Memo to Sen. Obama and Other Dems: There Is No Social Security Crisis
Here is what Obama said:
"Now, we've got 78 million baby boomers that are going to be retiring, and every expert that looks at this problem says 'There's going to be a gap, and we're going to have more money going out than we have coming in unless we make some adjustments now.'
This is just wrong. In fairness to Sen. Obama, he is not the only Democrat who makes this error. Sen. Clinton has said, "that if we just get our fiscal house in order that we can solve the problem of Social Security."
This is all utter nonsense. My friend Mark Weisbrot of the Center for Economic And Policy Research and one of the foremost authorities on Social Security, reminded me that we should not let this frame go unchallenged. He sent along a piece he wrote for Alternet:
In fact, the first cohort of baby boomers (those born in 1946) will begin retiring in just a couple of months, since many people take their Social Security at age 62 (with a correspondingly reduced benefit). Our Y2K moment is upon us, and nothing will happen - because the baby boomers' retirement has already been financed.
Back in 1983, when Social Security really was running out of money, with just a few months of payments on hand, Congress raised the payroll tax substantially. This was done deliberately in order to pile up a surplus to finance the baby boomers' retirement. And so it did: that accumulated surplus stands at more than two trillion dollars today, and is increasing at a rate of $190 billion annually.
As a result of this surplus, all the baby boomers' will have retired before Social Security runs into a projected shortfall in 2041. That is according to the Social Security's (mostly Republican-appointed) Trustees. According to the non-partisan Congressional Budget Office, Social Security can pay all promised benefits even longer, until 2046. By either date, most baby boomers will be dead, and almost all of the rest retired, before there is a problem.
And...
Even accepting that there could be a shortfall after 2046, it is not much to lose sleep about. The projected shortfall over Social Security's whole 75-year planning period is less than what we fixed in each of the decades of the 1950s, 1960s, 1970s, and 1980s.
In fact, even if nothing were ever done to close the projected gap - and that is a wildly implausible scenario - Social Security would, after 2046 still have enough money to pay indefinitely a bigger benefit than it does today. That's in real terms, adjusted for inflation. Of course, this benefit would be less than what seniors in the distant future would be entitled to, so we will eventually make some adjustments. But there's no hurry.
So, the bottom line is this: Democrats should not be attacking other Democrats for failing to propose a solution to something for which THERE IS NO CRISIS.
Comments
Why Not Start Now
Hi, Jonathan. While your analysis makes sense for the beginning boomers (1946-1956), all of whom will be 90 years old when Social Security has its shortfall in 2046, the later boomers will still be in their early 80's, and expecting to collect on their investment. I see no reason to not start to fix the problem today. It will not take drastic measures, such as the huge increase in FICA taxes as was done in 1983, but smaller, less painful adjustments can be made now, and move Social Security Solvency out to the 75 year period (currently 2082).
I do not know the protocols followed by your friend at the CEPR, but did he take into account the number of survivor claims and disability claims that will need to be paid out immediately considering the enormous number of deceased and wounded soldiers returning from the Middle East? I do not believe there is a WEP or GPO offset applied to VA benefits paid to soldiers injured during wartime, commonly known as VA Comp, as there is to Federal Employee retirees who get both a Federal Civil Service Pension and Social Security.
I guess my main concern is that the economic analysis on this may be somewhat shaky if it does not include the casualties of war and the increasing difficulty of people over 50, but not yet eligible for Social Security, to find jobs, which tends to lead to an exacerbation of minor ailments, and an increase in mental afflictions, thereby possibly qualifying many for disability benefits, prior to their retirement age.