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The Facts:
The Social Security Administration predicts the program will be able to fully pay all promised benefits through 2042, when most baby boomers will be dead--even using pessimistic assumptions about future economic growth. Annual productivity growth is forecast by SSA at only 1.6 percent through 2078; in the years 1913-1990 (including the Great Depression), it grew by about 2.3 percent, a rate that would more than wipe out any future shortfall (2004 Social Security Trustees' Report; The World Economy, OECD, 2001).
But for most of the media, no such context is allowed. The sole economic expert who appeared on ABC was David John of the right-wing Heritage Foundation, who likened the situation to a "horror movie." The Washington Post's Dana Milbank chided a Social Security commissioner for "whistling past the graveyard of entitlement insolvency" because he had the temerity to say, "There's no reason to have any immediate panic."
At the top of ABC's October 15 World News with Charles Gibson, the anchor declared this a "day of reckoning," later calling it "one of this country's greatest challenges." Correspondent David Wright called the first baby boomer filing for benefits "the raindrop that's about to become a tsunami," and warned that "paying for the baby boom's retirement may leave the next generation high and dry." The Post's Milbank (10/16/07) went further, claiming that baby boomers "will begin to bankrupt the nation."
The crisis claims in each report were more or less the same. According to ABC's Wright, "In 10 years time, Social Security will be paying out more in benefits than it takes in in taxes. And about the time the last of the baby boomers retires, the system will go bankrupt." As Milbank put it, "As the boomers retire, Social Security will go into the red in 2017 and become insolvent 24 years later, according to the system's trustees."
This rhetoric is profoundly misleading. Social Security has built up a massive surplus in order to pay for the long-anticipated retirement of the baby boomers.
Former Federal Reserve chair Alan Greenspan--whose word the media usually takes as a kind of gospel--told Tim Russert on Meet the Press (9/23/07) that there was no urgent Social Security crisis at all. "Social Security is not a big crisis," Greenspan explained. "We're approximately 2 percentage points of payroll short over the very long run. It's a significant closing of the gap, but it's doable, and doable in any number of ways."
Renowned Princeton economist and New York Times columnist Paul Krugman (New York Times, 12/7/04) has similarly debunked the notion that Social Security is heading into a crisis. The long-term financing of Social Security is "a problem of modest size....It's not at all hard to come up with fiscal packages that would secure the retirement program, with no major changes, for generations to come."
LeAnne-
The Cato Institute has been campaigning to Privatize Social Security for decades and along with the Conservative American Enterprise Institute and the Conservative Heritage Foundation has maintained a campaign of misinformation.
They usually won't mention the CAP on all income over $90,000 that doesn't get taxed under FISA.
Decades of conservative marketing have convinced Americans that government programs always create bloated bureaucracies, while the private sector is always lean and efficient. But when it comes to retirement security, the opposite is true. More than 99 percent of Social Security's revenues go toward benefits, and less than 1 percent for overhead. In Chile's system, management fees are around 20 times as high. And that's a typical number for privatized systems.
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