Bill Knight column for Mon., Tues., or Wed., June 4, 5 or 6
Social Security has been attacked for almost 80 years, and despite its popularity, it’s still attacked – although now it’s more indirect, through fear or false or misleading claims.
Fifty years ago this month, Morris Udall – an Arizona Congressman for 30 years – said, “The resources of our nation can very well be used to … make the prospect of old age a less fearsome prospect. The Social Security system is the proper mechanism to accomplish this.”
Social Security has worked since it was enacted in 1935, and can for decades. In fact, Social Security trustees recently reported $2.7 trillion in reserves now and anticipated reserves of $3 trillion by 2021, ensuring Social Security’s solvency for years.
However, some news media report that Social Security is going broke.
“The elite press repeatedly quotes the commentary of the devoted opponents of social insurance retirement programs,” Yale professor emeritus Theodore Marmor told Columbia Journalism Review (CJR). “They are supporting a strategic attack on social insurance that has been going on for years.”
CJR contributing editor Trudy Lieberman writes, “For nearly three years CJR has observed that much of the press has reported only one side of this story using ‘facts’ that are misleading or flat-out wrong while ignoring others. Whatever the reason – ideology, poor understanding of how the program works, gullibility or laziness – news outlets have given the public a skewed picture of the financial health of this hugely important program, the sole source of retirement funds for millions of Americans.”
Bad information can result in bad decisions. The consequences range from voting against our own interests to improperly planning for retirement.
All types of Americans support Social Security and strengthening the system. Lieberman notes, "Gallup polls dating back six decades consistently show some 70 percent of the public strongly supports Social Security."
True, there are fewer workers paying the Federal Insurance Contributions Act (FICA) payroll taxes than in the past, and life expectancy is increasing the number of recipients. But blanket assertions that there’s an unmanageable shortfall are exaggerated.
“The best way to make the size of the projected Social Security shortfall understandable is to put it in context,” writes economist Dean Baker. “Relative to the size of the economy, the projected Social Security shortfall is equal to 0.7 percent of GDP [Gross Domestic Product]. By comparison, annual spending on the military increased by more than 1.6 percentage points of GDP between 2000 and 2011. So the burden imposed by the wars in Iraq and Afghanistan are almost 2.5 times larger than the money that would be needed to eliminate the Social Security shortfall.
[Also,] “the Congressional Budget Office's analysis of the Ryan Medicare privatization plan implied that it would increase the cost of buying Medicare-equivalent policies by more than $34 trillion, a sum almost five times as large as the projected Social Security shortfall,” he adds.
The best way to bolster Social Security for the foreseeable future is to drop the cap on payroll taxes for those earning $250,000 and more, and to lift the “unearned income” tax break on the sale of stock or real estate, interest on savings deposits, and stock dividends – treating all that as regular income so FICA would be paid.
“Right now, someone who earns $110,100 pays the same amount of money into Social Security as a billionaire,” said U.S. Sen. Bernie Sanders (I-Vt.), chair of the Defending Social Security Caucus. “That makes no sense.”
Socially, some news reports have incorrectly stated that Social Security contributes to the deficit, but by law Social Security cannot borrow. If it lacks the revenue to cover benefits, it must cut benefits. So it doesn’t and can’t contribute to the federal deficit and cutting its benefits doesn’t reduce the debt.
Individually, workers are “being encouraged to join 401(k) programs and trust the vagaries of the stock market,” writes Washington media reporter Jason Linkins. “It is a worse deal for workers (but a great deal for Wall Street financial firms). And while there's nothing wrong with 401(k)s as investment vehicles, they are subject to storms and stresses of the market without the virtue of being a defined retirement benefit. What you save in your 401(k) is what you get. Blow through it and you're done.”
Still, those who’d privatize Social Security repeat criticisms that were rejected decades ago.
“Social Security received a broadside from the Chairman of the Board of Chase National Bank in 1936 [when] banker Winthrop Aldrich [in his speech accepting the presidency of the New York Chamber of Commerce] called it a ‘grave menace to the future security of the country as whole and to the security of the very people it is designed to protect’,” writes consumer advocate Ralph Nader.
Social Security should be defended from attacks, whether privateers or the press.