Myths of Social Security’s demise greatly exaggerated
December 8, 2004
For years, the death of the Social Security system has been pounded into my head.
Ask most young people, and they will probably say they don’t think there will be anything left of this program when they turn 65.
I didn’t much worry about this up until a couple of years ago. I was a victim of young persons’ disease, that is, I didn’t worry much about retirement because I was having too much fun being young.
But with marriage and parenthood, the realities of old age became apparent. I began to pay more attention to things like Social Security.
And it’s very clear that the myths of Social Security’s demise have been greatly exaggerated, for less-than-honest political purposes.
It’s really simple. The system that everyone thinks is in great peril is, by most financial standards, in pretty good shape.
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The statistic people get vexed over is the prediction by the 2004 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds that the Social Security trust fund will run out of money in 2042.
But this doesn’t mean it’s broke. Even if we do nothing to fix it, all this means is that retirees after that time will only get 80 percent of their expected benefits.
So we have 38 years to make up for that 20 percent. That’s a lot of time to fix the problem, and it fact, we may not have to do anything to fix it.
The report assumes that from 2015 on, the country’s annual gross domestic product will average a measly 1.8 percent.
That would be considered downright weak today. If the United States had only 1.8 percent growth for this year, there would be moving vans at the White House right now packing up George W. Bush’s stuff for the trip back to Texas. Even with predicted declines in population growth, 1.8 percent is pretty anemic.
So what would happen if the economy grew at 2.2 percent instead? There would be no shortfall in Social Security for the foreseeable future. No crisis, none, zip.
In fact, the same group’s prediction in 1994 was that the trust fund would run out in 2029. That means in 10 years, we’ve pushed that doomsday off by 13 years, all by doing nothing.
Now let’s look at Bush’s “reform” plan for Social Security, the partial privatization of the system for younger workers. According to Bush’s figures, if the private accounts averaged 7 percent returns then today’s workers would be better off than with the current Social Security system.
But for investments on whole to average 7 percent through the 21st century, the economy would have to grow at a far greater rate than the predicted 1.8 percent. That means Bush’s plan only works if we get economic growth that is robust enough it would save Social Security without changing it one bit.
Add in the $2 trillion price tag to fill in the shortfall created by the institution of the private accounts, and this is “reform” plan is truly a bad idea.
This is a phony crisis, cooked up by some Republican ideologues who have opposed Social Security since its inception. Hey, if they want a real crisis, try tackling Medicare. It’s slated to go bankrupt in only 15 years.
Kirk Caraway is Internet editor for the Nevada Appeal. Contact him at email@example.com or 881-1273.