Social Security Trustees Report Out … CRFB Lies About It
by Dale Coberly (Dale has been posting on AB on Social Security for over 12 years…some of his work and Bruce Webb’s can be found under our new category Social Security)
Social Security Trustees Report Out
CRFB Lies About It
When is a not-a-lie really a lie?
When the liar gives you a part of “true information” and leaves out “the whole truth” in order to lead you to a false conclusion. Or worse, to lead you to do something that hurts you.
Today Maya MacGuineas, president of the Committee for a Responsible Federal Budget, issued a statement in which she said:
“Acting today, we could fix Social Security with a 27 percent tax increase or 21 percent benefit reduction.”
What makes this a lie, though technically “true,” is that MacGuineas knows that the “27% tax increase” is 27% of a 6.2% tax…or about a 2% of payroll increase. On the other hand, the 21% benefit reduction is indeed 21% of the whole benefit. An average benefit is about 1500 dollars…so the benefit cut would amount to 300 dollars, leaving the retiree with about 1200 dollars a month to live on.
But the 2% of payroll tax increase, that would eliminate this benefit cut, would be 2% of about a 1000 dollar per week paycheck.. or about $20 dollars per week. And CRFB knows that this $20 per week increase in the tax does not have to happen all at once, but can be phased in about a dollar per week per year at a time, while wages are expected to grow by over 200 dollars per week (at 10 dollars per week per year).
MacGuineas also says, “Not only is this year’s outlook worse than in last year’s report,..” but it’s not. Not materially. The long-predicted shortfall in Social Security finances is the same as it has been since 2007 or earlier. SS will require a 4% increase in the tax in about 2030 or so, which can be reached by phasing it in at one-tenth of one percent at a time (if we start now). That 4% is the combined tax for both the employer and the worker. I used the one-tenth of one percent per year..which is the worker’s share and will be matched by a one-tenth of one percent per year increase in the tax paid by the employer. Sorry for the confusion, but I believe that the share paid by the worker is what matters to him, while the combined worker plus employer tax is what most people, not workers talk about.
I have recently been accused of lying about this to make the required increase look smaller than it is….even when i make a point of explaining the difference between what the employee pays and what the combined tax is. There is no lie here…whether it’s one dollar a week or two, it makes no meaningful difference to the worker.
Finally, here is the way real professional liars lie:
(MacGuineas says):
“”Thoughtful reforms can protect and strengthen benefits for those who rely on them, enhance progressivity, lower health care costs, improve our fiscal outlook, and support faster economic growth. Both tax and spending changes should be on the table…”
“With the economy on course for recovery, it’s time we turn our attention to rescuing Medicare and Social Security so these programs remain financially sustainable for current and future generations.”
This sounds so reasonable and good I might have written it myself. But MacGuineas and CRFB have absolutely no interest in making these programs financially sustainable for current and future generations. “Spending changes” means benefit cuts. And “making these programs sustainable” means keeping the program’s name for a program that cuts benefits below a level where “the program” is no longer meaningful as retirement insurance: Cutting government to a size where it can be drowned in the bathtub.
If one reads the Trustees Report carefully one will find that the ultimate cost of Social Security by 2095 will be about 6% of GDP, and the ultimate cost of Medicare will be about 2% of GDP. This will pay for all the basic needs of everyone in the country over the age of 65…that is, all of us when we get there.
And we will have paid for it ourselves,
i think we can afford it.
I use “about” a lot in the above. Because the nunbers are predictions, not accurate to the penny…so I don’t want you to think I am lying about them. You can look them up yourself. You might have to actually “do the math.”
Cob,
Can you point me to your post where your numbers were verified (I believe), by the Director of Social Security?
EMichael
it would be easier for me to repost the letter from the Deputy Chief Actuary. I can do that later today, or..here is an attempt to copy and paste
From: ^Actuary <Actuary@ssa.gov>
Subject: Response to Your Letter to Representative DeFazio
Date: September 5, 2017 at 2:36:51 PM PDT
To: “‘coberly@peak.org'” <coberly@peak.org>
Cc: “‘Wulfing, Rina'” <Rina.Wulfing@mail.house.gov>
Dear Mr. Coberly,
Representative DeFazio’s office forwarded your letter of August 5, 2017 to our office and asked that we respond to you. Your understanding of the financing of the Social Security Trust Funds is on target, including the implications for borrowing and debt. We appreciate your careful attention to the Trustees Report and the projections we develop for it in order to show policymakers the magnitude of any shortfall they will have to address.
We have looked at your thoughtful and detailed proposal for increasing the scheduled payroll tax rates for Social Security. As I’m sure you are aware, we have scored numerous comprehensive solvency proposals and other individual options for making changes to Social Security. These analyses are available on our website at https://www.ssa.gov/OACT/solvency/index.html and https://www.ssa.gov/OACT/solvency/provisions/index.html.
Your proposal would increase the payroll tax rate gradually, by 0.2 percentage point per year beginning in 2018 (a 0.1-percent increase for employees and employers, each). Based on the tables you provided, it appears you would propose an “automatic adjustment” to the rate in the future, allowing the tax rate increases to stop and then resume, applying a 0.2 percentage point increase whenever the 10th year subsequent would otherwise have a trust fund ratio (TFR) less than 100 percent of annual cost. The intent appears to be that TFR would not fall below 100 percent. If we are understanding your proposal correctly, this type of adjustment would very likely maintain trust fund solvency for the foreseeable future, based on the Trustees’ intermediate assumptions.
Also, based on our rough estimates, a 0.2 percentage point increase in the payroll tax rate each year from 2018 to 2035, reaching an ultimate rate of 16.0 percent in 2035 and later, would eliminate the actuarial deficit and keep the TFR above 100 for each year thereafter. An increase to 15.8 percent in 2034 would fall just short of both goals. Note that these rough estimates do not include any additional “automatic adjustments” such as the one you propose.
We hope this information is helpful. Please let us know if you have further questions. We are also copying Rina Wulfing from Rep. DeFazio’s office on this email.
Karen P. Glenn
Deputy Chief Actuary
Office of the Chief Actuary
Social Security Administration
Great.
Thanks.
Coberly:
I asked one time if you receive a letter, a paper document attached to an email or in the mail. Your answer was “no.” You can also find your recital on Angry Bear in two places. Here is one place: Social Security and Conversation January 2018
note, the situation has changed slightly since 2017. but the current Report shows that the same analysis still applies, only changing the result from” one tenth of one percent”… to “about one tenth of one percent” or “an average of one tenth of one percent.”
also, I note that Glenn’s slight variation on my proposal does not recognize that the one tenth percent per year..whenever the Trustees project “short term financial inadequacy” actually moves the date of “insolvency” so the 20 installments of “one tenth percent” are needed less and less often… in other words less than one tenth percent per years. it gets a little complicated to say, but the math turns out to be very simple.
i will try to say more about that in a subsequent post when i get time, if anyone is paying attention.
Posted your article over at Atrios. Immediately got the “Raise The Cap” solution. Sigh.
EM
atrios. don’t know why i am laughing. 12 years shot to hell?
gotta go work. back later.
run
thanks for the link. i looked at the old post and the comments. back then at least some people understood what i was talking about. but reading “sammy” i could almost see where his synapses stopped “Road Out. Follow Detour.”
Some other folks stopped by. they seemed honest and not demented, but they had their own theories about how things worked and they were sticking to them.
you, bess your heart, were one of those who understood.