Wow, Brad DeLong and others caught someone in the media doing his
job. Rex Nutting of CBS Marketwatch fact checking lies.
Bush exaggerates a few facts about Social Security WASHINGTON (CBS.MW) -
President Bush made several factual errors Tuesday about Social
Security's long-term financing problems at a photo op event designed
to educate the public about the retirement system. Bush is expected to
offer a plan in the next few weeks to cut future benefits and to
divert about one-third of Social Security's tax revenues into
individual private savings accounts in order to "save Social
Security." See full story. Before a specific plan is unveiled, the
White House is holding a series of events to convince the public that
the system must be radically altered to prevent a crisis.
According to the Social Security Administration and the
Congressional Budget Office, the retirement system faces long-term
funding problems, amounting to about 0.7 percent of gross domestic
product over the next 75 years, or $3.7 trillion. The SSA says the
system's trust fund, financed by payroll taxes and interest payments,
will probably be exhausted in 2042, requiring the government to reduce
benefits by about a fourth or a third. The CBO says the fund will be
exhausted by 2052.
Bush vs. facts
Bush: "As a matter of fact, by the time today's workers who are in
their mid-20s begin to retire, the system will be bankrupt. So if
you're 20 years old, in your mid-20s, and you're beginning to work, I
want you to think about a Social Security system that will be flat
bust, bankrupt, unless the United States Congress has got the
willingness to act now." The facts: The Social Security system cannot
go "bankrupt," for it has no creditors. By law, the trustees will
continue to pay reduced benefits even if the trust fund is exhausted.
Payroll taxes will continue to come in and benefits will continue to
be paid. According to the trustees' intermediate economic forecast
(neither doom nor boom), the trust fund will be able to pay about 73
percent of scheduled benefits in 2042 and about 68 percent of
scheduled benefits in 2078. Future presidents and Congresses could
also choose to fully fund scheduled retirement benefits from general
tax revenue.
Bush: "Most younger people in America think they'll never see a
dime." The facts: Social Security says younger people will see a lot
more than a dime. Their retirement benefits - even under a "flat-bust"
system -- will be significantly higher than today's benefits in real
terms. For low-income Americans, currently scheduled benefits for
those who retire in 2080 are $19,906 per year in 2004 dollars. If
Social Security can pay only 68 percent of those benefits, that would
be $13,536 per year, compared with benefits of $8,804 for low-income
retirees who retired last year. For the highest earners, Social
Security is currently promising $53,411 per year for those who retire
in 2080 (or $36,319 per year if Social Security can pay only 68
percent). Current maximum benefits are $21,891 per year for those who
retired last year.
Bush: "In the year 2018, in order to take care of baby boomers
like me and -- (laughter) -- some others I see out there -- (laughter)
-- the money going out is going to exceed the money coming in." The
facts: According to the SSA, costs are projected to exceed income,
including tax revenues and interest income from the trust funds'
bonds, starting in 2028, not 2018. The 2018 date is when tax revenues
alone no longer meet costs; workers have been paying extra taxes since
1983 to build up the trust funds' assets for just this eventuality.
Bush: "The problem is, is that times have changed since 1935.
Then, most women did not work outside the house, and the average life
expectancy was about 60 years old -- which for a guy 58 years old,
must have been a little discouraging. Today, Americans, fortunately,
are living longer and longer. I mean, we're living way beyond 60 years
old, and most women are working outside the house. Things have
shifted." The facts: According to the SSA, the life expectancy for a
65-year-old man in 1940 was 76.9 years. Today, a man aged 65 can be
expected to live to 81. Most of the increase in life expectancy in the
past half century has been for infants, not for the elderly. The
increase in the percentage of women working outside the home has
boosted Social Security's resources, rather than depleted them. Today,
many women who worked receive a widow's pension rather than their own
earned benefits. All the payroll taxes they paid are funding someone
else's retirement.
http://www.j-bradford-delong.net/movable_type/2005-3_archives/000153.html
Gary Denton
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