Remarkably horrible—but it's the norm!

MONDAY, OCTOBER 31, 2011

We’ll clarify what Dean Baker on one basic point: Many observers have already flagged the Washington Post’s remarkably awful “news report” concerning Social Security.

One example: To read Paul Krugman’s reaction, just click here.

The Post’s report was remarkably bad. We’ll discuss it in detail on Wednesday. And by the way, just so you’ll know: This was the featured report on Sunday’s front page. It ran more than 2400 words—and the report was accompanied by a very large graphic.

To see how the Post’s front page appeared, go ahead—just click this.

This front-page report was remarkably bad. That said, we’ll disagree with one part of Dean Baker’s reaction.

Krugman links to Baker’s post. You can go there yourself (just click here). For our money, Baker is one of the heroes of this long fight, thanks to the 1999 book he co-authored with Mark Weisbrot, “Social Security: The Phony Crisis.” (To read the book’s introduction, click this.)

The book is too technical to be fully useful for the general reader. But it’s the strongest effort anyone on our side has ever made in the face of thirty years of disinformation.

In our view, Baker mega-props. But we disagree with part of what he said, or might have seemed to say, at the start of a long blog post:
BAKER (10/29/11): News outlets generally like to claim a separation between their editorial pages and their news pages. The Washington Post has long ignored this distinction in pursuing its agenda for cutting Social Security, however it took a big step further in tearing down this barrier with a lead front page story that would have been excluded from most opinion pages because of all the inaccuracies it contained.

The basic premise of the story, as expressed in the headline ("the debt fallout: how Social Security went 'cash negative' earlier than expected") and the first paragraph ("Last year, as a debate over the runaway national debt gathered steam in Washington, Social Security passed a treacherous milestone. It went 'cash negative.'") is that Social Security faces some sort of crisis because it is paying out more in benefits than it collects in taxes. [The "runaway national debt" is also a Washington Post invention. The deficits have soared in recent years because of the economic downturn following the collapse of the housing bubble. No responsible newspaper would discuss this as problem of the budget as opposed to a problem with a horribly underemployed economy.]

This "treacherous milestone" is entirely the Post's invention, it has absolutely nothing to do with the law that governs Social Security benefit payments. Under the law, as long as there is money in the trust fund, then Social Security is able to pay full benefits. There is literally no other possible interpretation of the law.
From this opening excerpt, a reader might get the impression that this awful news report is somehow unique to the Washington Post. We don’t think Baker meant to say or imply that. But let’s make sure we’re perfectly clear about the actual truth.

It’s a bit misleading to say that the “treacherous milestone” is “entirely the Post’s invention.” In fact, this milestone has been part of right-wing disinformation for more than twenty years. So too with that “runaway national debt”—and we’re not sure why Baker feels that this report “would have been excluded from most opinion pages because of all the inaccuracies it contained.” It seems to us that presentations like this have been a common part of op-ed culture for the past many years.

This report was horrendous—but it’s the norm. Has been for a long time.

Why has this mountain of disinformation lived such a long, fruitful life? We’ll discuss that point on Wednesday, in part 3 of “Cult of dumb.”

We don’t think Baker meant to imply that this type of disinformation is confined to the Post. But this is a very important point. It needs to be made very clear.

39 comments:

  1. Speaking as an actuary, I'm not that impressed with Baker or WaPo. Here's a better way to look at Social Security IMHO

    1. The Trust Fund has little significance, beacause it's small relative to the unfunded liabilities. Also, the Treasury doesn't shown a charge for money borrowed from SS. This terrible accounting was introduced by Reagan to make his deficits look better. SS's annual surplus has been helping to mask the true budget deficit. In recent years, when SS was running a surplus, the fact that each year's surplus was smaller than the prior year's made the reported deficit worse. This trend will continue regardless of whether SS runs a surplus or deficit and regardless of the state of the Trust Fund.

    2. SS is pretty much a Pay-as-you-go system. The benefits retirees reeeive is pretty much the money paid in by workers and their employers.

    3. The best way to look at SS is to consider the ratio of workers to retirees. The ratio was once 16 to 1, so a relatively small assessment per worker could support a significant benefit per retiree. The ratio is now 3 to 1. In order for me to get $33,000 per year, three workers (plus their employer's share) have to pay $11,000 each. In, 2030, the ratio will be 2 to 1. So in order to support me, each worker (plus employer's share) will $16,500 in today's dollars. IMHO that's unaffordable, especially since the employee will have to pay for my Medicare coverage and his own Obamacare costs.

    4. It's my opinion that many of those pooh-poohing SS's fiscal problems actually hope we will evolve to a system where the General Fund routinely pays a substantial share of the cost. The will shift more of the burden from the lower middle class to the rich, since the rich pay the lion's share of income taxes.

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  2. Is there really any point in rebutting these very same carefully considered, originally devised "opinions" for the seven thousandth time? I don't think so. Not here.

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  3. We have, in David in Cal, a laboratory of misinformation or, more unkindly, propaganda. His every point here has been debunked numerous times, and if he's really an actuary, he's an incompetent or a dishonest one.

    It might be helpful if Bob Somerby announced his expectations - it's his blog, after all. Does he mean to refute this nonsense himself? Does he expect commentators to do so?

    More to the point, we have here an instance of an apparently inexhaustible liar. How, as "liberals", if that's what we are, do we handle it? What high-minded rhetorical strategy is going to make this crap go away? Bob has lots criticism for the media, much of justified. But let's hear it: how, on his own blog, is he going to deal with persistent misinformation?

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  4. In dealing with stories about the "crisis of Social Security," it would be well for the writer to reveal that the alarmist bombast about bankruptcy and reduced benefits followed by apocalypse 75 years down the road comes from the Intermediate forecast, one of the three possible scenarios issued annually by the actuaries of the Social Security Administration. The other two, seemingly unknown to commentators, are the Low Cost and the High Cost which are, respectively, the optimistic and the pessimistic projections. Since the Low Cost has proved, retrospectively, to be the most accurate of the three, we should be talking about its vision of a system that does not face bankruptcy and that can, under the economic assumptions set out in these yearly projections, provide full benefits indefinitely. Having said that, it should be admitted that the present system unfairly taxes lower incomes; the answer is to remove the cap on FICA-taxable income.

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  5. AVANCE, thanks for bringing up the 75 years. The SS actuaries consider SS to be "solvent" if their model shows it doesn't go broke for 75 years. This is a much laxer rule than would apply to a non-governmenal insurance company. Anyhow, according the 75 year rule, SS is insolvent today.

    Low Cost has not proved to be the most accurate recently. Just a couple of years ago we were supposedly decades away from SS running a deficit, yet it is running a deficit right now. Furthermore, I know from a discussion with A. Hayworth Robertson, former chief actuary of SS, that SS's assumptions are actually optimistic, not pessimistic.

    Also, the SS actuaries aren't stupid. If past results showed that their assumptions were too pessimistic, they will have changed their assumptions. You would be adjusting twice by selecting the optimistic scenario as most likely.

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  6. ...or the 7,001st time.

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  7. The most fruitful advice for dealing with the disingenuous DinCal is DNFTT.

    That is all.

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  8. Amen. I don't know how Bob feels about it, but I'm personally pretty sick of DinCal's hijack of this blog and its commenters.

    Why people bother responding to him -- and then go complain about his posting -- is beyond me. Just ignore him and he'll go find somewhere else to play. Don't read his posts so you won't be tempted. Just ignore him.

    His type isn't exactly unique, it's all too tiresomely common.

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  9. I've defended David in Cal on several occasions, but I have to say the mind reading bit in point four is a bit trollish.

    As D in C points out in his subsequent post, "the SS actuaries aren't stupid." I think this is probably a safe assumption--in fact I remember reading somewhere (maybe some other posters can help me out with this) that the SS actuaries actually knew something about demographics and that the changes in the ratio between workers and retirees were expected and taken into account when the system was set up.

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  10. It's ironic to be accused of being a troll on an actuarial topic. It's quite possible that many posters here may know more than I do about various political issues. My political beliefs may be wrongm even though they're sincere. I do present my beliefs in good faith. Still, I understand that my opinions may seem so outlandish to some that they think I must be insincere.

    But, I'm pretty sure I know more than the rest of you about SS. I'm an actuary. It's my profession. I'm trying to share my expertise. I'm not even taking a position about whether benefits should be cut, whether the rich should pay more, or any other controversial political aspect.

    I don't understand why my posts here on SS engender accusations of trolling.

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  11. Anon, I know something about what SS actuaries thought when the system was set up, because I once took a course from Robert J. Myers. Myers died last year at the age of 97.

    He was the first chief actuary of SS. He held that position until the Nixon Administration. Oddly enough, Myers was a fiscal conservative. His job philosophy was to do his work professionally, regardless of whether he approved of the program. He resigned, because Nixon was too liberal. He told the class that he no problem with FDR, Truman, or JFK, because they were elected as liberals. But, he strongly objected to Nixon's liberal programs, because Nixon was elected as a conservative.

    The assumptions when the system was set up was that benefits would be held in check, or assessments would be raised, by the requirement of "solvency", i.e. 75 years in the model without running out of money. As we know, the politicians abandoned that standard some time ago. And, the media seems utterly unaware.

    If the Trust Fund is projected to run, say, 30 more years, people like Bob Somerby are misled into thinking that means we're 30 years to the good. However, by the standards of the original actuaries, exhausing the Trust Fund in 30 years would mean SS is quite insolvent. It would be 45 years "to the bad" so to speak.

    P.S. Myers pointed out that before the automatic inflation adjustment SS's projections were accurate and even conservative. The growing prosperity meant that SS income routinely exceeded projections. However, the first official projection of costs of Medicare was off by a factor of over 10 times! That is, Medicare actually cost over ten times what it was projected at. This history is why I worry that Obama's health reform may turn out to be more costly than projected.

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  12. David in Cal:

    "However, by the standards of the original actuaries, exhausting the Trust Fund in 30 years would mean SS is quite insolvent. It would be 45 years "to the bad" so to speak."

    For someone who is "pretty sure [he] know[s] more than the rest of [us]about SS." this statement is 100% false and you know it.

    There was no "trust fund" when the system was set up. The trust fund was created by Reagan and Greenspan to deal with the baby boomers. The idea was to build up excess trust fund to pay for the larger than normal retirement generation of baby-boomers. Now that the boomers are retiring, the trust fund will be tapped. Once the baby boomers have all passed away, the trust fund will no longer be necessary and we will be back to the system as it was originally set up to function and successfully functioned since its inception.

    Every time you use buzzwords like "solvency" and "run out of money" and "bankrupcy" you are being utterly misleading.

    "As an actuary" you must know that the program is a pay-as-you-go transfer program. As such, it can never become "insolvent", "run out of money" or "go bankrupt" as those terms are commonly understood. By using those terms, you create the false impression that at some point social security will cease paying benefits.

    Since you "know more about SS than the rest of us" I feel confident in stating that your usage of these buzzwords is intended to be deliberately misleading and is an attempt to deliberately misinform. Shame on you.

    Also, for the love of god, please stop bringing up Medicare when we are talking about social security. Medicare costs have skyrocketed because health care costs in general have skyrocketed. Medicare is still cheaper than private healthcare and always will be.

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  13. There's absolutely nothing wrong whatsoever with "David in Cal" posting commentary here.

    It isn't "hijacking," it isn't "trolling," it isn't anything except taking public issue with Somerby's (and some of his readers') analysis.

    I'm a movement liberal. I happen to know when and how "David in Cal" is wrong on the facts, or has faulty or partisan-confused arguments. When he makes garbage claims like "It's my opinion that many of those pooh-poohing SS's fiscal problems actually hope we will evolve to a system where the General Fund routinely pays a substantial share of the cost," I know that it's either his bankrupt ideology or an amateur political operative's rank dishonesty that's the source, and that a good faith exchange of ideas is unlikely.

    Yet, despite my dedicated movement liberalism, and "David in Cal's" apparent willingness to obscure honest discussion with partisan talking points, I'm quite capable of understanding that there's no need whatsoever for Somerby to "deal with persistent misinformation" or to announce any policy with respect to the variety of commentary one might expect at a decent political-media blog such as his.

    Of course there's no need for such micro-managing of commentary. Of course there's no need for some explicit set of hall-monitor rules to tell us who's responsible for successfully refuting crap claims. Of course there's no need to "deal with" an individual whose arguments make some people mad.

    You know what will "make this crap go away"?

    A better press corps than the one we have now, one that's up to the task envisioned by the ratifiers of the First Amendment.

    Also, too, smarter movement liberals who are well-informed by whatever means necessary, and are capable and willing to set the record straight, and unwilling to resort to the usual poor tactics that have gotten us precisely nowhere for the past thirty years --such as whinging about what rightists say and how they say it, instead of figuring out how to defeat the successful messaging campaigns waged against the American people by all sorts of powerful interests.

    So we need a better press corps, but we need smarter, better-informed movement liberals first, and that means us. It's our job to be capable of helping our fellow citizens discern the facts, since our fantastic press corps either won't or can't. It's our responsibility to disengage ourselves as invested consumers of a "liberal media" that has failed the country for decades. If the press corps won't act in the public interest to defeat rightist, centrist or even establishment liberal and partisan disinformation campaigns, then we movement liberals must and will.

    Don't ask Bob Somerby what he's going to do about "David in Cal"'s (laughable, frankly) opinion that us neo-New Deal-ers are somehow trying to turn Social Security from a wildly successful social insurance and pension fund administration into a crappy, means-tested welfare program that claims general revenues, let's do something about that ourselves.

    Or can't we?

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  14. Excellent post by dave (not in CA). SS is not in crisis and it never goes broke, bankrupt or insolvent. In 1978, Bush told the Texas Observer that SS would go bust, broke in 10 years. Bush lied then and in 2005 when he tried to privatize SS. 75 years of lies and misinformation about SS, it's really appalling. These right wing scum will not be satisfied until they have totally destroyed SS and cast millions of the elderly into abject poverty and turn 80 year olds into homeless street people.

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  15. When I see that there are a lot of comments on a post in the front page, my guess is that David posted some banal stuff that's been refuted for years mixed in with some stuff that's interesting, and got a lot of responses.

    FWIW, I think we should reconsider how SS is funded. The payroll tax is very regressive. With a cap at around $106K in income, a secretary or a teacher pay 12.4% of their income into SS (since economists generally assume that taxes on wages paid by employers just come out of paychecks), while an actuary who makes $212K/year pays 6.2%, while a lawyer who makes $424K/year pays 3.1%, while a financier who makes $848K/year pays 1.55% of her income in payroll tax, etc.

    It's the opposite of a flat tax with a big exemption that's effectively progressive - it's a flat tax with a low cap that's effectively regressive.

    That's not a fair system. But the problem with changing it right now is that any change in the system will probably lead to defunding SS and decreasing benefits. Too bad we don't have a real democracy, etc.

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  16. Anon, stuart, see if this makes sense:

    SS can be viewed two ways, as an insurance scheme or as just another government benefit. One needs to be careful to denote which view one is using.

    If viewed as an insurance pension plan, SS now pays out more than it takes in. It will run larger and larger deficits. The SS Trust Fund will run out of money in perhaps 15 to 30 years and then go deeper and deeper into the red. SS can be kept solvent by some combination of reduced benefits and increased assessments.

    Legally, SS is just another government benefit. Unlike a non-government pension plan, SS has no legal obligation to pay benefits. Of course, it would be unthinkable for SS to just stop paying all benefits, but, if that were done, we'd have no legal recourse. SS is fundamentally different from a private pension plan, where those who paid in have a contractual right to benefits.

    Viewed as simply a government program, SS can't go broke any more than welfare or military spending or any other class of spending can go broke. However, the federal government could go broke, like Greece.

    In other words, viewed as just another federal benefit, SS has no threat of insolvency, but it's part of the entire government's deficit problem.

    Anon, your description of "right wing scum" who want to destroy SS is unfair. We actuaries are trying to get policy-makers to a realistic understanding so that the system can be saved. The wishful thinking represented in your post can lead to policies that will destroy SS.

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  17. @Stuart Zechman

    "Or can't we?"

    Unless you want to spend your life devoted to nothing but correcting right-wing lies and propaganda, "we can't".

    And we're NOT going to get a better press corps. My point was, Bob complains endlessly (and accurately) about how bad the mainstream press is in dealing with this crap. But here we have a perfect example. David in Cal is tireless, and is undeterred by refutations.

    So, if this blog is a microcosm of the media, how do you deal with it? How long before one loses interest in correcting the same lies, over and over again?

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  18. To the extent that David in Cal is posting lies, he should be refuted. Calling him a troll, or ignoring him, isn't constructive, especially because he writes in a reasonable tone and many of the things he writes sound correct.

    My only problem with David in Cal is that twice he's failed to respond to specific comments from me that challenged things he wrote, which makes me wonder whether he's really interested in a dialogue.

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  19. Anonymous, if you will identify these 2 comments, say by saying which post it was attached to and what time you eommented, I'll try to respond.

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  20. Troll or no troll, when someone here writes,

    "Calling him a troll, or ignoring him, isn't constructive, especially because he writes in a reasonable tone and many of the things he writes sound correct."

    you really have to wonder what we've come to. Somerby has been complaining for years about pundits who "write in reasonable tones" and who "sound correct" -- that is, if the reader/viewer doesn't know anything about the subject.

    Is it really necessary to point out that the most destructive forces in American life today where nice suits, have measured diction and "sound correct"?

    It may be best to think of David in Cal as a think-tank construction, or a bot -- "he" knows that "he" can't come here and adopt an "unreasonable" tone. So, following the usual pattern, he issues a blast of misinformation, others respond, he feints and weaves, concedes a point here and there, and then, the next morning, he's up to his old tricks again, as if none of it ever happened.

    In other words, we're being "had". This guy, as expressed here, is not a plausible human being. He or it is on a mission of some sort, absurd as it may be (how many people read this blog?). But the same is true of the media of the whole.

    "Liberals" and "conservatives" are playing two entirely different games. This is a problem (for "liberals").

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  21. "However, the federal government could go broke, like Greece."
    --------
    Damn straight it could. Greece's problems were caused by lack of tax collection. That sure sounds like something modern conservatives could get behind. Since you don't want to see us go broke like Greece, maybe Americans paying their fair share of taxes might be something David in Cal (and other modern conservatives, who make believe they don't just want to destroy the social safety net) could get behind instead.

    Berto

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  22. Berto, I pretty much agree with you. Here's where I differ. Instead of "fair share", an undefined concept, I'd say that we need to pay more taxes.

    And, I would change your last word from "instead" to "in addition." Our deficits are too big to be closed merely by tax increases on the rich or even by tax increases on everyone.

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  23. David in Cal:

    "SS is fundamentally different from a private pension plan, where those who paid in have a contractual right to benefits."

    It's also different from a private pension plan in that most Americans will actually be eligible for SS while vanishingly few will collect a private pension.

    Also, private pensions payments can (and are) terminated for many reasons, including bankruptcy. As a lawyer, I can assure you that most private "contractual rights" aren't worth the paper they are printed on.

    "We actuaries are trying to get policy-makers to a realistic understanding so that the system can be saved."

    This is hilarious. The bulk of your comments on this topic have been designed to misleadingly suggest that, if nothing is done, social security will "go bust" and utterly stop making payments. As a result of misinformation like yours, large segments of the population falsely believe that social security will be unable to pay them any benefits when they retire. Because of this false belief, these people are more willing to dismantle the existing system and replace it with stock market speculation.

    The fact is that, if nothing is done, social security will continue to make payments to beneficiaries indefinitely. If current projections hold it is possible that benefits will be reduced by 20% in 30 years or so. But note, even if this happens, benefits will still be higher, EVEN ADJUSTED FOR INFLATION, in 30 years than they are now.

    I for one, would like to see the payroll cap raised to protect against this possibility. It is an easy fix. However, it is politically impossible to make simple fixes when people like you have thoroughly mislead the public into believing that there is a major CRISIS that requires a complete overhaul of the system.

    P.S. Excellent job ignoring my refutation of your earlier lies up-thread.

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  24. David in Cal said: "Our deficits are too big to be closed merely by tax increases on the rich or even by tax increases on everyone."

    More falsehoods on a different topic I see.

    Actually, as THIS VERY BLOG has repeatedly noted, if we just do nothing the Bush tax cuts will eventually expire and our deficits will return to what most economists consider to be manageable levels. No further action on the deficit is necessary.

    This country has never not had a deficit and most economists believe that it is economically essential to maintain some manageable level of public debt.

    I look forward to rebutting your next falsehood.

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  25. dave -- Here are some of your view (shown in italics) which differ from mine:

    vanishingly few will collect a private pension. I don't know where that comes from. Not only will most organizations continue to pay their pension obligations, there's a federal Pension Benefit Guarantee Corp that guarantees pensions, up to some limit.

    However, there's a risk that our enormous deficits will lead to high inflation over a period of years. That would greatly reduce the value of fixed-dollar pensions.

    The bulk of your comments on this topic have been designed to misleadingly suggest that, if nothing is done, social security will "go bust" and utterly stop making payments. Not so. I would challenge you to find a single such comment, let alone "the bulk of them".

    The fact is I agree with you. SS is merely trading dollars from workers to retirees. There's certainly some level under which that program could be affordable and continue.

    large segments of the population falsely believe that social security will be unable to pay them any benefits when they retire. Yes, I believe this is true, particularly young people.

    it is possible that benefits will be reduced by 20% in 30 years or so. But note, even if this happens, benefits will still be higher, EVEN ADJUSTED FOR INFLATION, in 30 years than they are now. Not quite. SS benefits go up with inflation. If there's no reduction in benefits, then in 30 years, they'll be the same as today, adjusted for inflation. If benefits are cut 20%, they'll be 20% lower than today adjusted for inflation.

    There could be another problem. Initial benefits are related to wages earned. Right now, the cost of living is going up faster than wage inlfation. If that continues for a long time, new SS beneficiaries will receive lolwer benefits, adjusted for inflation, than my generation did.

    THIS VERY BLOG has repeatedly noted, if we just do nothing the Bush tax cuts will eventually expire and our deficits will return to what most economists consider to be manageable levels. I almost agree. However, I would add that the level of future deficits is not a fact, but is an official government projection. Where we differ is that I don't believe that projection. I think it underestimates SS and Medicare costs by using too low a mortality estimate, it reflects unreasonably optimistic economic projections, it ignores the likely cost overruns in Obamacare, and it ignores the continuing flood of new spending.

    most economists believe that it is economically essential to maintain some manageable level of public debt. Sure, but it depends on what amount constitutes a "managable level". Bob was quoting guesses from unnamed economists. Maybe they're right. However, we will find out the reality when foreign banks stop lending money to us or jack up the interest rates they charge. When that happens, our economy will tank, which will make the deficit worse and throw us into a Greek-type spiral. IMHO this would be such a disaster that it behooves us to avoid it by a wide margin.

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  26. David in Cal:

    "Not only will most organizations continue to pay their pension obligations, there's a federal Pension Benefit Guarantee Corp that guarantees pensions, up to some limit."

    (1) Most workers are not offered a pension plan; (2) America's 100 largest corporate pension plans were underfunded by $217 billion at the end of 2008. - apparently you aren't concerned that the federal govenrment might have to pay out hundreds of billions to private pensions; (3) Approximately half of all workers in the United States have less than $2000 saved up for retirement; (4) 36 percent of Americans say that they don't contribute anything at all to retirement savings; (5) The Pension Benefit Guaranty Corporation says that the number of pensions at risk inside failing companies more than tripled during the recession.

    "Not so. I would challenge you to find a single such comment, let alone "the bulk of them"."

    I am not going to go back through your posting history since you comment in every thread and bring up SS when it is off-topic. I will note that you repeatedly refer to the system becoming "insolvent" in this very thread.

    I am not a financial expert. I trust that you, as an actuary, are using the word "insolvent" in a technically correct manner. However, that word, and words like "bankrupt," "broke", "out of money", etc. mislead laypoeple into believing that SS will be unable to pay any benefits in 30 years. These phrases have been pushed into the conversation by political actors who want to eliminate social security because they are ideologically opposed to its existence. When people believe the system will utterly cease to function in 30 years, they are less likely to oppose its destruction.

    "There's certainly some level under which that program could be affordable and continue."

    That's what makes your use of the phrase "insolvent" misleading to laypeople.

    "Yes, I believe this is true, particularly young people."

    Doesn't it concern you that a large group of people hold this false belief? Don't you wonder why that is? Could it be because they are repeatedly told the system is about to go "bankrupt"?

    "Not quite. SS benefits go up with inflation. If there's no reduction in benefits, then in 30 years, they'll be the same as today, adjusted for inflation. If benefits are cut 20%, they'll be 20% lower than today adjusted for inflation."

    I have actually read that you are wrong about this. I have read that future promised benefits are actually higher in constant dollars than today. I cant remember where i read it so I cant post a link. If I find it I will let you know.

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  27. cont.:

    "I would add that the level of future deficits is not a fact, but is an official government projection. Where we differ is that I don't believe that projection. I think it underestimates SS and Medicare costs by using too low a mortality estimate, it reflects unreasonably optimistic economic projections, it ignores the likely cost overruns in Obamacare, and it ignores the continuing flood of new spending."

    This all may be true (although "Obamacare" is projected to reduce the deficit by bringing down healthcare costs). However, it actually illustrates the fundamental problem with any attempt to balance the long term budget: you simply can't control what future congresses will do. Who knows what the political climate will be in 25 years. Maybe we will have a govenrment of hardcore conservatives and we will have eliminated the modern regulatory state entirely. If that's the case, then no deficit issue. Maybe we will have a socialist govenrment of your worst nightmare, in which case, even if we eliminated the deficit entirely, the deficits will balloon again back to current levels or worse.

    I don't want to eliminate the regulatory state and I am not going to do it now based on a projection that it might be necessary 30 years from now. Why can't we just let the Bush tax cuts expire, thereby cutting our deficit nearly in half, and then see where we are in 5-10 years? If more action is necessary we can take action then (cut military spending; convert to single payer healthcare - thereby sharply reducing medicare costs; raise taxes; eliminate public education; whatever)

    Currently, the government can borrow money at almost 0%. Doesn't it make sense to borrow now, stimulate the economy, and then pay back when interest rates rise? We can set ourselves up now to be better able to take drastic action later if necessary.

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  28. David in Cal:

    I just checked the CBO revised long term projections and, contrary to your earlier statements, SS revenue still exceeds outlays and is expected to continue to do so for seven more years.

    Furthermore, according to the CBO, the Trust Fund will not be exhausted until 2049 (about the time I will be eligible for retirement) at which point, "revenues will equal only 84 percent of scheduled outlays. Thus, payable benefits will be 16 percent lower than scheduled benefits."

    According to the CBO: "Beginning in about 2070, the gap between scheduled and payable benefits will begin to grow, and by 2082, CBO projects, payable benefits will be 19 percent less than scheduled benefits."

    However, as I said before, even with a 19% reduction, the value of the future benefit is still higher than the value of today benefit.

    here's the CBO link to prove it: http://www.cbo.gov/doc.cfm?index=4866&type=0

    Quoth the CBO: "For average earners retiring at age 65 in 2035, the purchasing power of their first-year benefits is projected to be $17,000 (in 2003 dollars)--25 percent greater than that for a comparable retiree today."

    Thus, if, the trust fund is exhausted in 2049 and only 84% of benefits can be paid, the benefits paid would still be at least 9% more generous than they are today.

    By 2082, when the CBO projects payable benefits to be 19 percent less than scheduled benefits, payable benefits wills till be 6% more valuable than they are today.

    And this is if we do nothing to increase SS revenues in the next 70 years. So where's the crisis?

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  29. Thanks for the sources, dave. As I said, I think the CBO estimates are too optimistic. Time will tell.

    As to the factual question of whether SS ran a surplus or deficit this year, your CBO link is from 2003. Yes, at that time CBO thought SS would run a surplus for a long time. They were wrong. The SS Administration now says SS actually ran a deficit on $49 billion in 2010 and is projected to run a deficit of $46 billion in 2011. The CBO were too optimistic in 2001 and I think they're still too optimistic.

    Your point about new retirees getting bigger pensions (after inflation) than now and my point about them getting smaller ones are two sides of the same coin. At one time, wages were increasing faster than the CPI. The CBO assumed that trend would continue, and concluded that new retirees would get larger SS payments after inflation. However, in recent years, wages have gone up slower than the CPI. If that trend continues, new retirees will get smaller SS payments after inflation.

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  30. True that, Dave in Cal.
    How could the CBO be so optimistic about revenues, when liberals, like myself, have consistently stated that following Reagan-style modern conservative economic policies would surely lead to crashing the economy? (i.e. Who knew? Other than the people that have been described as "the looney left", of course).

    Some day, the powers that be will listen to us liberals and kill modern conservativism forever. Or is that too overly optimistic for you too?

    Berto

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  31. DinC, the cash flow deficit from the March SS Trustees report reflects the 2% FICA holiday rather than some fundamental flaw in the program.

    As to your statement it reflects unreasonably optimistic economic projections, that same Trustees' Report shows the middle case, the one most commonly referred to, using an annual GDP growth factor of 1.9% which consistently understates average actual GDP growth over the last 30 years.
    You could look it up in about 5 seconds.

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