Social Security 101: Arming for Battle
by Bruce Webb
In a world where we actually had our priorities straight we wouldn’t even be talking about Social Security. The country, the world is sick with fear about our jobs, about keeping our houses, about the plunging values in our 401ks. The LAST thing we need is the Peter G. Petersons fear-mongering Social Security. Why do they do it anyway? Well that is a topic for comments, what this post proposes to do is to supply people with the necessary weapons to beat these people back so that we can address the real world problems.
Discussion of Social Security should but mostly doesn’t start with the annual Reports of the Trustees. Each year since 1941 the Trustees have released a detailed report on the financial status of Social Security and all of them are available in a variety of formats. Yet hardly anyone seems to have read them. Why? Because they are long and boring and chock full of numbers. Moreover there are mine fields along the way. Because between the professionals who generate the numbers and the Congress to whom they are officially directed are situated the six Trustees. To the extent that people know the Trustees exist they tend to believe they are apolitical technocrats. Au contraire mon frere, instead they are all Presidential appointees including three cabinet secretaries and all typically committed to advancing the President’s agenda. Which for the last eight years has been privatization. The consequence has been that the shorter versions of the Reports: the Status Report, the Summary and the Press Release are subtly infused with ideological spin. So before just diving in most people would benefit from getting some instruction from the dive masters. Names and directions under the fold.
These days Dean Baker is probably best known for his role in calling the Housing Bubble early and often, most recently from his perch at his TAP blog Beat the Press where on a daily basis he excoriates the coverage of the MSM on all things economic. (The WaPo coming in for some really serious beat downs). But before his gig at BTP he was known as the chief promoter of the claim that opponents of Social Security were really not being animated by a desire to ‘fix’ a system in ‘crisis’ but instead on dismantling it. With colleauge Mark Weisbrot he published in 1999 Social Security: the Phony Crisis Excerpts from the Introduction are available at the link but the first few paragraphs are worth copying here:
We have a chance, said President Clinton, to “fix the roof while the sun is still shining.” He was talking about dealing with Social Security immediately, while the economy is growing and the federal budget is balanced. The audience was a regional conference on Social Security, in Kansas City, Missouri, that the White House had helped bring together.
The roof analogy is illuminating, but we can make it more accurate. Imagine that it’s not going to rain for more than 30 years. And the rain, when it does arrive (and it might not), will be pretty light. And imagine that the average household will have a lot more income for roof repair by the time the rain approaches.
Now add this: most of the people who say they want to fix the roof actually want to knock holes in it.
And probably the most prominent of those fixers (and already called out by name by Dean and Mark in 1999) is Peter G. Peterson, founder and more importantly funder of the Concord Coalition and the Peter G Peterson Foundation. Now Concord bills it self as follows:
The Concord Coalition is dedicated to educating the public about the causes and consequences of federal budget deficits, the long-term challenges facing America’s unsustainable entitlement programs, and how to build a sound economy for future generations.
But as the quote suggests they tend to strongly draw a line between ’causes’ of ‘federal budget deficits’ and ‘unsustainable entitlement programs’. Other parts of the deficit crisis are alluded to in passing, but generally their discussion starts and stops with Entitlements, a word that Concord may not have coined but has certainly promulgated. Most recently Concord and the PGP Foundation have been publically pushing their Fiscal Wake-up Tour itself covered in documentary form with the movie I.O.U.S.A.. While this movie was recently shown on CNN without much editorial comment it is not a neutral statement at all. Instead it is more of an infomercial designed to sell Social Security ‘crisis’.
Okay having established that Dean is the champion of Social Security and Pete G. Peterson is the adversary, where do you go to fill out your knowledge? Well you could stay close to home and read the essays put up by Dale Coberly here at AB Coberly on Social Security or by me Angry Bear Social Security Series perhaps starting with Social Security: Simple Story vs. Myth Busting but I would suggest making a first stop at Lee A. Arnold’s animation Social Security: a Polemic (in Ecolanguage)
At this point you would be prepared to go into the Reports themselves. You would want to first read the Overview keeping in mind that it is in part a political document and then jump into the List of Tables and the List of Figures. In toto this is a little of an information overload, to start with you need to look at the following:
Table VI.A4.—Historical Operations of the Combined OASI and DI Trust Funds, Calendar Years 1957-2007 [Amounts in billions]. This tells you where Social Security has actually been. (Note in particular how small the balances were under Johnson and Reagan, the notion that the former used Social Security to fund the Great Society or that the latter raided it to pay for tax cuts are in numeric context ridiculous, there just wasn’t that much money there.)
Now you can check out where Social Security is projected to go under the three alternatives: Low Cost, Intermediate Cost, and High Cost Table VI.F8.—Operations of the Combined OASI and DI Trust Funds, in Current Dollars, Calendar Years 2008-85 [In billions]. (Note that Low Cost has Social Security fully funded and even overfunded going forwards.)
To get some idea about which alternative is most probable you can look at Table V.B1: Principal Economic Assumptions &
Table V.B2: Additional Economic Factors keeping in mind that the most important numbers are ‘Ultimate’ ones, where the Reports see the economy settling out over the long run.
To see how realistic the demographic assumptions are you would look at Table V.A1.—Principal Demographic Assumptions, Calendar Years 1940-2085
So after reading Dean and watching Lee and dabbling in the offerings put up by Dale and me and examining the numbers in the above five tables you would be better armed than the vast majority of people out there who purport to know something about Social Security. And you would be in pretty good shape to make a claim about which of the following outcomes is in fact more probable. (Alternative II is Intermediate Cost, and the only one ever talked about in the media. It shows the standard story of Trust Fund peaking in the early 2020s and declining to zero in 2041. But if we end up with anything close to Alternative I which is Low Cost we will be having a whole different discussion going forwards.)