more revenues or future benefit cuts. That’s true regardless of which “reform” package we implement. #4 is the old present value into infinity shock figure. But I’m a little surprised at #15, which now says this shock figure rises only $160 billion per year, which translates into 1.3% of their $12 trillion number. Gee, Cato has stopped using the nominal interest rate to perpetuate this fraud, which makes #15 my personal favorite among their silly list of nonsense.