Wednesday, January 26, 2005

Social Security Error

---Taken from "The Week," April 8, 2005, Vol 5, Iss 202, pp. 8.

The solution is actually quite simple said Douglas Pike in the Philadelphia Inquirer. It's called fiscal responsibility. During the Clinton administration, Democrats made a point of curbing government spending and balancing the budget, without raiding Social Security surpluses. “That discipline ended soon after George W. Bush rode into town.” Bush’s ruinous combination of “reckless” tax cuts, unfunded wars, and massive spending has made a mess of the federal budget and forced him to “raid” the Social Security till. If Bush wants to “save” Social Security in 2041, he ought to stop sacking and pillaging the nation's fiscal future.

---Taken from DNC 3.9.05 Newsletter reports that:

1. Privatizing Social Security would cut guaranteed benefits by 40 percent.
2. Bush's risky plan does not ensure the solvency of the program -- in fact, it would shorten the life of Social Security.
3. Bush's plan would add trillions of dollars in additional debt, mostly owed to China and OPEC nations.

---Taken from Tyndall

According to blurb in Tyndall Report January 31-February 5, 2005: Bush had predicated his pitch on the actuarial projection that beginning in 2042, revenues will not fully cover benefits. Yet his aides acknowledged that “those private accounts will do nothing to solve that overall problem,” ABC’s George Stephanopoulos stated. He concluded that two separate debates were going on simultaneously: a financial one—how to fix the system; and an ideological one—whether to privatize it. “The hard fact is that some day benefits are going to be less,” CBS’ Plante asserted. He offered four “painful” options: give less money to wealthy retirees; make it harder to retire early; raise the retirement age again above 67; or stop tying benefits to wage increases, allowing them to lag behind the payroll.

---Taken From FactCheck.org

In a roundtable conversation on January 11, President Bush said the Social Security system “is going to be short the difference between obligations and money coming in, by about $11 trillion, unless we act.” Vice President Cheney echoed this claim in a January 13 speech at Catholic University when he said, “Again, the projected shortfall in Social Security exceeds $10 trillion.”

However two-thirds of that shortfall occurs after the year 2078. They both fail to mention that this is over the course of the “infinite future." Over the next 75 years the shortfall is projected to be $3.7 trillion.

The projection comes from the 2004 Social Security Trustees report which estimates that the system’s unfunded obligations are $10.4 trillion over the course of what they call the "infinite horizon." Historically, the infinite-horizon projection has not been included in the annual report, and was only added in 2003.

Previously the Trustees had used only a 75-year projection to estimate the system’s long-term deficits, roughly the length of a human lifetime. (Average life expectancy at birth has now increased to just over 77 years, up from just under 75 years as recently as the 1980's, according to the National Center for Health Statistics .) The Social Security Trustees' 2004 projection shows a $3.7 trillion shortfall over this 75-year period.

The Trustees reasoned that the 75-year window should be extended to the infinite future to give policymakers a better idea of the changes necessary to keep the system sustainable indefinitely, especially beyond 2078 when they said Social Security’s deficit will be increasing even faster than during the next 75 years.

Excerpts taken from FactCheck.org. Sources include: Table IV.B7.--Unfunded OASDI Obligations for 1935 (Program Inception) Through the Infinite Horizon, "THE 2004 ANNUAL REPORT OF THE BOARD OF TRUSTEES OF THE FEDERAL OLD-AGE AND SURVIVORS INSURANCE AND DISABILITY INSURANCE TRUST FUNDS," 23 March 2004: 59. Technical Panel on Assumptions and Methods (2003), Report to the Social Security Advisory Board. Washington, D.C., October 2003.