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The 75-Year Shortfall Is Only $3.7 Trillion: In a recent article for the Sunday New York Times, columnist Roger Lowenstein attempted to paint reformers as inflating the long-term Social Security deficit:
Cato, a libertarian policy center founded in the late 1970’s, has been arguing for 25 years that Social Security is on the verge of crisis. In a recent position paper, [Michael] Tanner wrote that Social Security faces a horrendous unfinanced liability of $26 trillion over 75 years. In a footnote, he cited the 2003 trustees’ annual report. Actually, the trustees’ intermediate projection is for a deficit, over 75 years, of $3.7 trillion.
True, $3.7 trillion does seem tiny when spread out over 75 years. Except that $3.7 trillion is not the 75-year shortfall; it is the present value of the shortfall. I’ve explained this at some length previously, but in a nutshell what this means is that the federal government would have to invest $3.7 trillion right now to cover the 75-year shortfall. The actual shortfall is much closer to Tanner’s number.
A Small Alteration Of 1.89 Percent of Payroll. Christian Weller of the Center for American Progress encapsulated this argument: “An immediate and permanent increase of the payroll tax by 1.89 percent would allow Social Security to pay all of its promised benefits for the next 75 years.”
Here’s how this works: Increasing payroll taxes 1.89 percentage points extends the date which the Social Security system begins paying out more in benefits that it receives in payroll taxes from 2018 to 2022. After 2022, the Social Security still has to redeem the bonds in the trust fund to pay benefits; it’s just that it will then have enough bonds, when combined with the higher payroll tax, to keep paying full benefits for 75 years. However, it still means the taxpayer will still have to shell out extra money, averaging $360 billion annually after payroll taxes are no longer sufficient to pay benefits.
A Small Alteration Of 2 Percent of GDP. Paul Krugman painted this happy face on Social Security’s insolvency about a year ago:
So does the Treasury report show a looming Social Security crisis? No.
Social Security’s problem, such as it is, is a matter of demography: as the population ages, the number of retirees will rise faster than the number of workers. As a result, benefit costs will rise by about 2 percent of G.D.P. over the next 30 years, and creep up slowly thereafter.
Krugman is clever — I’ll grant him that. Two percent seems like nothing. However, 2 percent of today’s GDP is about $238 billion. Thirty years from now, it will be in the neighborhood of $400 billion. Not exactly chump change.
Not surprisingly, the Democrats are now echoing the TINC line. Senator Byron Dorgan recently remarked, “If we let the president successfully convince people there’s a crisis in Social Security when in fact there is no crisis at all, then shame on us.” Yet it is a long shot at best that TINC will take root in the public mind.
Although ABC News tried to spin it, a recent poll it conducted along with the Washington Post showed that 25 percent of respondents felt Social Security faced a crisis, while another 49 percent thought it faced major problems. Reform opponents have a very long way to go to persuade Americans that reform isn’t necessary. Chances are they will only shave a few points off those numbers.
Another indication that TINC won’t gain much traction can be found at the TINC website. Websites managed by the big radical bloggers are usually filled with left-wing troglodytes who substitute snarky comments and gratuitous insults for serious debate. However, the comments sections at the TINC website are mostly empty. Apparently the left isn’t too excited by the prospects for success of the TINC argument.
Perhaps that’s all for the best. The public debate is best served by a discussion about how to fix the Social Security crisis, not by a hoard of sophists trying to bamboozle us into believing that it doesn’t exist.
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